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what is current ratio | analysts and creditors often use the current ratio which measures a company s ability to pay its short term financial debts or obligations the ratio which is calculated by dividing current assets by current liabilities shows how well a company manages its balance sheet to pay off its short term debts and payables it shows investors and analysts whether a company has enough current assets on its balance sheet to satisfy or pay off its current debt and other payables | |
what are current assets | current assets represent all the assets of a company that are expected to be conveniently sold consumed used or exhausted through standard business operations within one year current assets appear on a company s balance sheet and include cash cash equivalents accounts receivable stock inventory marketable securities prepaid liabilities and other liquid assets current liabilities are typically settled using current assets the bottom linecurrent liabilities are a company s short term financial obligations bills that are due within one year or within a normal operating cycle current liabilities are typically settled using current assets examples of current liabilities include accounts payable short term debt dividends and notes payable as well as income taxes owed the analysis of current liabilities is important to investors and creditors this can give a picture of a company s financial solvency and management of its current liabilities | |
what is the current ratio | the current ratio is a liquidity ratio that measures a company s ability to pay short term obligations or those due within one year it tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables a current ratio that is in line with the industry average or slightly higher is generally considered acceptable a current ratio that is lower than the industry average may indicate a higher risk of distress or default similarly if a company has a very high current ratio compared with its peer group it indicates that management may not be using its assets efficiently the current ratio is called current because unlike some other liquidity ratios it incorporates all current assets and current liabilities the current ratio is sometimes called the working capital ratio investopedia lara antalformula and calculation for the current ratioto calculate the ratio analysts compare a company s current assets to its current liabilities 1current assets listed on a company s balance sheet include cash accounts receivable inventory and other current assets oca that are expected to be liquidated or turned into cash in less than one year 2current liabilities include accounts payable wages taxes payable short term debts and the current portion of long term debt 3current ratio current assets current liabilities begin aligned text current ratio frac text current assets text current liabilities end aligned current ratio current liabilitiescurrent assets understanding the current ratiothe current ratio measures a company s ability to pay current or short term liabilities debts and payables with its current or short term assets such as cash inventory and receivables 1in many cases a company with a current ratio of less than 1 00 does not have the capital on hand to meet its short term obligations if they were all due at once while a current ratio greater than 1 00 indicates that the company has the financial resources to remain solvent in the short term however because the current ratio at any one time is just a snapshot it is usually not a complete representation of a company s short term liquidity or longer term solvency for example a company may have a very high current ratio but its accounts receivable may be very aged perhaps because its customers pay slowly which may be hidden in the current ratio some of the accounts receivable may even need to be written off analysts also must consider the quality of a company s other assets vs its obligations if the inventory is unable to be sold the current ratio may still look acceptable at one point in time even though the company may be headed for default public companies don t report their current ratio though all the information needed to calculate the ratio is contained in the company s financial statements interpreting the current ratioa ratio under 1 00 indicates that the company s debts due in a year or less are greater than its assets cash or other short term assets expected to be converted to cash within a year or less a current ratio of less than 1 00 may seem alarming although different situations can negatively affect the current ratio in a solid company for example a normal cycle for the company s collections and payment processes may lead to a high current ratio as payments are received but a low current ratio as those collections ebb calculating the current ratio at just one point in time could indicate that the company can t cover all of its current debts but it doesn t necessarily mean that it won t be able to when the payments are due additionally some companies especially larger retailers such as walmart have been able to negotiate much longer than average payment terms with their suppliers if a retailer doesn t offer credit to its customers this can show on its balance sheet as a high payables balance relative to its receivables balance large retailers can also minimize their inventory volume through an efficient supply chain which makes their current assets shrink against current liabilities resulting in a lower current ratio walmart s current ratio as of january 31 2023 was 0 82 4in theory the higher the current ratio the more capable a company is of paying its obligations because it has a larger proportion of short term asset value relative to the value of its short term liabilities however though a high ratio say more than 3 00 could indicate that the company can cover its current liabilities three times it also may indicate that it is not using its current assets efficiently securing financing very well or properly managing its working capital the current ratio can be a useful measure of a company s short term solvency when it is placed in the context of what has been historically normal for the company and its peer group it also offers more insight when calculated repeatedly over several periods | |
