The Compound Annual Growth Rate (CAGR) is the compound discount rate which an investor would have to get to go from a present value to a future value. The compound annual growth rate can be computed using the ending value of an investment and taking the Nth root of it for the number of compounding periods (usually years). The idea is to have a smoothed average number that an initial would have to have received in a compounding investment to end up at the future value. Continue reading...
Also known as the annual equivalent rate (AER), the effective annual interest rate is the actual annual interest rate on a bond or loan when it compounds more than once a year. The effects of compounding will make the AER higher than the annual interest rate if the security compounds greater than annually. Continue reading...
A company's balance sheet gives a picture of how all the assets, liabilities, and equities of the company "balance out." The basic accounting equation is Total Assets = Total Liabilities + Equity, and a Balance Sheet is going to detail these parts to show how everything adds up at the time of the report. With things equal on both sides of the equation, the company's books are balanced, the same way someone might go back through the carbon copies of checks they've written and "balance the checkbook" to make sure all checks written have been accounted for. Continue reading...
A 10-k is an annual filing required by the SEC for companies over a certain size, which provides the regulators with more detail than can be found in an Annual Report. If a company has over $10 Million in assets and equity shares divided among 500 or more people, it must file a 10-K within 60 days of the end of the fiscal year, as well as 10-Q filings quarterly, whether it is publicly or privately traded. The 10-K will include specific details that companies may not have put in their Annual Report to shareholders, such as executive compensation, subsidiaries, audited financial statements, lawsuits, and so on. Continue reading...
A weighted average is a calculation considers the relative importance or relevance of a piece of data. Weighted averages multiply numbers in the average by a predetermined factor, like time, that enhances the relevance given to the number. One example of a weighted average is the Exponential Moving Average (EMA), an alternative to the Simple Moving Average (SMA) line which gives greater weight to the more recent data. SMAs are effective in their simplicity, but their efficacy is most closely tied to how they are used. Continue reading...
The Golden Cross is a breakout candlestick pattern formed when the short term 50-day moving average for a security exceeds its long term 200-day average, backed by high trading volumes. Investors typically interpret this crossover as a harbinger of a bull market, and its impact can reverberate throughout index sectors. The longer time horizons tend to increase the predictive power of the Golden Cross. As seen in the chart in this example, a trader may view the moment when a 50-day moving average (blue line) crosses above a 100-day or 200-day moving average (red line) as a bullish sign for the stock or security. A trader may consider taking a long position in the security, or perhaps explore call options to take advantage of the potential upside. Continue reading...
The Death Cross is the inverse of a Golden Cross: a chart pattern occurring when a security’s short-term moving average crosses underneath its long-term counterpart, typically followed by an increase in trading volume. A death cross, which like a golden cross most commonly uses long-term 50-day and 200-day moving averages to detect the pattern, usually signifies an incoming bear market to traders. Continue reading...
A moving average ribbon is created by plotting many incremental moving average lines on top of the same price chart. The visual relationship of the moving averages can help reveal crossover points, which traders can use as trade signals. As with other crossover indicators, the shorter-term moving average lines will tend to move more than the longer-term ones, and the degree of momentum that the crossovers imply increases for moving average lines of lengthier look-back periods. Continue reading...
The Kaufman’s Adaptive Moving Average (KAMA) was developed by analyst Perry Kaufman in an attempt to cancel out the noise of market volatility and inefficiency by using an efficiency ratio multiple. Kaufman’s algorithm is a bid to cancel out “noise” in the data used to create a moving average line. The Exponential Moving Average (EMA) is imperfect in part because of its reliance on historical data – if the data is not current, it tells traders nothing about how an asset may trend in the future. Some traders also believe that EMAs are biased by virtue of weighting recent data more heavily, which can lead to false signals and potential losing trades. Continue reading...
Moving averages are important components of many technical indicators. The Exponential Moving Average (EMA) uses the closing prices of all the previous trading days for a given interval to calculate an average price from that for the period, but is weighted to give the most recent days more influence over the final number. The weighted averages are plotted in a line that helps traders follow trends. Continue reading...
