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What is Brand Equity?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Brand Equity”. Brand equity is a phrase used in the marketing industry which describes the value of having a well-known brand name, based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products with a less well-known name. One situation when brand equity is important is when a company wants to expand its product line. If the brand's equity is positive, the company can increase the likelihood that customers will buy its new product by associating the new product with an existing, successful brand. For example, if Campbell's releases a new soup, it would likely keep it under the same brand name, rather than inventing a new brand. The positive associations customers already have with Campbell's would make the new product more enticing than if the soup had an unfamiliar brand name. Companies can create brand equity for their products by making them memorable, easily recognizable and superior in quality and reliability. Mass marketing campaigns can also help to create brand equity. If consumers are willing to pay more for a generic product than for a branded one, however, the brand is said to have negative brand equity. This might happen if a company had a major product recall or caused a widely publicized environmental disaster. By Barry Norman, Investors Trading Academy
What is a Sunk Cost?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Sunk Cost” As the name suggests, sunk cost refers to money that has already been invested in something, money that can't be recovered. Too often, we factor that expense into our financial decision-making when we shouldn't. Let's say you've spent $40 on a nonrefundable ticket to the theater for tomorrow night. And you're suddenly invited to play board games at a friend's house that same evening. You might think that you should go to the theater -- after all, you spent that $40 -- even though what you'd rather do is hang out with your friends and play games. The $40 is a sunk cost. It's spent, whether you go see the play or not, and the money doesn't know the difference. So you should do whatever you would rather do. Companies need to keep sunk costs in mind when they plan projects and execute strategies. It's easy to think that once they have spent money buying another company or perhaps building a factory or coal mine, they should stick with it, even if it's not turning out to be as productive as initially expected. If they disregard the sunk costs, though, they can make more sensible decisions about where to spend their next dollars -- ideally on their most promising options. By Barry Norman, Investors Trading Academy
What is an Arbitrage?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Arbitrage”. Arbitrage occurs when an investor simultaneously buys and sells an asset in an attempt to benefit from an existing price difference on similar or identical securities. The arbitrage technique enables investors to self-regulate the market and aid in smoothing out price differences to ensure that securities continue to trade at a fair market value. Given the advancement in technology it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly and the opportunity is often eliminated in a matter of seconds. Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. This is considered riskless profit for the investor/trader. In the context of the stock market, traders often try to exploit arbitrage opportunities. For example, a trader may buy a stock on a foreign exchange where the price has not yet adjusted for the constantly fluctuating exchange rate. The price of the stock on the foreign exchange is therefore undervalued compared to the price on the local exchange, and the trader makes a profit from this difference. By Barry Norman, Investors Trading Academy
What is a Corporation?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Corporation” A corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company's debts. A corporate structure is perhaps the most advantageous way to start a business because the corporation exists as a separate entity. In general, a corporation has all the legal rights of an individual, except for the right to vote and certain other limitations. Corporations are given the right to exist by the state that issues their charter. If you incorporate in one state to take advantage of liberal corporate laws but do business in another state, you'll have to file for "qualification" in the state in which you wish to operate the business. There's usually a fee that must be paid to qualify to do business in a state. What sets the corporation apart from all other types of businesses is that a corporation is an independent legal entity, separate from the people who own, control, and manage it. In other words, corporation and tax laws view the corporation as a legal "person" that can enter into contracts, incur debts, and pay taxes apart from its owners. Other important characteristics also result from the corporation's separate existence: A corporation does not dissolve when its owners or shareholders change or die, and the owners of a corporation have limited liability. By Barry Norman, Investors Trading Academy
What is a Series 7 License?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Series 7 License” The Series 7 license is known as the general securities representative (GS) license. It authorizes licensees to sell virtually any type of individual security. This includes common and preferred stocks; call and put options; bonds and other individual fixed income investments; as well as all forms of packaged products (except for those that also require a life insurance license to sell). The only major types of securities or investments that Series 7 licensees are not authorized to sell are commodities futures, real estate and life insurance. The Series 7 exam is by far the longest and most difficult of all the securities exams. It lasts for six hours and covers all aspects of stock and bond quotes and trading; put and call options; spreads and straddles; ethics; margin and other account holder requirements; and other pertinent regulations. Those who carry this license are officially listed as "registered representatives" by FINRA, but they are generally referred to as stockbrokers. Many insurance agents and other types of financial planners and advisors also carry the Series 7 license to facilitate certain types of transactions inherent in their businesses. Principals of general representatives must also obtain the Series 24 license. By Barry Norman, Investors Trading Academy - ITA
What is The OECD?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “OECD” OECD is the common name for the Organization for Economic Cooperation and Development (OECD) is a unique forum where the governments of 34 democracies with market economies work with each other, as well as with more than 70 non-member economies to promote economic growth, prosperity, and sustainable development. The OECD provides a forum in which governments can work together to share experiences and seek solutions to common problems. We work with governments to understand what drives economic, social and environmental change. The organization measures productivity and global flows of trade and investment. They analyze and compare data to predict future trends. The OECD sets international standards on a wide range of things, from agriculture and tax to the safety of chemicals. The Organization for Economic Co-operation and Development celebrated its 50th anniversary, but its roots go back to the rubble of Europe after World War II. Determined to avoid the mistakes of their predecessors in the wake of World War I, European leaders realized that the best way to ensure lasting peace was to encourage co-operation and reconstruction, rather than punish the defeated. The OEEC was established in 1947 to run the US-financed Marshall Plan for reconstruction of a continent ravaged by war. By making individual governments recognize the interdependence of their economies, it paved the way for a new era of cooperation that was to change the face of Europe. By Barry Norman, Investors Trading Academy
What is an Angel Investor?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Angel Investor”. An Angel investor is a person, business or group that provides financial backing for small startups or entrepreneurs. Angel investors are usually found among an entrepreneur's family and friends. The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through difficult times. A Business Angel investor uses their personal disposable finance and business or professional experience to invest in the growth of a small business, generally in start-up or early stage. Angel investors can make investments on their own or as part of a syndicate. Angel investors invest in early stage or start-up companies in exchange for an equity ownership interest. Angel investing in start-ups has been accelerating. High-profile success stories like Uber, WhatsApp, and Facebook have spurred angel investors to make multiple bets with the hopes of getting outsized returns. The typical angel investment is $25,000 to $100,000 a company, but can go higher. Here is what angels particularly care about: • The quality, passion, commitment, and integrity of the founders. • The market opportunity being addressed and the potential for the company to become very big. • A clearly thought out business plan, and any early evidence of obtaining traction toward the plan. • Interesting technology or intellectual property. • An appropriate valuation with reasonable terms. Angel investors give more favorable terms than other lenders, as they are usually investing in the person rather than the viability of the business. They are focused on helping the business succeed, rather than reaping a huge profit from their investment. Angel investors are essentially the exact opposite of a venture capitalist. By Barry Norman, Investors Trading Academy
