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What is Form 2848: Power of Attorney and Declaration of Representative?
IRS Link to Form — Found Here Sometimes individuals need representation to argue their case to the IRS or the tax court. To this end, there is an IRS form, the 2848, which designates an individual to represent the taxpayer on tax matters. The person receiving agency must be qualified and certified to perform such work. CPAs, Enrolled Agents (EAs), tax attorneys, and a few other professionals are qualified to represent taxpayers (or non-taxpayers, as the case may be) on tax matters in a tax court or IRS audit. To give one of these registered tax advisors the authority to serve as your agent and proxy for such matters before the IRS and tax courts, you must file a Form 2848. Continue reading...
What is a Financial Advisor?
The term "Financial Advisor" applies to professionals who are compensated for helping to implement investment strategies, but it is a broad and non-specific term. There are thousands of people who are called “Financial Advisors” – but within this category are various professions with different specialties and compensation structures. There are Financial Advisors, Financial Planners, Investment Managers, Registered Investment Advisors (RIAs), and at times even CPAs, insurance agents, and lawyers are included in this umbrella term. Continue reading...
What is a Reverse Mortgage?
A reverse mortgage is basically an annuity paid for with home equity. In a reverse mortgage, instead of paying to for your home, you’re getting paid for your home. It is considered a loan, but it does not have to be repaid, except by the proceeds from selling the home. Older Americans who need the income and aren’t concerned about their heirs getting their house might apply for a reverse mortgage. It is also known as a Home Equity Conversion Mortgage (HECM). Continue reading...
Is Bitcoin Legal?
Bitcoin remains a technology and a currency that primarily exists outside of the influence and control of governments and regulated markets. In most places, it is accepted for what it is. In some countries, it is explicitly banned. Bitcoin is technically illegal in a few parts of the world, but for the most part, it remains in the extra-legal realm, existing outside of the traditional legal system and the regulated markets. Bitcoin was created in large part to be difficult to understand and to pin down, to be part of the fringe and underground that could not be controlled by a central authority. It is open-source, so no one owns the rights to the code, and the community of programmers interested in shaping the future of cryptocurrency frequently attempts to make small upgrades and tweaks to blockchain technology in the interest of creating more efficient, more scalable blockchain cryptocurrency. Continue reading...
What are Fibonacci Clusters?
Fibonacci lines, retracements, and extensions are used by chartists to identify possible future support and resistance levels, as well as areas where there may be reversals. Investors can use this information to put hedges or speculative bets in place, if they believe that, like many naturally occurring systems in nature, the market behavior will exhibit some fractal-like forms that can be measured with Fibonacci sequence numbers and the Golden Ratio. Continue reading...
What is divergence analysis?
The analysis of convergence and divergence between indexes and other data seeks to find leading indicators where there is confirmation or non-confirmation of trends. Dow Theory was one of the first examples of such thinking. Charles Dow would watch the movements of Industrials and the Rail and compare the uptrend or downtrend of each. Where trends do not line up (e.g., one is trending downward with lower troughs and the other has “higher lows”) there is “divergence”, and non-confirmation of what was thought to be a trend in one index. Continue reading...
What are Fibonacci Channels?
Price movement often occurs in a range-bound way, even when an uptrend or downtrend is in effect. Fibonacci channels estimate support and resistance numbers using Fibonacci numbers, which are found throughout the natural world, in order to define possible places where reversals will occur. Fibonacci numbers are related to the study of chaos theory, which seeks to find order in complex systems. Since the markets have so many variables, but no lack of data, they are an excellent place to search for Fibonacci patterns. Continue reading...
What is a Home, Legally-Speaking?
The laws concerning a legal residence or primary residence may come into play for purposes of insurance, state taxes, and business matters. Some people have secondary residences, some people choose to remain legal residents of one state while they inhabit another. It can be quite complicated and various statutes may apply, depending on the situation. It can matter for a mortgage loan, for local voting, for healthcare and for business: what is a home? Continue reading...
What is a Takeover?
A takeover is an acquisition done through the procurement of enough equity interest to govern a company from the board of directors. Takeovers can be hostile or friendly, and may involve a tender offer from the acquiring company who seeks to buy a large block of shares. Takeover carries a negative connotation, since in peaceful circumstances this is usually called an acquisition. An acquiring corporation will offer to buy enough shares to have a controlling interest in the company in what is called a tender offer. Shareholders of the target company will have a set amount of time to decide whether they would like to take the offer, which is normally to buy the shares at a premium over the market price. Continue reading...
What are Technical Indicators?
Technical Indicators are charting tools that appear as lines on charts, or as other kinds of graphical information, which serve as guidelines for buying and selling opportunities. They are based on mathematical formulas, and may be called oscillators, trading bands, and signal lines, among other things. Technical analysts use information about price, volume, standard deviation, and other metrics to construct systems for trading using mathematical formulas which can be translated into useful charting tools. The systems can bring discipline to a trader’s strategy by providing clearly defined circumstances in which a trader has reason to buy, sell, hold, and so on. Continue reading...
