Real World Examples

1. Function: Number of Deer in a National Park

• x-axis (independent variable): Year
• y-axis (dependent variable): Population (number of deer)

Trading Analogy: This is akin to looking at the yearly performance of a stock or asset. The x-axis represents time (in this case, years), and the y-axis represents a measurable value (deer population, analogous to stock price).

• If the graph shows an upward trend, it means the population of deer is increasing each year, similar to a stock price that is trending upward over the years.

• If the graph shows a downward trend, the population of deer is decreasing, similar to a declining stock.

In trading, such a trend could be used to make long-term investment decisions. A steadily increasing stock might be considered a good long-term investment, just as park rangers might consider increased deer populations as a sign of a healthy ecosystem (or possibly overpopulation that might need intervention).

2. Function: Height of an Elephant

• x-axis: Age of the elephant
• y-axis: Height (in feet)

Trading Analogy: This can be likened to a company's growth over time. Age is analogous to the time since a company's inception, and height is analogous to the company's size or market capitalization.

• An elephant grows rapidly in its early years, just like how startups might experience rapid growth.

• As the elephant matures, the growth rate in height might slow down, similar to established companies that might see more steady, incremental growth.

In trading, such a curve might indicate whether a company is in its growth phase or maturation phase. Investors looking for rapid growth might invest in "younger" companies (analogous to younger elephants), while those looking for stability might invest in mature, established companies.

3. Function: Height of a Rollercoaster Car

• x-axis: Time
• y-axis: Height (in meters)

Trading Analogy: This is very much like looking at short-term price fluctuations in a volatile market. The rollercoaster's highs and lows represent the peaks and troughs of a stock price over a short duration.

• The ascent of the rollercoaster is similar to a bullish phase in the market, where prices are climbing.

• The descent is akin to a bearish phase, where prices are dropping.

Traders, especially day traders or swing traders, are keenly interested in these short-term movements. They try to buy at the troughs (lows) and sell at the peaks (highs) to make a profit. The rollercoaster graph can be thought of as a very short-term stock price chart with high volatility.

Visualizing these functions in a trading context helps in understanding the underlying patterns and trends that traders look for when making investment decisions. Whether looking at long-term trends or short-term fluctuations, these functions provide insights into the behavior of stocks or assets.