What is Rights Offering?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Rights Offering”. In a rights offering, also known as a subscription right, a company offers existing shareholders the opportunity to buy additional shares of company stock in proportion to the number they already own before any new shares are offered to the public. Such an offering is usually mandated by the corporate charter. To act on the offering, you turn over the rights you receive, typically one for each share of stock you own, and the money needed to make the purchase within the required period, often two to four weeks. The amount of money that's required is known as the subscription price. You don't have to buy the additional shares, and you can transfer your rights to someone else if you prefer. But buying helps you maintain the same percentage of ownership you had in the company before the new shares were issued rather than having that percentage diluted. For example, a company whose stock is trading at $20 may announce a rights offering whereby its shareholders will be granted one right for each share held by them, with four rights required to buy each new share at a subscription price of $19. The company will also specify that the rights expire on a certain date, which is usually anywhere from one to three months from the date of announcement of the rights offering. Companies typically issue rights to give their existing shareholders the opportunity to buy additional shares before other buyers, and also to enable current shareholders to maintain their proportionate stake in the company. By Barry Norman, Investors Trading Academy
What is Crowdfunding?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Crowdfunding” Crowdfunding is a way of financing your business through donations of money from the public. This is commonly done through crowdfunding websites. Generally, you post your business idea as a 'campaign idea' onto the website, with a description of your project. If people want to support your campaign, they can donate money to help you achieve your goal. These supporters are often called backers. On some websites, you need to set a monetary goal, and a time frame to reach this goal by. To encourage people to support your campaign, you can offer incentives and rewards based on amount they donate. These incentives and rewards can be anything, such as merchandise, acknowledgement, discounts on future purchase of the product you are developing, etc. For example, you can set that for every donation of $10, you will provide an acknowledgement to the donor on your product’s website, and for every donation of $20, you will reward a 5% discount on the purchase of your product once it is produced. Crowdfunding has a long history with more than one root. Books have been crowdfunded for centuries: Authors and publishers would advertise book projects in remuneration or subscription schemes. The book would be written and published if enough subscribers signaled their readiness to buy the book once it was out. The subscription business model is not exactly crowdfunding since the actual flow of money will only begin with the arrival of the product. The list of subscribers has, on the other hand, the power to create the necessary confidence among investors that is needed to risk the publication. War bonds are theoretically a form of crowdfunding military conflicts. London's mercantile community saved the Bank of England in the 1730s when customers demanded their pounds to be converted into gold - they supported the currency until confidence in the pound was restored and thus crowdfunded their own money. By Barry Norman, Investors Trading Academy - ITA
What is a Basis Point?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Basis Point”. Investment professionals regularly refer to "basis points" when discussing things like bond yield, mutual funds or lending rates. Why does this seemingly tiny unit of measure—one basis point is equal to one one-hundredth of a percentage point—get so much attention? It's pretty simple: Basis points can add up to a lot of money for both individual investors and institutions. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point. Basis points are used as a convenient unit of measurement in contexts where percentage differences of less than 1% are discussed. The most common example is interest rates, where differences in interest rates of less than 1% per year are usually meaningful to talk about. For example, a difference of 0.10 percentage points is equivalent to a change of 10 basis points for example a 4.67% rate increases by 10 basis points to 4.77%. In other words, an increase of 100 basis points means a rise by 1%. Like percentage points, basis points avoid the ambiguity between relative and absolute discussions about interest rates by dealing only with the absolute change in numeric value of a rate. For example, if a report says there has been a "1% increase" from a 10% interest rate, this could refer to an increase either from 10% to 10.1% By Barry Norman, Investors Trading Academy
What is Palladium?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Palladium”. Palladium is an important component in electronics, and is used in many new technologies such as fuel cells. As a commodity, it has drawn the attention of investors because it is not easily substituted, and is an important component of catalytic converters. Palladium, platinum, rhodium, ruthenium, iridium and osmium form a group of elements referred to as the platinum group metals. It is a metal used in many types of manufacturing processes and is found in electronics and industrial products. Palladium is an element found in the periodic table (atomic number 46), and is considered to be rare. The majority of the world's supply comes from mines located in the United States, Russia, South Africa and Canada. More than half the annual global demand of about 10 million ounces for palladium is from the automobile sector, while a quarter is used in other industries and in dentistry. Physically backed exchange-traded funds account for some demand, and about 4% of demand comes from jewelry. Car sales in China, the world's biggest auto market, are expected to grow by 11% this year to reach 24 million units out of the global total of 88.5 million, according to industry consultancy Frost & Sullivan. It expects U.S. sales to climb about 4% to almost 16 million. Barclay’s analysts say the Chinese government's plans to phase out 6 million old and environmentally unfriendly vehicles will create demand for 1.5 million passenger cars this year, which would further support the price of palladium. Palladium is also used in cars powered by natural gas, which is a growing niche offering in emerging markets such as India. Brazil, India and Russia are expected to experience robust auto-sales growth this year. India car sales in 2014 are expected to rise 10% to 3.2 million units. By Barry Norman, Investors Trading Academy
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What is a Bank Guarantee?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Bank Guarantee” A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss. Note that a bank guarantee is not the same as a letter of credit. A bank guarantee, like a line of credit, guarantees a sum of money to a beneficiary. Unlike a line of credit, the sum is only paid if the opposing party does not fulfill the stipulated obligations under the contract. This can be used to essentially insure a buyer or seller from loss or damage due to nonperformance by the other party in a contract. A bank guarantee might be used when a buyer obtains goods from a seller then runs into cash flow difficulties and can't pay the seller. The bank guarantee would pay an agreed-upon sum to the seller. Similarly, if the supplier was unable to provide the goods, the bank would then pay the purchaser the agreed-upon sum. Essentially, the bank guarantee acts as a safety measure for the opposing party in the transaction. These financial instruments are often used in trade financing when suppliers, or vendors, are purchasing and selling goods to and from overseas customers with whom they don't have established business relationships. The instruments are designed to reduce the risk taken by each party. By Barry Norman, Investors Trading Academy
Why is The Weekly Crude Oil Inventory Important to Speculators?
