Range-bound trading is a strategic approach employed by traders seeking to profit from securities trading within specific price channels. This method involves identifying crucial support and resistance levels and connecting them using horizontal trendlines. Traders capitalize on this strategy by buying securities at the lower support trendline and selling them at the upper resistance trendline, within the established channel. Continue reading...

What are Resistance and Support Levels?

In&nbsp;technical analysis, a&nbsp;level of resistance&nbsp;is an imaginary barrier that keeps the price of a security from rising beyond a certain level. Conversely, a&nbsp;level of support&nbsp;is an imaginary barrier that keeps the price of a security from falling beyond a certain level. A resistance line can be thought of as the theoretical glass ceiling that a&nbsp;security price&nbsp;has difficulty breaking through. Resistance lines (along with&nbsp;moving averages,&nbsp;standard deviation, and similar calculations) are used to put a range of probability on the expected movement of a security price, with the resistance line representing the top of that range. Continue reading...

What are the basics of technical analysis?

What does it mean to technically analyze a stock or other security? Technical analysis involves identifying price ranges, trend momentum, and points of possible reversals via graphical representations of the math behind price movements, examining information to the second or third derivative, and using trial-and-error with formulas. Geometry, calculus, physics, and finance all play a part in this methodology. Continue reading...

What are Breakouts?

Breakouts are events where a stock or index suddenly changes the magnitude and direction of its trading range and a new level of support and resistance is defined. A stock or index might bump up against the same support or resistance level for some time, or experience a time of consolidation and horizontal movement before the price breaks the upper limit of resistance and a new high is attained. Sometimes prices consolidate or hit resistance levels as the markets and investors wait to see what some news will be about the condition of the economy and so forth. Once there is good news, investors might take it as the “go-ahead” sign, and the price will breakout from the previous range. Continue reading...

AA+/Aa1 — credit rating

AA+ — S&amp;P / Fitch Aa1 — Moody’s Major independent rating institutions such as Moody’s, Fitch, and Standard &amp; Poor’s (S&amp;P) can make or break a company or municipality’s ability to issue debt at a competitive yield. They rank companies and debt issues in terms of the risk of default. Ratings in the A range are considered Investment Grade, which is a rating mostly used by institutional investors. The interesting thing is that there are 7 kinds of A ratings, and they are different between the ratings institutions. We will not list them here, but charts that show the system are readily available online. Continue reading...

What is a Bond?

A bond is a contract which “binds” the lender to the debtor, where an individual investor is generally the lender and the debtor is the company or government which has borrowed funds. When a company or government entity needs more capital, whether to fund operations or a specific project, it can borrow money from investors instead of from a banking institution. Where there is a risk of the investor not being repaid, the interest rate will be proportionally higher. The simplest way a bond works is with set payments at set intervals that gradually repay the debt and interest owed to the investor over a set amount of time. Continue reading...

Who are Chartists?

Chartists are technical traders, theorists, and experts in charting, with the goal of better representing data and using charts to the greatest effect in trading. They attempt to find parameters and algorithms that can offer efficient trading signals and profits, using only the information present on charts – a type of&nbsp;technical analysis. Technical analysis is a discipline that involves identifying price ranges,&nbsp;trend momentum, and points of possible reversals via graphical representations of the math behind price movements, examining information to the second or third&nbsp;derivative, and using trial-and-error with formulas. Geometry, calculus, physics, and finance all play a part in this methodology. Continue reading...

Relative Strength Index (RSI) is a momentum oscillator developed by Welles Wilder. In the RSI, the average gains and average losses over a specific time period (such as 14 days) are divided to calculate the Relative Strength, then normalized into the Relative Strength Index (RSI), which is range bound between 0 and 100. The RSI typically fluctuates between values of 70 and 30, with higher numbers indicating more momentum. According to this indicator, a security with an RSI over 70 (out of 100) can be considered overbought, while a security with an RSI under 30 (out of 100) can be considered oversold. Continue reading...

BB/Ba2 — credit rating

BB — S&amp;P / Fitch Ba2 — Moody’s A bond rated BB/Ba2 is just below investment grade and is a somewhat speculative financial instrument. Fitch, Moody’s, and Standard &amp; Poor’s (S&amp;P) are the Big Three major credit ratings institutions. They each have proprietary formulas for assessing the financial strength and creditworthiness of companies, municipalities, insurers, and bond issues, The most common use of these ratings is for bonds, as investors seek to learn how likely it is that a bond will default on its payments. Continue reading...