What is an Uptrend?
An uptrend is a continuous upward movement in a stock's price. An uptrend is an upward movement over a few increments of time (whatever time increment being used), where the successive numbers being compared continue to increase. The parameters being compared might be just peaks, just troughs, closing prices, or averages, but formally it is defined as increased in successive peaks and troughs both. Continue reading...
Top Stock Chart Patterns
Chart patterns are shapes that sometimes appear in the charts of securities prices. Some of them may prove useful to you. Some frequently discussed chart patterns include Head and Shoulders, Double/Triple Bottom/Top, Cups and Saucers, Flags and Pennants, and others. Generally, it can be useful to compare and connect the troughs to each other and the peaks to each other to see if there is a trend confirmation if the breadth is narrowing, or if a reversal might be imminent. Continue reading...
What are Fibonacci Retracements?
Fibonacci Retracements are places where a Fibonacci lines and arcs. If a retracement has a length that proportionally fits within certain parameters in comparison to the uptrend that preceded it, some traders attempt to predict the size of the uptrend that will come afterwards using Fibonacci numbers. The most popular retracement percentages to use are 23.6%, 38.2%, 50%, 61.8%, and 100%. Fibonacci numbers are part of the Fibonacci sequence, where the two previous numbers are added together to calculate the next number in the sequence. The ratio of two Fibonacci numbers is the Golden Ratio, or 1.61803398875, which has been used since ancient times as the perfect proportion in architecture and other design. The Golden Ratio is also known as Phi (pronounced “fee”). Because Fibonacci numbers are found throughout the natural world, they have been integrated into some traders’ strategies for market analysis. Continue reading...
What is Home Equity?
Home equity is a notional amount that a person owns at any given time, which is computed as the market value of a home minus any remaining principal repayments on a loan. Home equity is an asset on a person’s balance sheet, and can be used as as leverage for additional loans or lines of credit. A person’s home equity is the amount in their home which is “paid off.” It can be computed by taking the fair market value of a home and subtracting the amount of principal, if any, that still needs to be repaid on a mortgage loan. Continue reading...
What is Deflation?
Deflation is an economic term used to describe a trend of broad-based price declines for goods and services. Deflation is generally considered a big negative in the realm of economics. If a country is experiencing deflation, it is usually because demand for goods has fallen substantially, pushing prices down. It can also be tied to falling investment and government spending, both factors that signal weak demand in an economy. Continue reading...
What is a Home Equity Conversion Mortgage?
The main type of reverse mortgage that people get today is the Home Equity Conversion Mortgage, backed by the US Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). These reverse mortgages are available to people age 62 or older who are interested in leveraging their home equity to gain liquidity, either in the form of a lump sum, monthly payments, or other arrangement. A Home Equity Conversion Mortgage (HECM) is a reverse mortgage available to homeowners age 62 or older, insured by the Federal Housing Administration (FHA). Continue reading...
What does “Buying on Weakness” Mean?
Instead of waiting for confirmation of reversal, “buying on weakness” means to go ahead and buy a long position (or cover a short position) while a stock is in the middle of a downtrend, in the hopes that it will reverse soon and the preemptive move will allow you to capture the entire upside. Upswings can happen very quickly, and failure to prepare for them can cost investors a lot of money. Buying on weakness is intended to put the investor in a position for maximum gains, as well as preventing losses on a short position. This is one part of the “buy on weakness / sell on strength” mantra, which is essentially the same thing as “buy low / sell high”. Continue reading...
What is a Mortgage Equity Withdrawal?
Mortgage Equity Withdrawals (MEWs) may effectively be a withdrawal when viewed in a balance sheet, but they are actually loans that use the equity in a home as the collateral. These are also known as home equity loans. A full liquidation of equity through such a loan is a reverse mortgage. When a homeowner has paid off their home, they have a lot of equity and collateral to work with if they would like to get some liquidity (money) out of a hard asset. Continue reading...
What are market indicators?
Market indicators are quantitative tools for the analysis of market information, which may hint or confirm that a trend or reversal is about to happen (leading indicator) or has begun (lagging indicator). Indicators are technical analysis algorithms which give investors signals that may be used as the guidelines for trading. Indicators might be called oscillators or have various other proper names, since some of them are quite well-known, but there are general conventions or instructions for how to use an indicator, how it can be tweaked to suit the scope of your analysis, and what is considered a trade signal. Continue reading...
How to use the Relative Strength Index (RSI) in trading
The Relative Strength Index (RSI) was developed by J. Welles Wilder Jr. to measure asset momentum using price changes and the speed of those changes. Like stochastics, the RSI is an oscillator that reads between 0 and 100; in this case, the RSI calculation determines the ratio of upward and downward movement using 14 periods of data, then smooths it out so only strong trends approach 0 or 100. Traders traditionally interpret RSI values of 70 or greater as an indicator of an overbought asset, while values 30 or below indicate an asset has been oversold; higher or lower values (like 80 and 20) can be used to minimize the number of bought or sold readings. Continue reading...