 
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Welcome to the Investors Trading Academy event of the week. Each week our staff of analysts and educators tries to provide you a better understanding of a major market event scheduled during the next week. This week we will focus on weekly EIA crude oil inventory. Once a week usually on Wednesday, the Energy Information Administration gives us a glimpse into what the future demand for oil is going to be by releasing its Crude Oil Inventory numbers. The report also provides data on inventories of distillates and gasoline, which are refined products of crude oil. Crude oil inventory levels change based on demand and supply trends. Demand comes primarily from refineries that process this crude into refined products like gasoline and heating oil. Supply comes from domestic production and imports from other countries. The Crude Oil Inventories number reports the number of barrels of crude oil commercial firms have in inventory. Commercial firms report their inventory levels to the Energy Information Administration on a weekly basis, but the EIA must still make some estimates to arrive at the final number. Inventories increase when demand is lower and decrease when demand is higher than supplies for the week. Every week, analysts anticipate an increase or decrease in crude inventories based on demand and supply expectations in that week. The difference between actual and expected changes in inventories affects crude prices. Another important figure that the EIA reports is the level of crude oil inventories at Cushing, Oklahoma, which is a major inland oil hub in the US. It’s the pricing point for the North American “benchmark,” WTI crude. Inventory levels at Cushing reflect the pace at which the increasing US oil supply is moving from major inland production areas such as the Bakken in North Dakota and the Permian in west Texas to the major refining hub situated on the Gulf Coast. A buildup of inventories at Cushing can pressure the price of WTI crude downwards, and vice versa. The amount of crude supply available, with respect to demand, also drives crude prices. A strong supply level is bearish for crude prices—unless it’s met with parallel demand. Lately, this has been happening in the US. Strong production levels resulted in robust crude inventory levels. They haven’t been matched by demand. By Barry Norman, Investors Trading Academy
What is a Monopoly?
 
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A monopoly situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition, which often results in high prices and inferior products. According to a strict academic definition, a monopoly is a market containing a single firm. In such instances where a single firm holds monopoly power, the company will typically be forced to divest its assets. Antimonopoly regulation protects free markets from being dominated by a single entity. A pure monopoly is a single supplier in a market. For the purposes of regulation, monopoly power exists when a single firm controls 25% or more of a particular market. Governments may grant a firm monopoly status, such as with the Post Office, which was given monopoly status by Oliver Cromwell in 1654. The Royal Mail Group finally lost its monopoly status in 2006, when the market was opened up to competition. A monopoly could be created following the merger of two or more firms. Given that this will reduce competition, such mergers are subject to close regulation and may be prevented if the two firms gain a combined market share of 25% or more. For example, if you want to buy a new automobile and there is only one brand from which you can purchase your car, that brand will be considered to hold a monopoly. Monopolies are harmful because they allow one entity to set the price on goods without consideration for competitive, affordable pricing. This is because when there is a monopoly, there are no competitors. This leaves customers at the mercy of the monopolist. In the late 1990s, Microsoft faced several suits due to perceived violations of these antitrust laws. Had the Justice Department proved the company was in violation, Microsoft would have been forced to divide itself into subsidiaries in order to break up the potential monopoly. This is happening with Google in Europe at present and the most well-known case was in the US when the government forced the telephone companies to break into several regional businesses called “baby bell". By Barry Norman, Investors Trading Academy
What is The Cash Conversion Cycle - CCC?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Cash Conversion Cycle - CCC” The cash conversion cycle is the theoretical amount of time between a company spending cash and receiving cash per each sale, output, unit of operation, etc. It is basically a measure of how long cash is tied up in working capital. The CCC is a great way to analyze the efficiency of the organization in managing cash to generate more sales. In management accounting, the Cash conversion cycle measures how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity risk entailed by growth. However, shortening the CCC creates its own risks: while a firm could even achieve a negative CCC by collecting from customers before paying suppliers, a policy of strict collections and lax payments is not always sustainable. The cash conversion cycle involves determining how long it takes to create inventory, sell inventory and collect on invoices to customers. Changes in cash conversion cycle can be very telling. For example, when companies take an extended period of time to collect on outstanding bills, or they overproduce due to poor estimations, their cash conversion cycles lengthen. For small businesses especially, long cash conversion cycles can mean the difference between profit and bankruptcy. After all, companies can only pay for things with cash, not profits. In turn, the net operating cycle is a measure of managerial competency as well as operational efficiency. It is important to note that different industries have different capital requirements and standards, and determining whether a company has a long or short cash conversion cycle should be made within that context. By Barry Norman, Investors Trading Academy - ITA
What is Rule of 70?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Rule of 70”. The Rule-of-70 provides a simple way to calculate the approximate number of years it takes for the level of a variable growing at a constant rate to double. The rule of 70 states that in order to estimate the number of years for a variable to double, take the number 70 and divide it by the growth rate of the variable. This rule is commonly used with an annual compound interest rate to quickly determine how long it would take to double your money. An Asset grows exponentially when its increase is proportional to what is already there. A common example is compound interest, where $100 invested at 7% per year annual compound interest will double in 10 years! Exponential growth applies to populations, too -- if a population grows at 7% per year, it, too, will double in 10 years. There are surprising consequences to the phenomenon of exponential growth. The $100 invested at a 7% annual return will double in 10 years to approximately $200, double in another 10 years to approximately $400, and double again in the next 10 years to approximately $800. Significant gains can be made by simply relying on exponential growth over time. One way of saying this is that the longer you wait on your investment, the faster your returns come in. Another useful application of the rule of 70 is in the area of estimating how long it would take a country's real GDP to double. Similar to compound interest rates, one can use the GDP growth rate in the divisor of the rule. For example, if the growth rate of the China is 10%, the rule of 70 predicts it would take 7 years for China's real GDP to double. By Barry Norman, Investors Trading Academy
What is Scalping?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Scalping” So what is scalping, in case of forex, forex scalping? Scalping is a method of trading where a trader “skims” small profits continuously. It is the act of entering and exiting positions several times in one day while trying to make profits during high velocity moves, a scalper will act quickly on releases of economic data and other significant news events that influence trading activity. Although similar, scalping is not the same as day trading. While day trading, a trader will open a position once or twice within one day, but close it before the day is through. He will never leave the position open overnight or carry it into another session. A day trader opens and closes positions once or maybe a few times a day based on information they obtain from five minute, fifteen minute or 30 minute charts. A scalper is even more feverish as he aims to skim tiny profits multiple times through going in and out of positions numerous times within a single day. This trader makes trades according to data from tick charts or one minute charts. As day traders chase after few profits involving dollars and cents per share or unit, scalpers aim to make numerous gains on trades involving between five and ten pips (fractions of pennies). They act fast and furiously when conducting transactions. When trading on standard lots, these petty gains add up. The average made on one pip for trading one lot is $10 and if five pips are involved, $50 can be made on a single trade. If this trade is successfully made ten times within a trading period, the trader can profit by $500. Of course, if everything goes properly and without any problem. Sometimes just one single position takes the profit made through several winning positions down the drain. By Barry Norman, Investors Trading Academy - ITA
What is Warrant?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Warrant” Corporations may issue warrants that allow you to buy a company's stock at a fixed price during a specific period of time, often 10 or 15 years, though sometimes there is no expiration date. Warrants are generally issued as an incentive to investors to accept bonds or preferred stocks that will be paying a lower rate of interest or dividends than would otherwise be paid. How attractive the warrants are — and so how effective they are as an incentive to purchase — generally depends on the growth potential of the issuing company. The brighter the outlook, the more attractive the warrant becomes. When a warrant is issued, the exercise price is above the current market price. For example, a warrant on a stock currently trading at $15 a share might guarantee you the right to buy the stock at $30 a share within the next 10 years. If the price goes above $30, you can exercise, or use, your warrant to purchase the stock, and either hold it in your portfolio or resell at a profit. If the price of the stock falls over the life of the warrant, however, the warrant becomes worthless. Warrants are listed with a "wt" following the stock symbol and traded independently of the underlying stock. For example, if you own warrants to purchase a stock at $30 a share that is currently trading for $40 a share, your warrants would theoretically be worth a minimum of $10 a share, or their intrinsic value. By Barry Norman, Investors Trading Academy
