Reaction

AAA

DEFINITION of 'Reaction'

A reversal in the movement of a security's price. Reaction is most often associated with a downward movement in the price of a security after a period of upward movement, as investors sell off shares or decrease the volume of buy orders for fear of the security being overvalued. Reactions are likely to be mild and lead to a slight increase or decrease in price, rather than a large change in value. A reaction is similar to a correction but lacks the same intensity.

INVESTOPEDIA EXPLAINS 'Reaction'

Reactions are generally considered to be positive for the overall health of the market, since unending price increases can cause inflation or result in an even larger price drop if a company doesn't meet expectations. A reaction is likely to prevent events such as runs or high volume sell offs at later dates.

RELATED TERMS
  1. Bulge

    A fast increase in a security's or commodity's trading price. ...
  2. Break

    A term used in futures markets to describe a rapid and sharp ...
  3. Security

    A financial instrument that represents: an ownership position ...
  4. Reversal

    A change in the direction of a price trend. On a price chart, ...
  5. Correction

    A reverse movement, usually negative, of at least 10% in a stock, ...
  6. Futures Contract

    A contractual agreement, generally made on the trading floor ...
RELATED FAQS
  1. What's a good forex strategy to use when spotting a Wedge-shaped Pattern?

    Use wedge-shaped patterns to identify bullish or bearish price action when trading currencies in the foreign exchange (forex) ... Read Full Answer >>
  2. What's the most accurate way to find out a nation's nominal GDP?

    The data for gross domestic product, or GDP, is compiled by statistical governmental agencies in each country and is aggregated ... Read Full Answer >>
  3. What are the different formations of yield curves?

    There are three main different formations of yield curves: normal, inverted and flat yield curves. The yield curve describes ... Read Full Answer >>
  4. How do I perform a financial analysis using Excel?

    Investors can use Excel to run technical calculations or produce fundamental accounting ratios. Corporations use Excel to ... Read Full Answer >>
  5. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
  6. How does a bond's coupon rate affect its price?

    A bond's coupon rate has a large effect on its market price because it dictates the amount of income the bond generates per ... Read Full Answer >>
Related Articles
  1. Active Trading

    Is A Reversal On The Way? Consult Traders' Index

    Use this indicator to gauge the end of a price trend.
  2. Fundamental Analysis

    4 Key Indicators That Move The Markets

    Find out what reports to watch in order to anticipate and react to market movements.
  3. Trading Strategies

    When Is A Bull Market Not A Bull Market?

    During some bull or bear moves in the stock markets, investors will be going with the trend, but day traders may find they cannot.
  4. Active Trading Fundamentals

    Forces That Move Stock Prices

    You can't predict exactly how stocks will behave, but knowing what affects prices will put you ahead of the pack.
  5. Active Trading

    Market Cycles: The Key To Maximum Returns

    You need to understand the various phases of the market cycle to avoid bubbles and make the best investments.
  6. Options & Futures

    The Stock Cycle: What Goes Up Must Come Down

    Stock prices seem random, but there are repeating cycles. Learn to take advantage.
  7. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  8. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?
  9. Chart Advisor

    These REITs Are Looking Good Right Now

    These REITs are in strong uptrends and looking to go higher.
  10. Economics

    Tech Startup Momentum Being Generated In Detroit

    Rising from the ashes in the once proud auto-manufacturing City of Detroit is a rapidly emerging tech startup scene that could prove to be its salvation.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center