what makes the current ratio good or bad often depends on how it is changing a company that seems to have an acceptable current ratio could be trending toward a situation in which it will struggle to pay its bills conversely a company that may appear to be struggling now could be making good progress toward a healthier current ratio | in the first case the trend of the current ratio over time would be expected to harm the company s valuation meanwhile an improving current ratio could indicate an opportunity to invest in an undervalued stock amid a turnaround imagine two companies with a current ratio of 1 00 today based on the trend of the current ratio in the following table for which would analysts likely have more optimistic expectations two things should be apparent in the trend of horn co vs claws inc first the trend for claws is negative which means further investigation is prudent perhaps it is taking on too much debt or its cash balance is being depleted either of which could be a solvency issue if it worsens the trend for horn co is positive which could indicate better collections faster inventory turnover or that the company has been able to pay down debt the second factor is that claws current ratio has been more volatile jumping from 1 35 to 1 05 in a single year which could indicate increased operational risk and a likely drag on the company s value example using the current ratioin its q4 2022 fiscal results apple inc reported total current assets of 135 4 billion slightly higher than its total current assets at the end of the last fiscal year of 134 8 billion however the company s liability composition significantly changed from 2021 to 2022 at the 2022 the company reported 154 0 billion of current liabilities almost 29 billion greater than current liabilities from the prior period 5for 2021 apple had more current assets than current liabilities its current ratio was 134 836b 125 481b 1 075 this means that if all current liabilities of apple were immediately due the company could pay all of its bills without leveraging long term assets at the end of 2022 it was a slightly different story apple s current ratio was 135 405b 153 982b 0 88 this means that apple technically did not have enough current assets on hand to pay all of its short term bills analysts may not be concerned due to apple s ability to churn through production sell inventory or secure short term financing with its 217 billion of non current assets pledged as collateral for instance current ratio vs other liquidity ratiosother similar liquidity ratios can supplement a current ratio analysis in each case the differences in these measures can help an investor understand the current status of the company s assets and liabilities from different angles as well as how those accounts are changing over time the commonly used acid test ratio or quick ratio compares a company s easily liquidated assets including cash accounts receivable and short term investments excluding inventory and prepaid expenses to its current liabilities the cash asset ratio or cash ratio also is similar to the current ratio but it only compares a company s marketable securities and cash to its current liabilities 6companies may use days sales outstanding to better understand how long it takes for a company to collect payments after credit sales have been made while the current ratio looks at the liquidity of the company overall the days sales outstanding metric calculates liquidity specifically to how well a company collects outstanding accounts receivables finally the operating cash flow ratio compares a company s active cash flow from operating activities cfo to its current liabilities 6 this allows a company to better gauge funding capabilities by omitting implications created by accounting entries the current ratio is most useful when measured over time compared against a competitor or compared against a benchmark limitations of using the current ratioone limitation of the current ratio emerges when using it to compare different companies with one another businesses differ substantially among industries comparing the current ratios of companies across different industries may not lead to productive insight for example in one industry it may be more typical to extend credit to clients for 90 days or longer while in another industry short term collections are more critical ironically the industry that extends more credit actually may have a superficially stronger current ratio because its current assets would be higher it is usually more useful to compare companies within the same industry another drawback of using the current ratio briefly mentioned above involves its lack of specificity unlike many other liquidity ratios it incorporates all of a company s current assets even those that cannot be easily liquidated for example imagine two companies that both have a current ratio of 0 80 at the end of the last quarter on the surface this may look equivalent but the quality and liquidity of those assets may be very different as shown in the following breakdown in this example company a has much more inventory than company b which will be harder to turn into cash in the short term perhaps this inventory is overstocked or unwanted which eventually may reduce its value on the balance sheet company b has more cash which is the most liquid asset and more accounts receivable which could be collected more quickly than liquidating inventory although the total value of current assets matches company b is in a more liquid solvent position the current liabilities of company a and company b are also very different company a has more accounts payable while company b has a greater amount in short term notes payable this would be worth more investigation because it is likely that the accounts payable will have to be paid before the entire balance of the notes payable account company a also has fewer wages payable which is the liability most likely to be paid in the short term in this example although both companies seem similar company b is likely in a more liquid and solvent position an investor can dig deeper into the details of a current ratio comparison by evaluating other liquidity ratios that are more narrowly focused than the current ratio | |
what happens if the current ratio is less than 1 | as a general rule a current ratio below 1 00 could indicate that a company might struggle to meet its short term obligations whereas ratios of above 1 00 might indicate a company is able to pay its current debts as they come due if a company s current ratio is less than one it may have more bills to pay than easily accessible resources to pay those bills | |
