A debt-to-equity ratio (Or D/E) is the ratio in finance that shows the relation of the size of a company’s outstanding debt in relation to a company’s market cap versus what the business owes after financing the purchase of assets, research and development, and product launches. The debt to equity ratio is similar to leverage. […]
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Creative destruction (Also sometimes known as Schumpeter’s gale), is a concept of economics which is known primarily from Joseph Schumpeter who was an Austrian economist. The theory of creative destruction originally came from the writings of Karl Marx and it became a popular theory for the business cycle of innovation and destruction. Schumpeter said that
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This is a Guest Post by: Colibri Trader @priceinaction Ray Dalio is an American billionaire who is a legend in the investing and hedge fund communities. He is the founder, CIO, and co-chairman of Bridgewater Associates, one of the major players in the investment world. As of June 2019, he was ranked as the 58th wealthiest person
Moving averages are technical trading indicators for capturing trends. This post shows the backtesting data and system equity curve versus buy and hold using TrendSpider.com. This is the backtest based on buying $QQQ when the 5 day EMA crosses and closes over the 20 day EMA and then selling when the 5 day EMA closes
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The Sortino ratio is a way to measure the risk adjusted return of an asset, investment portfolio, or trading strategy. The Sortino ratio is an adjustment to the Sharpe Ratio that filters volatility from upside moves from downside moves. The Sortino ratio only measures downside moves that are below a specified volatility target or return
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Below are the stock holdings of publicly traded stocks held by Warren Buffett inside his Berkshire Hathaway portfolio as of September 30, 2019 based on the 13F filing on November 14, 2019 report that is filed with the Securities and Exchange Commission. This is a great place to look for creating your own watch list for
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Simple interest is only calculated on the original amount of capital inside a set time period. It does not include the compounding effect of returns on new money accrued. Simple interest can be used over any time period but annual returns is the one that is most commonly used. Simple interest is calculated on original principle alone. Compound interest includes the additional
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A Monte Carlo simulation is a process used to show all the potential outcomes of a trading system, business model, supply chain, scientific theory, insurance, research and development, or a casino. A Monte Carlo simulation uses the most important available metrics of a system including inputs of size of wins and losses along with win
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The rule of 72 is a process for quickly projecting how long it will take for a rate of investment return to make capital double. The number 72 is used in figuring out the answer by dividing the rate of return percentage per period to get an approximation of the number of years in most
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The Sharpe Ratio was developed it in 1966 by William F. Sharpe as a way to quantify potential risk in an individual investment or an investing method or trading strategy. The Sharpe Ratio is the defined difference of the returns between an investment and the potential risk free return that is then divided by the standard deviation/volatility of the
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Inside probability theory, conditional probability is a way to calculate and measure the probability of some event happening if another event has already occurred. The Bayes’ Theorem is one way of calculating a probability of something occurring when you know probabilities of other things happening. The Bayes’ theorem is a mathematical formula that explains how to
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The definition of a ‘brand’ is when the name and/or logo of a company is so recognizable that people associate it with a specific feeling and experience which can be both good or bad. Most brands have a confluence of the their name with a logo, and colors that all become familiar. Most of the
In stock investing and trading your watch list can be set up by not only the value of a stocks earnings and sales trend but also the intrinsic brand value. The greater the brand equity and notoriety the more the bullish bias over the long term. Disney currently has the most powerful brand equity and
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For publicly traded companies and in investment terms the return on equity (Also abbreviated as ‘ROE’) is a way to measure the amount of net profits from a business as it relates to the total value of the equity of the enterprise. ROE is a measurement of how efficiently a business uses its asset value
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The time value of money is the measurement of the benefit of getting money in the present instead of the same amount at a later time in the future. It is based on the preference of when you receive money on a time line. Time value of money is the reason interest is received. Interest
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This is a Guest Post by Liam from PriceActioNinja.com. A professional Forex trader is not identified by having multiple trading screens or highly complex trading strategies. Instead, what separates winning, professional traders from amateur, losing traders is the mindset they approach trading with and the actions they take to improve and refine their trading performance.
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Standard deviations are used to measure current price action in relation to the average price of a chosen time frame. The assumption in the use of a standard deviation is that over the long term historical prices are distributed inside a bell curve. Although at times there are ‘fat tales’ or ‘black swans’ in prices
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A zero sum game is a situation where one person’s gain is equal to another person’s loss, so the total money inside the game for the players and participants is always a net change of zero as a whole unless money is removed or added to the game. The financial contract markets for futures and
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Opportunity cost expresses the expense of a chosen option among other alternatives in contrast to enjoying the benefit of the other possible choices. The ‘cost’ is the difference in one reward versus another. The opportunity cost is the reward that is not received due to not choosing the other better option. If the second best
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Most people only think of income as earned income from working actively at a job. That is the most popular type of income, selling your time by the hour for a wage or by the week for a salary. However that is not the only type of income, along with active income there is also
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