What is EPS or Earnings per Share?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “EPS or Earnings per Share”. EPS is one of the most common things brought up during an earnings announcement, and it provides investors insight into a company’s earnings health and often affects its stock price after an announcement. Earnings per share is generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. EPS is calculated by taking net income, subtracting the preferred dividends -for the sake of simplicity; let’s assume Hemlock Incorporated doesn’t offer dividends on preferred shares, and taking that difference and dividing it by the average number of outstanding shares. In the case of Hemlock, its current quarterly EPS is calculated by dividing its NI of $25 million by the company’s 37 million outstanding shares. When reported, EPS is typically compared up against EPS from either the previous quarter or year-after-year. As well, it is used in basic valuation calculations like the P/E Ratio. An important aspect of EPS that's often ignored is the capital that is required to generate the earnings in the calculation. Two companies could generate the same EPS number, but one could do so with less equity or investment - that company would be more efficient at using its capital to generate income and, all other things being equal would be a "better" company. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures. By Barry Norman, Investors Trading Academy
What is Foreign Policy?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Foreign Policy” Foreign policy are plans of action adopted by one nation in regards to its diplomatic dealings with other countries. Foreign policies are established as a systematic way to deal with issues that may arise with other countries. The United States has a different foreign policy for almost every country, and the policies can vary based on trade agreements in addition to many other conditions. Some countries foreign policy has been to exert a large amount of military force against countries that have different standards. U.S. foreign policy has traditionally been relatively consistent between Democratic and Republican administrations. Key allies have always been other Western powers like the UK, France. Allies in the middle east were—and continue to remain—countries like Israel, Saudi Arabia and Bahrain. Nevertheless, some differences can be seen based on the Obama administration's handling of relations with certain countries. For example, Israel and the U.S. have always been strong allies. But relations between Obama and Israeli Prime Minister Benjamin Netanyahu have been tense. A major contributor to this tension has been the Obama administration's Iran policy. The U.S. tightened sanctions on Iran in Obama's first term, but negotiated a deal in the second term that allowed international inspections of Iranian nuclear facilities. The U.S. and Iran also found common ground against the threat from ISIS. This rapprochement has irked Iran's traditional rival Israel, even though for all practical purposes Israel and the U.S. remain staunch allies. Republicans in Congress opposed the Iran deal and the easing of sanctions against Iran. They also invited Netanyahu to deliver a speech against the deal. Another country where the Democratic Obama administration reversed decades of U.S. policy is Cuba. Republican Rand Paul supported the unfreezing of relations with Cuba but his opinion is not shared by a majority of Republicans. Republicans like presidential contenders Marco Rubio and Ted Cruz have publicly opposed the normalization of relations with Cuba. By Barry Norman, Investors Trading Academy - ITA
What is Encumbrance?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Encumbrance” Encumbrance” includes a mortgage, charge, lien, pledge, right of pre-emption, option, covenant, restriction, lease, trust, order, decree, title defect or any other security interest or conflicting claim of ownership or right to use or any other third party right and any agreement to create any of the foregoing. An Encumbrance is the name given to funds that have been reserved when a purchase requisition is finalized and encumbered. When a requisition is processed, funds are placed aside for that transaction. Those funds are no longer available for use in other transactions, but also have not been included in the Actual Funds balance because a payment has not yet been generated and the funds have not physically left the university. The purpose and main benefit of encumbrance accounting is avoiding budget overspending. Encumbrances can also be used to predict cash outflow and as a general planning tool. Encumbrances are important in determining how much funds are available. The term encumbrance covers a wide range of financial and non-financial claims on property by parties other than the title-holder. Encumbrances prevent the property owner from exercising full – that is, unencumbered – control over his or her property. In some cases, the property can be repossessed by a creditor or seized by a government. By Barry Norman, Investors Trading Academy
What is a Stock or a Share?
 
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At some point, just about every company needs to raise money, whether to open up a West Coast sales office, build a factory, or hire a crop of engineers. In each case, they have two choices: 1) Borrow the money, or 2) raise it from investors by selling them a stake in the company. A stock is an ownership share in a corporation. Each of these shares denotes a part ownership for a shareowner, stockholder, or shareholder, of that company. When you own a share of stock, you are a part owner in the company with a claim however small it may be on every asset and every penny in earnings. Individual stock buyers rarely think like owners, and it's not as if they actually have a say in how things are done. Nevertheless, it's that ownership structure that gives a stock its value. If stockowners didn't have a claim on earnings, then stock certificates would be worth no more than the paper they're printed on. As a company's earnings improve, investors are willing to pay more for the stock. There are shares in private companies and public companies. Public companies are known as corporation and their shares can be purchased on global exchanges. There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated. By Barry Norman, Investors Trading Academy
What is a Conglomerate?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Conglomerate” A conglomerate is a corporation formed by the acquisition by one firm of several others, each of which is engaged in an activity that generally differs from that of the original. The management of such a corporation may wish to diversify its field of operations for a number of reasons: making additional use of existing plant facilities, improving its marketing position with a broader range of products, or decreasing the inherent risk in depending on the demand for a single product. There may also be financial advantages to be gained from the reorganization of other companies. In the late 19th century many American conglomerates, such as the Standard Oil Company and Trust, sought to control all aspects relating to the development, production, marketing, and delivery of their products. Responding to criticisms of the apparent monopolies enjoyed by such companies, the U.S. Congress enacted antitrust legislation with the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act in 1914. A strategy of diversification spurred the formation of many conglomerates in the mid-20th century, especially as firms sought to acquire unrelated companies whose products and services might better withstand economic slowdowns. By Barry Norman, Investors Trading Academy
What is Algorithm Trading (Algo Trading)?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Algorithm trading” Algorithm trading is a system of trading which facilitates transaction decision making in the financial markets using advanced mathematical tools. A trading system that utilizes very advanced mathematical models for making transaction decisions in the financial markets. The strict rules built into the model attempt to determine the optimal time for an order to be placed that will cause the least amount of impact on a stock's price. Large blocks of shares are usually purchased by dividing the large share block into smaller lots and allowing the complex algorithms to decide when the smaller blocks are to be purchased. In this type of a system, the need for a human trader's intervention is minimized and thus the decision making is very quick. This enables the system to take advantage of any profit making opportunities arising in the market much before a human trader can even spot them. As the large institutional investors deal in a large amount of shares, they are the ones who make a large use of algorithmic trading. It is also popular by the terms of algo trading, black box trading, etc. and is highly technology-driven. It has become increasingly popular over the last few years. By Barry Norman, Investors Trading Academy
What is The Efficient Market Hypothesis - EMH?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Efficient Market Hypothesis” You can't beat the market. The efficient market hypothesis says that the price of a financial asset reflects all the information available and responds only to unexpected news. Thus prices can be regarded as optimal estimates of true investment value at all times. It is impossible for investors to predict whether the price will move up or down as future price movements are likely to follow a random walk, so on average an investor is unlikely to beat the market. This belief underpins ­arbitrage pricing theory, the capital asset pricing model and concepts such as beta. The hypothesis had few critics among financial economists during the 1960s and 1970s, but it has come under increasing attack since then. The fact that financial prices were far more volatile than appeared to be justified by new information, and that financial bubbles sometimes formed, led economists to question the theory. Behavioral economics has challenged one of the main sources of market efficiency, the idea that all investors are fully rational homo economicus. Some economists have noted the fact that information gathering is a costly process, so it is unlikely that all available information will be reflected in prices. Others have pointed to the fact that arbitrage can become costlier, and thus less likely, the further away from fundamentals prices move. The efficient market hypothesis is now one of the most controversial and well-studied propositions in economics, although no consensus has been reached on which markets, if any, are efficient. However, even if the ideal does not exist, the efficient market hypothesis is useful in judging the relative efficiency of one market compared with another. By Barry Norman, Investors Trading Academy - ITA
What is a Commodity?
