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Don’t start investing or trading in stock market without proper knowledge. In Indian stock market or in any stock market few standard terms are used with the relevance of technical analysis. Sharetipsinfo suggest investors or traders must read complete glossary to understand stock market better. Learn basics of stock market with our glossary.
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Implied Volatility
A key variable in most option pricing models, including the famous Black-Scholes Option Pricing Model . Other variables usually include : security price , strike price , risk-free rate of return and days to expiration . If all other variables are equal , the security with the higher volatility will have the highest option prices . Many NSE and tech stocks have higher volatilities than Nifty and their options are also priced accordingly . One method of measuring of volatility is by finding the standard deviation of the underlying security . However, the standard deviation cannot always explain the volatility that is implied by an option’s price. Many times the price of an option will reflect more volatility than the measured by the standard deviation . This led to the notion of implied volatility, which is based on option prices . If the option price is known , then plugging in all variables and solving for volatility will yield the implied volatility.
Indicator
A value usually derived from a stock’s price or volume that an investor can use to try to anticipate future price movements . Indicators are divided into two groups: trend following or lagging and momentum or leading . Lagging indicators tell you what prices are doing now , or in the recent past , so they are useful when sticks are trending . A moving average is an example of a lagging indicator . Leading indicators are designed to anticipate future price action and many come in the form of oscillators . RSI is an example of a momentum indicator .
Inverted Hammer
A one day bullish reversal pattern. In a downtrend , the open is lower , then it trades higher , but closes near its open , therefore looking like an inverted lollipop .
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