what does a current ratio of 1 5 mean | a current ratio of 1 5 would indicate that the company has 1 50 of current assets for every 1 of current liabilities for example suppose a company s current assets consist of 50 000 in cash plus 100 000 in accounts receivable its current liabilities meanwhile consist of 100 000 in accounts payable in this scenario the company would have a current ratio of 1 5 calculated by dividing its current assets 150 000 by its current liabilities 100 000 | |
how is the current ratio calculated | calculating the current ratio is very straightforward simply divide the company s current assets by its current liabilities current assets are those that can be converted into cash within one year while current liabilities are obligations expected to be paid within one year examples of current assets include cash inventory and accounts receivable examples of current liabilities include accounts payable wages payable and the current portion of any scheduled interest or principal payments the bottom linethe current ratio is a useful liquidity measurement used to track how well a company may be able to meet its short term debt obligations it compares the ratio of current assets to current liabilities and measurements less than 1 0 indicate a company s potential inability to use current resources to fund short term obligations | |
what is the current yield | current yield is an investment s annual income interest or dividends divided by the current price of the security this measure examines the current price of a bond rather than looking at its face value current yield represents the return an investor would expect to earn if the owner purchased the bond and held it for a year however current yield is not the actual return an investor receives if he holds a bond until maturity understanding current yieldcurrent yield is most often applied to bond investments which are securities that are issued to an investor at a par value face amount of 1 000 a bond carries a coupon amount of interest that is stated on the face of the bond certificate and bonds are traded between investors since the market price of a bond changes an investor may purchase a bond at a discount less than par value or a premium more than par value and the purchase price of a bond affects the current yield | |
how current yield is calculated | if an investor buys a 6 coupon rate bond for a discount of 900 the investor earns an annual interest income of 1 000 x 6 or 60 the current yield is 60 900 or 6 67 the 60 in annual interest is fixed regardless of the price paid for the bond on the other hand if an investor purchases a bond at a premium of 1 100 the current yield is 60 1 100 or 5 45 the investor paid more for the premium bond that pays the same dollar amount of interest therefore the current yield is lower current yield can also be calculated for stocks by taking the dividends received for a stock and dividing the amount by the stock s current market price as a financial theory general rule investors should expect higher returns for riskier investments therefore if two bonds have similar risk profiles investors should opt for the higher return producing offering factoring in yield to maturityyield to maturity ytm is the total return earned on a bond assuming that the bond owner holds the bond until the maturity date for example let s assume that the 6 coupon rate bond purchased for a discount of 900 will mature in the 10 years to calculate ytm an investor makes an assumption about a discount rate so that the future principal and interest payments are discounted to present value in this example the investor receives 60 in annual interest payments for 10 years at maturity the owner receives the par value of 1 000 and the investor recognizes a 100 capital gain the present value of the interest payments and the capital gain are added to compute the bond s ytm if the bond is purchased at a premium the ytm calculation includes a capital loss when the bond matures at par value | |
what is a cusip number | a cusip number is a unique nine digit identification number assigned to financial securities in the united states and canada it covers equity debt derivatives and other securities cusip numbers are used to create a concrete distinction between securities that are traded on public markets these numbers help facilitate trades and settlements by providing a constant identifier to help distinguish the securities within a trade each trade and the corresponding cusip number are recorded to facilitate the tracking of actions and activities | |
how cusip numbers work | pronounced q sip cusip is an acronym for the committee on uniform security identification procedures which oversees the entire cusip system just like the stock symbols assigned to the shares of a publicly traded company a cusip number is a unique identifier attached to the equity debt and other securities issued by a company it is similar to a serial number and is made up of nine digits the table below highlights some of the securities that are identified by cusip numbers 2by providing a consistent identifier that distinguishes securities cusip numbers help facilitate and ease actions and activities such as trades and settlements cusip global services creates anywhere from 1 000 to 2 000 new identifiers each day 3cusip global services is managed by factset research systems on behalf of the american bankers association aba factset purchased cusip global services from standard poor s s p in 2022 for about 1 925 billion 45the number of u s and canadian issues by the cusip system as of september 2022 latest information 6 | |