 
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Our word of the day is “Commodity” Commodities are the raw materials humans use to create a livable world. Humans use energy to sustain themselves, metals to build weapons and tools, and agricultural products to feed themselves. These — energy, metals, and agricultural products — are the three classes of commodities, and they are the essential building blocks of the global economy. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade. The commodity has to be tradable, meaning there needs to be a viable investment vehicle to help you trade it. For example, a commodity is included if it has a futures contract assigned to it on one of the major exchanges, or if a company processes it, or if there’s an ETF that tracks it. All the commodities have to be physically deliverable. Crude oil is included because it can be delivered in barrels, and wheat is included because it can be delivered by the bushel. Every commodity has an active market with buyers and sellers constantly transacting with each other. Liquidity is critical because it gives you the option of getting in and out of an investment without having to face the difficulty of trying to find a buyer or seller for your securities. By Barry Norman, Investors Trading Academy
What is Brent Oil?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Brent Oil”. There are different types of crude oil – the thick, unprocessed liquid that drillers extract below the earth – and some are more desirable than others. For instance, it’s easier for refiners to make gasoline and diesel fuel out of low-sulfur, or “sweet,” crude than oil with high sulfur concentrations. Low-density, or “light,” crude is generally favorable to the high-density variety for the same reason. Where the oil comes from also makes a difference if you’re a buyer. The less expensive it is to take delivery of the product, the more you’re willing to pay for it. From a transportation standpoint, oil extracted at sea has certain advantages over land-based supplies, which depend on the capacity of Pipelines. North Sea Brent crude was discovered in the early 1960s. It is now sourced primarily by the United Kingdom, Norway, Denmark, the Netherlands and Germany. Brent crude oil is not as light or as sweet as its counterpart, West Texas Intermediate oil. Brent Crude is more ubiquitous, and most oil is priced using Brent Crude as the benchmark. However, in the United States, West Texas Intermediate is the preferred measure. Brent Crude is produced near the sea, so transportation costs are significantly lower. In contrast, West Texas Intermediate is produced in landlocked areas, making transportation costs more on-erous. In recent years, due to advancements in oil drilling and fracking, West Texas Intermediate has become cheaper than Brent Crude oil. Prior to this, Brent Crude tended to be cheaper than West Texas Crude. By Barry Norman, Investors Trading Academy
What is FOB - Free On Board?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “FOB - Free On Board” The FOB abbreviation is an import/export term relating to the point at which responsibility for goods passes from seller – the exporter to buyer or importer. It's in this listing because it's commonly misunderstood and also has potentially significant financial implications. FOB meant originally that the seller is liable for the goods and is responsible for all costs of transport, insurance, etc., until and including the goods being loaded at the port. Logically FOB also meant and still means that the seller is liable for any loss or damage up to the point that the goods are loaded onto the vessel at the FOB port, and that thereafter the buyer assumes responsibility for the goods and the costs of transport and the liability. From the seller's point of view an FOB price must therefore include his costs of transport from factory or warehouse, insurance and loading, because the seller is unable to charge these costs as extras once the FOB price has been stated. The FOB expression originates particularly from the meaning that the buyer is free of liability and costs of transport up to the point that the goods are loaded on board the ship slightly different ways, even to the extent that other interpretations are placed on the acronym, most commonly 'Freight On Board ‘While liability and responsibility for goods passes from seller to buyer at the point that goods are agreed to be FOB, the FOB principle does not correlate to payment terms, which is a matter for separate negotiation. FOB is a mechanism for agreeing price and transport responsibility, not for agreeing payment terms. By Barry Norman, Investors Trading Academy
What is a Zero-Sum Game?
 
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A situation in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero. A zero-sum game may have as few as two players, or millions of participants. Zero-sum games are found in game theory, but are less common than non-zero sum games. Poker and gambling are popular examples of zero-sum games since the sum of the amounts won by some players equals the combined losses of the others. In game theory, the game of “Matching Pennies” is often cited as an example of a zero-sum game. The game involves two players – let’s call them A and B – simultaneously placing a penny on the table; the payoff depends on whether the pennies match or not. If both pennies are heads or tails, Player A wins and keeps Player B’s penny; if they do not match, Player B wins and keeps Player A’s penny. This is a zero-sum game because one player’s gain is the other’s loss. Zero-sum games are essentially bets. In the financial markets, for instance, speculators essentially place bets on the future prices of certain commodities. Thus, if you disagree with the consensus that wheat prices are going to fall, you might buy a futures contract. If your prediction is right and wheat prices increase, you could make money by selling the futures contract before it expires. Zero-sum games have a bigger purpose in the markets, however; they provide a lot of liquidity to the futures market and help companies find a way to stabilize their prices and thus their operations and financial performance. By Barry Norman, Investors Trading Academy
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What are Bollinger Bands?
 
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Bollinger Bands are volatility bands placed above and below a moving average. Volatility is based on the standard deviation, which changes as volatility increases and decreases. The bands automatically widen when volatility increases and narrow when volatility decreases. This dynamic nature of Bollinger Bands also means they can be used on different securities with the standard settings. For signals, Bollinger Bands can be used to identify M-Tops and W-Bottoms or to determine the strength of the trend. By Barry Norman, Investors Trading Academy.
