Stock Market Glossary
Recession
Phase of declining economic performance, typically two consecutive quarters of GDP decline.
In brief: Phase of declining economic performance, typically two consecutive quarters of GDP decline.
Meaning in practice
Recessions depress corporate profits, increase unemployment and depress stock prices. But they are also phases in which long-term investors can buy at attractive prices – if they are liquid.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
In practice, the term should be linked to a specific trading plan: entry, exit, position size and costs belong together. In short time frames, spread, slippage and delayed execution can quickly outweigh the theoretical benefit of an observation.
What to keep in mind
Write down which observation confirms or invalidates your assumption before trading. This keeps the term a decision-making tool rather than a retrospective justification for risk already taken.