how to locate a cusip number | cusip numbers are publicly available and can be accessed through the municipal securities rulemaking board msrb via the electronic municipal market access emma system additionally the information is often listed on official statements relating to a security such as confirmations of purchase or periodic financial statements or the information can be accessed through various securities dealers a dummy cusip is a temporary nine character placeholder used internally by a company to identify a specific security until its official cusip number is assigned cusip vs isin vs cinscusip global services also has a series of other important identifiers along with cusip two of these are isin and cins expanding beyond the cusip system is the international securities identification number isin system isins are used internationally with most united states and canadian securities labeled with an additional two character prefix and one final check character attached at the end of the originally issued cusip additionally information regarding the currency of the specified security is also required to facilitate proper processing and recording this has helped establish an international system for the clearance of securities while it is not yet used worldwide the isin system has gained traction across foreign markets as a way to simplify trading processes particularly for international investing a cins number which is known as the cusip international numbering system is another international extension of the cusip numbering system a cins number consists of nine characters and is used for securities issued in 30 markets outside north america in this case the first letter represents the issuing country for example e09876aa7 represents an aa credit rating corporate bond issued in spain e is the letter used to identify spain and offered in a foreign market 7examples of cusip numbershere are a few examples of actual cusips for companies across various sectors 8 | |
why are cusip numbers important | cusip numbers are unique identifiers attached to listed stocks and bonds they provide a standardized method for identifying securities to facilitate the clearance and settlement of trading market transactions | |
what does a cusip number tell you | a cusip will tell you the exact type of security it references and who issued it the unique identifier will also tell you what type of security it is e g a corporate bond or common stock | |
what can i do with a cusip number | as an ordinary investor cusip numbers are not of much use instead these are used primarily by brokerage and clearing firms to ensure that transactions are properly settled and recorded | |
how do i look up a cusip number | there are several ways to do this perhaps the simplest is to request a stock quote on a broker s website which often will include the cusip you can also find the numbers on a brokerage s official statements sent to clients or on physical stock or bond certificates if you own them certain bond cusips may also be obtained through the municipal securities rule making board via the electronic municipal market access system the bottom linea cusip number is a nine digit alphanumeric code that is used to identify securities such as stocks bonds and other financial instruments the cusip committee on uniform securities identification procedures system was developed in the 1960s as a way to uniquely identify securities and facilitate the settlement of trades each cusip number is unique to a specific security and it is assigned by the cusip service bureau which is operated by the american bankers association cusip numbers are used by banks brokerages and other financial institutions to identify and track securities in their systems and they are also used to facilitate the clearing and settlement of trades cusip numbers are typically found on the front of a bond certificate and they can also be found in various databases and other sources of information about securities | |
what is a custodial account | the term custodial account generally refers to a savings account at a financial institution mutual fund company or brokerage firm managed by one person for the benefit of another generally an adult controls a custodial account for a minor a person under the age of 18 or 21 years depending on the laws of the state of residence approval from the custodian is mandatory for the account to conduct transactions such as buying or selling securities in a broader sense a custodial account can mean any account maintained by a fiduciarily responsible party on behalf of a beneficiary such as an employer based retirement account handled for eligible employees by a plan administrator a fiduciary is bound ethically and legally to act on the best behalf of another s interests each state has specific regulations governing the age of majority and the naming of custodians and alternative custodians investopedia mira norian | |
how a custodial account works | once established a custodial account functions like any other account at a bank or brokerage the custodian a designated manager or investment advisor decides how to invest the money the account manager or other entities can continue to contribute to the fund as noted above custodial accounts can invest in a variety of assets however the financial institution probably won t allow the manager to use the account to trade on margin or buy futures derivatives or other highly speculative investments once the minor reaches the legal age of adulthood in their state control of the account officially transfers to the named beneficiary from the custodian at which point they claim full control and use of the funds should the minor die before reaching the age of majority the account will become part of the child s estate types of custodial accountscustodial accounts come in two basic varieties the uniform transfers to minors act utma accounts and the older uniform gift to minors act ugma accounts their main distinction lies in the kind of assets you can contribute to them there are two types of custodial accounts the uniform transfers to minors act utma and the uniform gift to minors act ugma the utma is allowed in all states except vermont and south carolina while the ugma is allowed in all 50 states utma accounts can hold virtually any kind of asset including real estate intellectual property and works of art ugma accounts are limited to financial assets of cash securities stocks bonds mutual funds annuities and insurance policies every u s state allows ugma accounts however south carolina and vermont don t allow utma accounts both utma and the older version ugma have custodial accounts set up in the minor s name with a designated custodian usually the child s parent or guardian initial investments minimum account balances and interest rates vary by the company that houses the account advantages and disadvantages of custodial accountsthere are advantages including tax advantages for custodial accounts