What is a Market Maker?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Market Maker” A broker-dealer who is prepared to buy or sell a specific security — such as a bond or at least one round lot of a stock — at a publicly quoted price, is called a market maker in that security. Other brokers buy or sell specific securities through market makers, who may maintain inventories of those securities. There is often more than one market maker in a particular security, and they bid against each other, helping to keep the marketplace liquid. The Stock Market and the corporate and municipal bond markets are market maker markets. In contrast, on the floor of the New York Stock Exchange there's a single specialist to handle transactions in each security. Market Makers must be compensated for the risk they take; what if he buys your shares in IBM then IBM's stock price begins to fall before a willing buyer has purchased the shares? To prevent this, the market maker maintains a spread on each stock he covers. The market maker may purchase your shares of IBM from you for $100 each the ask price and then offer to sell them to a buyer at $100.05 the bid price. The difference between the ask and bid price is only $.05, but by trading millions of shares a day, he's managed to pocket a significant chunk of change to offset his risk. In contrast to conventional brokers, marker makers assume a high level of risk because of the high number of units they hold their inventory. Market makers are entrusted with promoting market efficiency by keeping markets liquid. To ensure impartiality for the benefit of their clients, brokerage houses who act as market makers are legally required to separate their market making activities from their brokerage sales operations. By Barry Norman, Investors Trading Academy - ITA
What is Antitrust?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Antitrust” Antitrust is a government policy for dealing with a monopoly. Antitrust laws aim to stop abuses of market power by big companies and, sometimes, to prevent corporate mergers and acquisitions that would create or strengthen a monopolist. There have been big differences in antitrust policies both among countries and within the same country over time. This has reflected different ideas about what constitutes a monopoly and, where there is one, what sorts of behavior are abusive. In the United States, monopoly policy has been built on the Sherman Antitrust Act of 1890. This prohibited contracts or conspiracies to restrain trade or, in the words of a later act, to monopolize commerce. In the early 20th century this law was used to reduce the economic power wielded by so-called "robber barons", such as JP Morgan and John D. Rockefeller, who dominated much of American industry through huge trusts that controlled companies' voting shares. Du Pont chemicals, the railroad companies and Rockefeller's Standard Oil, among others, were broken up. In the 1970s the Sherman Act was turned against IBM, and in 1982 it secured the break-up of AT&T's nationwide telecoms monopoly. In the 1980s a more laissez-faire approach was adopted, underpinned by economic theories from the Chicago school. These theories said that the only justification for antitrust intervention should be that a lack of competition harmed consumers, and not that a firm had become, in some ill-defined sense, too big. Some monopolistic activities previously targeted by antitrust authorities, such as predatory pricing and exclusive marketing agreements, were much less harmful to consumers than had been thought in the past. By Barry Norman, Investors Trading Academy - ITA
What is a Blue Chip?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Blue Chip” A "blue chip" is the nickname for a stock that is thought to be safe, in excellent financial condition, and firmly entrenched as a leader in its field. Blue chip stocks generally pay very large and growing dividends, making them favorably regarded by investors. A few examples of blue chips are Wal-Mart, Coca-Cola, Procter & Gamble, Exxon Mobil, PepsiCo, McCormick & Company, Unilever, and Johnson & Johnson. According to the New York Stock Exchange, a blue chip is stock in a corporation with a national reputation for quality, reliability, and the ability to operate profitably in good times and bad. The most popular index that follows U.S. blue chips is the Dow Jones Industrial Average. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928. While a blue-chip company may have survived several challenges and market cycles over the course of its life, leading to it being perceived as a safe investment, this may not always be the case. The bankruptcy of General Motors and Lehman Brothers, as well as a number of leading European banks, during the global recession of 2008, is proof that even the best companies may sometimes be unable to survive during periods of extreme stress. By Barry Norman, Investors Trading Academy
What is Common Law?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Common Law” The law of the land which comes from neither the statute books nor the constitution but from court law reports. Originally that body of law which was common to all parts of England not customary or local law and developed over centuries from the English courts to be adopted and further developed in countries using that system. As compared to democratically maintained law, common law is judge maintained and modified law and is valid unless it conflicts with statute law. Common law also known as case law or precedent is law developed by judges, courts, and similar tribunals, stated in decisions that nominally decide individual cases but that in addition have precedential effect on future cases. The common-law system prevails in England, the United States, and other countries colonized by England. It is distinct from the civil-law system, which predominates in Europe and in areas colonized by France and Spain. The common-law system is used in all the states of the United States except Louisiana, where French Civil Law combined with English Criminal Law to form a hybrid system. The common-law system is also used in Canada, except in the Province of Quebec, where the French civil-law system prevails. By Barry Norman, Investors Trading Academy - ITA
What is Working Capital?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Working Capital” Working capital is a common measure of a company's liquidity, efficiency, and overall health. Because it includes cash, inventory, accounts receivable, accounts payable, the portion of debt due within one year, and other short-term accounts, a company's working capital reflects the results of a host of company activities, including inventory management, debt management, revenue collection, and payments to suppliers. Positive working capital generally indicates that a company is able to pay off its short-term liabilities almost immediately. Negative working capital generally indicates a company is unable to do so. This is why analysts are sensitive to decreases in working capital; they suggest a company is becoming overleveraged, is struggling to maintain or grow sales, is paying bills too quickly, or is collecting receivables too slowly. Increases in working capital, on the other hand, suggest the opposite. There are several ways to evaluate a company's working capital further, including calculating the inventory-turnover ratio, the receivables ratio, days payable, the current ratio, and the quick ratio. One of the most significant uses of working capital is inventory. The longer inventory sits on the shelf or in the warehouse, the longer the company's working capital is tied up. By Barry Norman, Investors Trading Academy - ITA
What is a Cyclical Stock?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Cyclical Stock”. A Cyclical stock is a stock highly correlated to the economic activity. When the economy is in a recession the profits of a cyclical company tend to drop and so its share price. Conversely, when the economy is in a good shape the share price tends to goes up with the profit growth. The best example is the automobile sector. Indeed an individual is not willing to buy a new car when his income lowers, which drags car manufacturers’ revenues down. On the contrary, he will be more tempted to treat himself with a new car if his economic situation is improving. Another example would be IT firms. A company is more reluctant to invest in renewing its computer system if it is in the middle of an economic turmoil and facing a declining activity. This expenditure will certainly be postponed until the recovery. Since cyclical stocks generally rise in good economic times and fall during bad times, investors attracted to cyclical stocks are faced with the arduous task of trying to time the market. This means they must try to predict where the bottom of the business cycle is in order to buy these stocks at the optimal time and then predict where the top of the cycle is in order to sell at the optimal time. Regardless, timing the market can be hard, given the fact that some cyclical stocks start bouncing back before a recession is actually over. Holding the stock of companies in cyclical industries over the long-term is therefore a somewhat controversial issue because economic downturns can take years to recover from. By Barry Norman, Investors Trading Academy
What is RSI - Relative Strength Index?
 
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The Relative Strength Index is a momentum oscillator that measures the speed and change of price movements. An RSI calculation oscillates between zero and 100. Traditionally RSI is considered overbought when above 70 and oversold when below 30. Signals can also be generated by looking for divergences, failure swings and centerline crossovers. RSI can also be used to identify the general trend. A technical RSI compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. A trader using RSI should be aware that large surges and drops in the price of an asset will affect the RSI by creating false buy or sell signals. Like many momentum oscillators, overbought and oversold readings for RSI work best when prices move sideways within a range. By Barry Norman, Investors Trading Academy.