On Tickeron’s homepage, you will see a news feed just like you would see on Facebook. However, even if you aren’t a subscriber to Tickeron yet, you can use and customize the newsfeed (to a degree). There are several more options for customizing the newsfeed and gaining greater access to information and insights for subscribers. Non-subscribers can filter the news based on asset classes/securities such as stocks, ETFs, mutual funds, cryptocurrencies, and Forex: Continue reading...
Parents and family members, or actually anyone, can contribute up to the annual gift tax exclusion limits, and beyond. Several people can fund 529 plans for the same person or child, and any one person can maintain as many 529 plans as they would like. Each person can contribute up to the annual gift tax exclusion amount, which in 2016 is $14,000, per beneficiary. 529 plans have a special provision that allows the owner of the account to exceed the gift tax exclusion by contributing up to $70,000 at once – but no contributions can be made for 5 years after that, because this provision is really just allowing you to accelerate the contributions. Continue reading...
Total Return is the measure of all appreciation and interest as well as dividends and other distributions from an investment. Often computations of return will only consider appreciation, and it can be an easy mistake to make when looking at performance data at times. When a stock pays significant and consistent dividends, it needs to be factored in to the computation of total return. This adds a significant compounding effect to the investment’s overall performance, but if you just looked at the sheets that said it had a 4% return and a 2% dividend yield, you would be missing the most important part. Total return can be calculated for different kinds of investments or an entire portfolio, and is often done on an annual basis once all distributions have been made. Continue reading...
Also called net operating margin, return on sales can indicate how well a company makes use of its sales revenue. By dividing Operating Profit by Net Sales, we can arrive at the Return on Sales. Essentially what we’ve done is broken down profits on a per sales basis. We can see what percentage of sales ends up as profit, or, on the other side of the coin, how much profit is generated per unit of sales. This can be useful for a comparison of companies of different sizes, because it excludes their assets, capital structures, taxes, and interest. Continue reading...
The Volume Weighted Average Price (VWAP) helps traders consider the influence of volume on prices. VWAP is calculated by taking the average of prices from a time period and dividing it by the trading volume for the current day. Traders use VWAP to confirm trends and decide whether to take long or short positions, while large institutions are likely to use VWAP to avoid disrupting market prices, finding the liquid and illiquid price points and trading so as not to move prices away from the averages. Continue reading...
Moving averages are important components of many technical indicators. The Endpoint Moving Average (EPMA) is a popular method of plotting a line that uses linear regression instead of averages, which reduces the noise of market price activity and can reveal or follow trends. Compared to a simple moving average, this method hews more closely to data and lags less. A moving average line averages prices in a given time period (such as the 30 days leading up to each day), and plots that point on a chart; when connected, the collection of points becomes the moving average line. Continue reading...
Moving averages are important components of many technical indicators. A simple moving average determines the average of a range of closing prices for a security or index for a specific period of time. An exponential moving average is a moving average that gives more weight to the most recent data. Simple moving averages are not weighted for time the way that exponential moving averages are, which has the effect of snapping the chart to the most current information, while simple moving averages have lag. Continue reading...
Return on Equity refers to the return on shareholder’s equity, which is like looking at the compounding effects of profits. Shareholder’s equity, in the standard accounting equation, is the amount of assets and retained earnings in a company over and above the company’s liabilities. Return on Equity is a ratio which divides the net income of a company by the total shareholder’s equity in a company, which is effectively looking at the profitability of the profits of a company. Continue reading...
Trend traders can use the Average Directional Index (ADX) technical indicator to spot and confirm the strength of a trend in a security, then combine the ADX reading with other indicators to determine whether it makes sense to trade with the trend. Click here to view the current news with the use of other Technical Indicators Technical Indicators are charting tools that appear as lines on charts, or as other kinds of graphical information, and serve as guidelines for buying and selling opportunities. Traders use technical indicators like the ADX to make predictions about future prices. They verify how well a specific indicator works for a particular security, often by calculating the odds of success under similar market conditions to guide their actions. Continue reading...
Investors and traders are in constant search of tools they can use to gain any possible advantages from shifting markets. Technical indicators are especially vital parts of any trader’s kit, and few indicators are as consistent (and dependable) as moving averages. A Simple Moving Average (SMA) is a technical indicator that can help traders determine whether a bull or bear trend will continue or reverse course. It typically adds up closing prices for a given time period, then divides that figure by the number of time periods used for the average. Continue reading...