What should I know about IPOs?
IPOs are initial public offerings of a private company ready to turn public and trade on an exchange, with the scrutiny of shareholders. IPOs are priced by the investment bank selling them, instead of the supply and demand of the market. Many have heard the term "IPO" (Initial Public Offering), which is the issuance of the first publicly-available shares of a company. It actually represents the only capital a company will ever raise with its stocks, unless they issue more at another time or if they have issued convertible bonds or warrants. After the IPO, any money made on those shares of stock will be by the buyers and sellers in the market, which is known as the Secondary Market-- the Primary Market is where stocks are issued and purchased directly from the company. Continue reading...
What is the Triple Bottom (Bullish) Pattern?
The Triple Bottom pattern appears when there are three distinct low points (1, 3, 5) that represent a consistent support level. The security tests the support level over time but eventually breaks resistance and makes a strong move to the upside. This type of formation happens when sellers can not break the support price, and market participants eventually pour in. Once the price breaks out from the top pattern boundary, day traders and swing traders should trade with an UP trend. Consider buying a security or a call option at the breakout price level. To identify an exit, compute the target price by adding the pattern’s height (highest price minus the bottom price support level) to the breakout level the highest high. When trading, wait for the confirmation move, which is when the price rises above the breakout level. Continue reading...
How does Bitcoin Mining Work?
Anyone with a computer connected to the internet can potentially be a bitcoin miner. Bitcoin’s blockchain technology requires that a large network of computers, running the same client software, be used to randomly succeed at validating blocks of encrypted transactions every 10 minutes or so. That’s where bitcoin mining comes in. Mining is the act of letting one’s computer run what’s known as the “hash function” over and over and over in an attempt to crack the codes on the blocks that need validation. The codes that need cracking are all similar and are only difficult enough to require an average of 10 minutes for a random mining computer to get the right answer. The code and the answers are only significant in that they take time to complete, and that they allow the transactions to be validated and added to the ledger of all bitcoin transactions. Continue reading...
What is the Symmetrical Triangle Bottom (Bullish) Pattern?
The Symmetrical Triangle Bottom pattern forms when the price of a pair fails to retest a high or a low and ultimately forms two narrowing trend lines. As the support and resistance levels consolidate, it forms a triangle (15). Symmetrical Triangles are characterized by the upper line sloping downward and lower line sloping upward. The price movement inside the triangle should fill the shape with some uniformity, without leaving large blank areas. Continue reading...
What is the Discount Rate?
The Discount Rate can actually have multiple meanings, but the most prevalent one is in regards to the minimum interest rate the Federal Reserve will charge for lending to commercial banks. The Federal Reserve sets the discount rate in an effort to discourage or encourage commercial banks to borrow, depending on the economic conditions. The discount rate also refers to the rate used to calculate the present value of future cash flows, as part of Discounted Cash Flow (DCF) analysis. Continue reading...
What is the Glass-Steagall Act?
The Glass-Steagall Act was passed in 1933 to place a dividing wall between commercial banking and investment banking. It was in an effort to protect consumers and the economy from the risks of speculative investment banking. JP Morgan and other large institutions were targeted. The act was partially repealed and replaced in 1999 by the Gramm-Leach-Bliley Act. After 2008, some opined that the repeal of the original act contributed to the financial crises, and they instituted the Volcker Rule, which reinstated part of the original Glass-Steagall act. Continue reading...
A-/A3 — credit rating
A- — S&P / Fitch A3 — Moody’s Rating institutions assign various levels of credit ratings to signify the chance of default; the A-/A3 rating is considered Investment Grade, but it is getting closer to the Junk Bond range. If a company or debt issue has a rating of A-/A3, it means that S&P and Fitch have given it an A- and Moody’s has given it an A3 rating. They have their own symbology for their ratings system but these are at the same level on both scales: these ratings are at the 6th or 7th degree from the top possible ratings, which is AAA/Aaa. Continue reading...
Where Do I Find a Financial Advisor?
A financial advisor can be found through an online search, at events, or through the recommendation of friends. Believe it or not, while there are thousands of resources and databases, the best way to find a Financial Advisor is to ask your friends. You will need to determine a few basic criteria when looking for a Financial Advisor, such as geographical location, his or her age bracket, years of experience, frequency and medium of communication, and the amount of fees you are willing to pay. While there are thousands of resources and databases, sometimes the easiest way to find a Financial Advisor is to ask your friends. Continue reading...
Can You Pay More Than Nominal Value for a Bond?
Yes, and this is part of what’s called the interest rate risk of bonds. If someone purchased a $1,000 bond with a 5% coupon, and a year later, the company issued new $1,000 bonds with a 4% coupon, in order to buy the 5% coupon bond from the owner, you would obviously need to pay more than $1,000 (since the new bonds issued by the company have a 4% coupon). What does Nominal Value mean? What Happens to the Price of a Bond After I Buy It? Can You Sell a Bond for Less Than the Price You Paid For It? 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...