ACTIVE MARKET Meaning and
Definition
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An active market refers to a financial market where there is a high volume of buying and selling activities taking place. In an active market, there is significant liquidity, meaning there are numerous buyers and sellers ready to execute transactions. As a result, active markets often have narrow spreads, which refer to the difference between the buying and selling prices of a security or asset. The narrow spreads in an active market indicate that there is minimal delay in executing trades and low transaction costs.
An active market provides advantages for investors, such as the ability to easily enter or exit a position without significantly impacting the market price. This dynamic allows for increased flexibility and efficient trading. Furthermore, an active market is characterized by frequent price movements and volatility, providing opportunities for traders to exploit short-term price fluctuations for profit.
Various factors contribute to the creation of an active market, including active participation from market participants, market depth, trading volume, and the availability of relevant market information. Active markets commonly exist for stocks, bonds, commodities, derivatives, and currencies, among others.
Overall, an active market is a vibrant and highly liquid financial environment characterized by quick trade executions, narrow spreads, frequent price movements, and ample trading opportunities.
Common Misspellings for ACTIVE MARKET
- cative market
- zctive market
- sctive market
- wctive market
- qctive market
- axtive market
- avtive market
- aftive market
- adtive market
- acrive market
- acfive market
- acgive market
- acyive market
- ac6ive market
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- actuve market
- actjve market
- actkve market
- actove market
- act9ve market
Etymology of ACTIVE MARKET
The word "active" comes from the Old French word "actif" and the Latin word "activus", both meaning "doing, performing, or causing". "Market" comes from the Latin word "mercatus", which refers to a place of trade or commerce.
Therefore, the term "active market" combines the idea of something being dynamic, vibrant, or vigorous ("active") with a place or environment where buying and selling activities occur ("market"). In the context of finance and investing, an active market refers to a situation where a significant volume of trading is taking place and securities are readily bought and sold.
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