What is Macroeconomics?
 
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Macroeconomics is focused on the movement and trends in the economy as a whole, while in microeconomics the focus is placed on factors that affect the decisions made by firms and individuals. By Barry Norman, Investors Trading Academy.
What Is The Acid Test Ratio?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Acid Test” Current cash and “near “cash assets such as government bonds, current receivables, but excluding inventory compared to current debts like bank loans, payables. The acid test shows how much and how quickly cash can be found if a company gets into trouble. The acid-test ratio is a strong indicator of whether a firm has sufficient short-term assets to cover its immediate liabilities. Commonly known as the quick ratio, this metric is more robust than the current ratio, also known as the working capital ratio, since it ignores illiquid assets such as inventory. Companies with an acid-test ratio of less than 1 do not have the liquid assets to pay their current liabilities and should be treated with caution. If the acid-test ratio is much lower than the current ratio, it means that current assets are highly dependent on inventory. This is not a bad sign in all cases, however, as some business models are inherently dependent on inventory. Retail stores, for example, may have very low acid-test ratios without necessarily being in danger. At the time of writing, Wal-Mart Stores Inc.'s (WMT) acid-test ratio is 0.20, while Target Corp.'s is 0.40. The companies' current ratios are 0.90 and 1.20, respectively. In such cases other metrics should be considered, such as inventory turnover. The acceptable range for an acid-test ratio will vary by industry, and comparisons are most meaningful within a given industry. By Barry Norman, Investors Trading Academy - ITA
All About JP Morgan - Founder of J.P. Morgan & Co.
 
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Welcome to the Investors Trading Academy event of the week. Each week our staff of educators tries to introduce you to a person of interest in the financial world. This could be a person in government or banking or an important investors or trader, on just someone making the financial headlines in recent days. One of the most well-known names in the financial markets, a name that commands respect from professional and new investors is that of JP Morgan. Although most investors know the man by the company that bears his name, but most know nothing about the man himself. JPMorgan Chase & Co. is one of the oldest, largest and best-known financial institutions in the world. The firm's legacy dates back to 1799 when its earliest predecessor was chartered in New York City. The firm is built on the foundation of more than 1200 predecessor institutions. Its major heritage firms — J.P. Morgan, Chase Manhattan, Chemical, Manufacturers Hanover (in New York City) and Bank One, First Chicago, and National Bank of Detroit (in the Midwest) were each closely tied, in their time, to innovations in finance and the growth of the United States and global economies. As JPMorgan Chase & Co does today, these firms also made significant contributions to their local communities. J.P. Morgan founded the banking company J.P. Morgan & Co., one of the leading financial firms in the country, in 1871. Born on April 17, 1837, in Hartford, Connecticut, J.P. Morgan would later become one of the most famous financiers in business history. In 1871, Morgan began his own private banking company, which later became known as J.P. Morgan & Co., one of the leading financial firms in the country. Morgan died on March 31, 1913, in Rome, Italy. He was hailed as a master of finance at the time of his death, and continues to be considered one of the country's leading businessmen. His company became one of the leading financial firms in the country. It was so powerful that even the U.S. government looked to the firm for help with the depression of 1895. The company also assisted in thwarting the 1907 financial crisis. During his career, his wealth, power, and influence attracted a lot of media and government scrutiny. During the late 1800s and even after the turn of the century, much of the country's industries were in the hands of a few powerful business leaders, especially Morgan. He was criticized for creating monopolies by making it difficult for any business to compete against his. Morgan dominated two industries in particular -- he helped consolidate railroad industry in the East and formed the United States Steel Corporation in 1901. Today, Morgan is considered one of America's leading businessmen, and is credited for helping to shape the nation into what it is today. By Barry Norman, Investors Trading Academy - ITA
What is The NYSE (New York Stock Exchange) ?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is the “NYSE” The New York Stock Exchange, often referred to as NYSE and "The Big Board," is the largest stock exchange by market capitalization in the world. Home to more than 2,800 companies with a combined value of more than $15 trillion, the NYSE relies on face-to-face trades, rather than electronic trades. The NYSE began in 1792, when 24 stockbrokers gathered under a buttonwood tree on Wall Street to sign an agreement that established the rules for buying and selling bonds and shares of companies. This agreement, or the Buttonwood Agreement, was named after the tree. The NYSE is the oldest and largest stock exchange in the U.S., located on Wall Street in New York City. The NYSE is responsible for setting policy, supervising member activities, listing securities, overseeing the transfer of member seats, and evaluating applicants. Unlike some of the newer exchanges, the NYSE still uses a large trading floor in order to conduct its transactions. It is here that the representatives of buyers and sellers, professionals known as brokers, meet and shout out prices at one another in order to strike a deal. This is called the open outcry system and it usually produces fair market pricing. In order to facilitate the exchange of stocks, the NYSE employs individuals called specialists who are assigned to manage the buying and selling of specific stocks and to buy those stocks when no one else will. By Barry Norman, Investors Trading Academy
What is Efficiency Ratio?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Efficiency Ratio”. No matter what kind of business a company is in, it must invest in assets to perform its operations. Efficiency ratios measure how effectively the company utilizes these assets, as well as how well it manages its liabilities. A ratio used to calculate a business’s efficiency. Not all businesses calculate the efficiency ratio the same way. The ratio can be calculated in various ways: In all methods, an increase means the company is losing a larger percentage of its income to expenses. If the efficiency ratio is getting lower, it is good for the corporation and its shareholders. Also referred to as the overhead burden or overhead efficiency ratio. Some common ratios are accounts receivable turnover, fixed asset turnover, sales to inventory, sales to net working capital, accounts payable to sales and stock turnover ratio. These ratios are meaningful when compared to peers in the same industry and can identify businesses that are better managed relative to the others. Also, efficiency ratios are important because an improvement in the ratios usually translate to improved profitability. By Barry Norman, Investors Trading Academy
What is The World Trade Organization?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “World Trade Organization” The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. The WTO was formed in 1995 to enforce the regulations established by the General Agreement on Tariffs and Trade (GATT) and several other international trade agreements. Composed of representatives from 150 nations and observers from additional nations, it regulates international trade with the goal of helping it to flow as smoothly and freely as possible. Advocates praise the WTO for helping to create an increasingly global economy and bringing prosperity to developing nations through increased trade. Critics, however, assert that industrialized nations such the US, Canada, and the countries of the European Union have used the WTO to open trade with developing nations while disregarding these nations’ environmental and labor-related practices. By Barry Norman, Investors Trading Academy
What is a Multinational Corporation?