A+/A1 — credit rating

A+ — S&amp;P / Fitch A1 — Moody’s In the spectrum of ratings given to bonds and companies, A+/A1 is a very good rating to get, even if it is the 5th rating from the top. The Big Three ratings institutions, which are Fitch, Moody’s, and S&amp;P, give ratings for creditworthiness after inspecting the books of companies who issue bonds. There are credit ratings given for companies and credit ratings given to bond issues. Continue reading...

What is a Callable Bond?

A callable bond, also known as a “redeemable bond,” is one where the issuer has the ability to pay off the debt prior to its maturity date, with certain conditions. Which the issuer has the right to redeem prior to its maturity date, under certain conditions. The primary reason that an issuer would choose to “call” a bond is that interest rates have declined since the bond was issued. By calling the bond, the issuer generally has to opportunity to refinance that debt at a lower rate. Once called, the issuer will notify the creditor and pay off the debt, typically with a slight premium added to close the deal. Continue reading...

Keywords: debt, bond,

What is a Convertible Bond?

A convertible bond, also known as convertible debt, is debt that can be converted to equity (in the form of common stock) at the discretion of the bondholder. There are typically windows that an investor can choose to convert the bond to equity, which an investor may choose to do if they have confidence the company will continue to perform well. Because a convertible bond has the option to convert to stock, it typically offers a lower interest rate since the conversion capability itself has value. Continue reading...

Keywords: bond,

What is a Bond Coupon?

A bond coupon is the interest rate that a bond issuer agrees to pay&nbsp;to the bondholder, representing the interest earned from owning the bond. Bond coupons are fixed at the time the bond is issued and remain constant throughout the bond's life. The fixed nature of bond coupons makes them an attractive investment for investors seeking predictable income streams. Continue reading...

What are Bond Ratings?

The possibility of a company or municipal government defaulting on their bond obligations, usually by going bankrupt, is a real one. For this reason, all bonds are rated according to the financial stability of the issuer. A look at the history of corporate and municipal debt will illuminate the fact that the possibility of the issuer being unable to pay its obligations to bondholders is a very real one. There is an established system of bond ratings that gives a rough estimate of the bond's reliability. Continue reading...

A/A2 — credit rating

A — S&amp;P / Fitch A2 — Moody’s Such ratings are given to bond issues and insurance companies, primarily, and this particular one is in the Upper Medium band of the Investment Grade ratings. Investment grade bonds are considered to have a very low possibility of default. The ratings go up to AAA/Aaa and all the way down to DDD/D, with Investment Grade bonds being in the range of AAA/Aaa to BBB-/Baa3. Continue reading...

What are asset classes?

Asset classes are types of appreciable investments that can be grouped and distinguished from one another based on the correlation of their price movements and the structure of their cash flows. Some of the most common asset classes are stocks, bonds, cash (and cash equivalents), commodities, and real estate. Many individual securities and sub-classes will fall into each of these. Asset classes are a large consideration when creating a well-diversified portfolio. Continue reading...

A bond ladder is a portfolio of bonds that have different maturities, that may range from months to years in difference. A bond ladder is designed to reduce interest rate risk and create predictable income streams. An investor will build a bond ladder often in an effort to reduce interest rate risk and also to create predictable income streams, where coupon payments happen at different times and principal is also returned in various intervals. Continue reading...

What is the Bond Market?

You might not know it, but the Bond Market is about twice the size of the Stock Market. It’s true; in the US and internationally, the bond market, which includes municipal bonds, corporate bonds, government bonds, v, etc, has almost twice the amount invested in it than the Stock Market. Within these categories, there are many subsets. Bonds are widely used by individual investors as well as corporations and governments. Continue reading...

What Types of Bonds Are There?

Bonds are divided into a several categories, and it is possible to get substantial diversification within a bond portfolio alone. Bonds may be categorized into several types. There are investment grade bonds which are conservative and safe, high-yield bonds which are relatively risky and profitable, floating rate bonds whose coupon rate is not fixed, zero coupon bonds which only pay at maturity, and foreign bonds, and so on. Continue reading...

What is an Income Bond?

Income bonds are issued by companies and they will only pay a coupon or interest rate if the company generates adequate earnings to do so. Non-payment of a coupon or interest rate does not necessarily mean that the company is in default. The principal amount plus some interest is due to the bondholder at maturity. Income bonds are sometimes issued by companies who are experiencing hard times and cannot guarantee a coupon payment to bondholders. Continue reading...