DEFINITION of 'Downside'

The negative movement in the price of a security, sector or market. Downside can also refer to economic conditions and it describes periods when an economy has either stopped growing or is shrinking. Movement to the downside is often expressed in terms of risk, as in there is a downside risk in a particular country's economy; or, stock ABC has downside risk because of changing consumer trends. Downside risk can be evaluated by fundamental and technical factors.


Downside risk is sometimes expressed in terms of an estimation of a security or economy's potential to experience negative movement. A stock analyst, for example, might guess how big a price drop he or she expects stock ABC will endure because of certain events. Economists can estimate the downside risk a country's economy is likely to suffer due to current conditions, such as unemployment and GDP growth.

  1. Bear

    An investor who believes that a particular security or market ...
  2. Upside

    The potential dollar or percentage amount by which the market ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Upside/Downside Ratio

    A technical indicator that shows the relationship between the ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
Related Articles
  1. Investing Basics

    Beta: Know The Risk

    Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here.
  2. Options & Futures

    Cut Down Option Risk With Covered Calls

    A good place to start with options is writing these contracts against shares you already own.
  3. Options & Futures

    A Beginner's Guide To Hedging

    Learn how investors use strategies to reduce the impact of negative events on investments.
  4. Active Trading Fundamentals

    Limiting Losses

    It is impossible to avoid them completely, but there is a systematic method you can use to control them.
  5. Options & Futures

    Prices Plunging? Buy A Put!

    You can make money on a falling stock. Find out how going long on a put can lead to profits.
  6. Investing

    Why Is Financial Literacy and Education so Important?

    Financial literacy is the confluence of financial, credit and debt knowledge that is necessary to make the financial decisions that are integral to our everyday lives.
  7. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  8. Fundamental Analysis

    Value Investing Strategies in a Volatile Market

    Volatile markets are a scary time for uneducated investors, but value investors use volatile periods as an opportunity to buy stocks at a discount.
  9. Mutual Funds & ETFs

    Using Short ETFs to Battle a Down Market

    Instead of selling your stocks to get gains, consider a short selling strategy, specifically one that uses short ETFs that help manage the risk.
  10. Mutual Funds & ETFs

    How to Lower Investment Account Fees in Retirement

    Retired investors need all the money they have, which is why they should keep an eye on investment fees, as high fees can lower returns.
  1. How does leverage affect pip value?

    A standard forex account has specific lots and pip units. A lot is the minimum quantity of a security that may be traded, ... Read Full Answer >>
  2. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  3. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  4. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  5. What are the requirements for being a Public Limited Company?

    The requirements for an entity to be considered a public limited company (PLC) include registration requirements, establishing ... Read Full Answer >>
  6. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!