 
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Our word of the day is “Multinational Corporation” A multinational corporation is a business that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation. There are four categories of multinational corporations: (1) a multinational, decentralized corporation with strong home country presence, (2) a global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available, (3) an international company that builds on the parent corporation's technology or R&D, or (4) a transnational enterprise that combines the previous three approaches. According to UN data, some 35,000 companies have direct investment in foreign countries, and the largest 100 of them control about 40 percent of world trade. In economic terms, a firm’s advantages in establishing a multinational corporation include both vertical and horizontal economies of scale and an increased market share. Although cultural barriers can create unpredictable obstacles as companies establish offices and production plants around the world, a firm’s technical expertise, experienced personnel, and proven strategies usually can be transferred from country to country. Critics of the multinational corporation usually view it as an economic and, often, political means of foreign domination. By Barry Norman, Investors Trading Academy
What is The Balance Of Payments?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Balance Of Payment” The balance of payments, also known as balance of international payments, encompasses all transactions between a country's residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. The BOP is divided into three main categories: the current account, the capital account and the financial account. Within these three categories are sub-divisions, each of which accounts for a different type of international monetary transaction. The current account is used to mark the inflow and outflow of goods and services into a country. Earnings on investments, both public and private, are also put into the current account. Within the current account are credits and debits on the trade of merchandise, which includes goods such as raw materials and manufactured goods that are bought, sold or given away or possibly in the form of aid. Services refer to receipts from tourism, transportation (like the levy that must be paid in Egypt when a ship passes through the Suez Canal), engineering, business service fees (from lawyers or management consulting, for example) and royalties from patents and copyrights. When combined, goods and services together make up a country's balance of trade. The BOT is typically the biggest bulk of a country's balance of payments as it makes up total imports and exports. If a country has a balance of trade deficit, it imports more than it exports, and if it has a balance of trade surplus, it exports more than it imports. By Barry Norman, Investors Trading Academy
All About Ralph Nelson Elliott
 
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In this video we are going to reach back in time to at a look at Ralph Nelson Elliott, if you are new to the financial markets or do not know what technical analysis is then you probably have never heard of Ralph Elliott before. Elliott is the father of the Wave Theory, which is commonly called and more accurately described as the Elliott Wave Principle. Born on July 28, 1871 in Marysville, Kansas, Elliott reached his ultimate achievement late in life by a circuitous route. After a long career in various accounting and business practices, R.N. Elliott was forced into an unwanted retirement at the age of 58 due to an illness contracted while living in Central America. Needing something to occupy his mind while recuperating, he turned his full attention to studying the behavior of the stock market. By Barry Norman, Investors Trading Academy.
What are Treasury Securities?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Treasury Securities” These U.S. government-issued debt securities are divided into three categories by maturity dates: Treasury bonds mature in 10 or more years, Treasury notes mature between one and 10 years and Treasury bills mature in one year or less. These debt obligations are considered the safest option for bond investors since they are backed by the full faith and credit of the U.S. government. But that safety comes at a price: The interest rates on Treasury’s are lower than other bonds with the same duration. Treasury securities are divided into three categories according to their lengths of maturities. These three types of bonds share many common characteristics, but also have some key differences. The categories and key features of treasury securities include: T-Bills – These have the shortest range of maturities of all government bonds at 4, 13, 26 and 52 weeks. They are the only type of treasury security found in both the capital and money markets, as three of the maturity terms fall under the 270-day dividing line between them. T-Bills are issued at a discount and mature at par value, with the difference between the purchase and sale prices constituting the interest paid on the bill. T-Notes – These notes represent the middle range of maturities in the treasury family, with maturity terms of 2, 3, 5, 7 and 10 years currently available. Treasury notes are issued at a $1,000 par value and mature at the same price. They pay interest semiannually. T-Bonds – Commonly referred to in the investment community as the “long bond”, T-Bonds are essentially identical to T-Notes except that they mature in 30 years. T-Bonds are also issued at and mature at a $1,000 par value and pay interest semiannually. By Barry Norman, Investors Trading Academy
What Are Economic Sanctions?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Economic Sanctions” A way of punishing errant countries, which is currently more acceptable than bombing or invading them. One or more restrictions are imposed on international trade with the targeted country in order to persuade the target's government to change a policy. Possible sanctions include limiting export or import trade with the target; constraining investment in the target; and preventing transfers of money involving citizens or the government of the target. Sanctions can be multi­lateral, with many countries acting together, perhaps under the auspices of the united nations, or unilateral, when one country takes action on its own. How effective sanctions are debatable. According to one study, between 1914 and 1990 there were 116 occasions on which various countries imposed economic sanctions. Two-thirds of these failed to achieve their stated goals. The cost to the country imposing sanctions can be large, particularly when it is acting unilaterally. It is estimated that in 1995 imposing sanctions on other countries cost the American economy over $15 billion in lost exports and 200,000 in lost jobs in export industries. Widely considered a notable success was the use of economic sanctions against the apartheid regime in south Africa, although some economists question how big a part the sanctions actually played. Clearly important was the fact that the sanctions were imposed multilaterally by the international community, so there were comparatively few breaches of the restrictions. But, arguably, the most crucial factor in persuading the government in Pretoria to cave in was that foreign companies fearing that their share price would fall because their investments in south Africa would attract bad publicity voluntarily chose for commercial reasons to disinvest. By Barry Norman, Investors Trading Academy - ITA
What is an OEIC (Open Ended Investment Company) ?
 
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Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Open Ended Investment Company (OEIC)” Primarily in the United Kingdom, a mutual fund in which the number of shares may be increased or decreased depending on the amount of money invested in the company. This means that the fund's capitalization is not fixed, and changes upon the demand of shareholders. In other words, an open-end investment company issues new stock when people invest in it, and buys back old shares when investors want to be rid of them. The latter is referred to as redeeming one's share of the mutual fund. The value of each share is the net portfolio value divided by the number of shares. In the United States, this investment vehicle is usually called an open-end mutual fund. The company pools money it raises by selling shares in a fund and the fund's manager invests in stock, bonds, money market instruments, or a combination of these asset classes to meet the fund's specific objectives. However, the open-end company may stop selling new shares in a fund if it decides the fund has grown too large to invest additional assets effectively. In contrast, when a closed-end investment company creates a fund, it issues only a limited number of shares, and those shares trade on the secondary market as shares of stock do. If you purchase fund shares directly from the open-end investment company, you pay the current net asset value (NAV) per share. You also redeem shares at the NAV that's current at the time you sell. If you buy shares through a broker or other investment professional, you may pay an up-front sales charge, or load. By Barry Norman, Investors Trading Academy - ITA
Everything You Need To Know About Cryptocurrency Exchanges
 
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Cryptocurrency exchanges are websites where you can buy, sell or exchange cryptocurrencies for other digital currency or traditional currency like US dollars or Euro. It’s important to do a little homework before you start trading. Here are a few things you should check before making your first trade. Bitcoin interest has been growing lately, and with that comes volatility. Bitcoin is currently much more volatile than any other currency, making it a prime candidate for arbitrage.