Ripple

DEFINITION of 'Ripple'

A term used by "The Dow Theory" author, Robert Rhea, to describe the day-to-day fluctuations in stock market price activity. Rhea wrote that three simultaneous movements of stock prices occur that can be compared to tides, waves and ripples. The Dow Theory, published in 1932, indicated that speculators attempt to ride the tides and the occasional big waves, and that only reckless investors would ever attempt to profit by the day-to-day price changes or ripples.

BREAKING DOWN 'Ripple'

Many of today's technical and fundamental analysts encourage investors to ignore market ripples -the small changes in daily price movement -and instead focus on the longer-term tides and waves. Active traders, and in particular day traders and scalpers, try to exploit these short-term ripples for profit, often opening and closing a position within a matter of hours, minutes or even seconds. Despite Rhea's belief that this type of investing was reckless, it has become an established type of market participation.

RELATED TERMS
  1. Uptick

    A transaction for a financial instrument that occurs at a higher ...
  2. Dow Theory

    A theory which says the market is in an upward trend if one of ...
  3. Wave

    A pattern of behavior marked by noticeable increases and decreases. ...
  4. Tide

    A metaphor for a long-term market trend. The tide would refer ...
  5. Downtick

    A transaction on an exchange that occurs at a price below the ...
  6. Tight Monetary Policy

    A course of action undertaken by the Federal Reserve to constrict ...
Related Articles
  1. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  2. Technical Indicators

    A Primer On The MACD

    Learn to trade in the direction of short-term momentum.
  3. Investing Basics

    Do Your Investments Have Short-Term Health?

    If a company is strong enough to survive tough times, it is more likely to provide long-term value.
  4. Active Trading Fundamentals

    Identifying Market Trends

    The success or failure of your long- and short-term investing depends on recognizing the direction of the market.
  5. Trading Strategies

    10 Tips For The Successful Long-Term Investor

    These guiding principles will help you avoid common folly during the decision-making process.
  6. Forex Education

    Mastering Short-Term Trading

    Making money in a pressure-cooker environment is all about minimizing risk on hot picks.
  7. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  8. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  9. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  10. Economics

    The History of Stock Exchanges

    Stock exchanges began with countries who sailed east in the 1600s, braving pirates and bad weather to find goods they could trade back home.
RELATED FAQS
  1. I have a short period of time (1 year or less) during which I will have money to ...

    If you only have a short period of time in which to invest your money (i.e. less than one year), there are several investment ... Read Full Answer >>
  2. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  3. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  4. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  5. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  6. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center