but there are also downsides including the risk that the account will limit the amount the child can access in financial aid in college because it s considered an asset owned by the minor custodial accounts have enormous flexibility there are no income or contribution limits and no requirements to make regular distributions at any point also there are no withdrawal penalties while all withdrawn funds are restricted to being used for the benefit of the minor this requirement is vague and isn t limited to educational costs as with college savings plans the custodian may use the funds for everything from providing a place to live to paying for clothing as long as the beneficiary receives a benefit a custodial account is much simpler and less expensive to establish than a trust fund the aim of both ugma and utma regulations was to allow adults to transfer assets to minors without the need to establish a special trust to enable such ownership while not tax deferred like iras custodial accounts have some tax advantages known as the kiddie tax the irs considers the minor child the owner of the account so the earnings are taxed at the child s tax rate up to a certain point every child under 19 years old 24 for full time students who files as part of their parent s tax return is allowed a certain amount of unearned income at a reduced tax rate for 2024 the first 1 300 of unearned income is tax free the next 1 300 is subject to the child s tax rate then anything over that amount may be subject to the parent s tax rate however once the minor reaches the age of majority in their state of residence they can file a tax return at this age all account earnings will be subject to the beneficiary s tax bracket at the filing age also an individual can contribute up to 18 000 for the 2024 tax year without incurring the federal gift tax a minor s ownership of the custodial account can be a double edged sword because the holdings count as assets they may reduce a child s financial aid eligibility when they apply for college it could also reduce their ability to access other forms of government or community aid any deposit or gifts made to the account are irrevocable meaning they can t be changed or reversed all the account s holdings pass irrevocably to the minor at the age of majority in contrast many college savings plans such as a 529 account allow parents to retain control of the funds custodial accounts aren t as tax sheltered as other accounts to mitigate a tax bite a custodian can transfer education funds to an eligible 529 plan however to do so the custodian must liquidate any non cash investments in the custodial account also the custodial account beneficiary can t be altered whereas the beneficiary on a 529 college plan may change with some limitations a custodial account is set up in the minor s name because the account is irrevocable the beneficiary of the account may not change and no gifts or contributions made into the account can be reversed easy to establish and managefree from income contribution or withdrawal limitscan invest in a variety of assetsless tax advantaged than other accountscan hurt child s financial aid prospectsirrevocably passes to child upon majorityexamples of a custodial accountmost brokerages both digital and brick and mortar offer custodial accounts custodial account terms usually parallel those of their regular non tax advantaged accounts for individuals for example a merrill edge the digital broker platform from merrill lynch ugma utma custodial account can be set up online with funds directly transferred from a checking or savings account at bank of america merrill s parent company there are no annual account fees or minimum investment amounts you can also open custodial deposit and checking accounts at most bank branches can you withdraw money from a custodial account yes money can be withdrawn from custodial accounts as long as it is used for the benefit of the minor a vague term that includes but isn t limited to educational costs | |
what do you do with a custodial account when your child turns 18 | the account is transferred to the child once they reach the age of majority which is either 18 or 21 depending on the state | |
how do i get a custodial account | if you are under the age of either 18 or 21 depending on the state an adult can open a custodial account for you the person who opens the account would manage it until you reach the age of majority or at a designated later age at which point it is transferred over to you and you are responsible for its management | |
how is a custodial account taxed | children file as part of their parent s tax return generally for the 2024 year any unearned income interest and dividends over the 2 500 threshold for ugma or utma custodial accounts may be taxed at the parent s rate as per irs requirements the bottom linea custodial account is a means by which an adult can open a savings account for a child the adult who opens the account is responsible for managing it including making investment decisions and deciding how the money is to be used as long as it benefits the child in some way there are specific tax advantages to a custodial account but there are also risks such as the possibility that the existence of the account limits the amount of financial aid a child might get for college weigh the pros and cons before deciding to open a custodial account | |
what is a custodian bank | a custodian bank is a financial institution that holds customers securities for safekeeping to prevent them from being stolen or lost the custodian may hold stocks bonds or other assets in electronic or physical form on behalf of its customers often a custodian bank does more than provide asset protection it can manage customers accounts and transactions manage the settlement of financial transactions account for the status of assets and ensure compliance with tax regulations investopedia lara antal | |
how a custodian bank works | since they are responsible for the safety of assets and securities worth hundreds of millions or even billions of dollars custodians tend to be large and reputable firms such as banks investment advisory firms routinely use custodian banks to safeguard the assets they manage for their clients a custodian also may be appointed to maintain control of the assets of a minor child or an incapacitated adult and manage them on their behalf most custodians offer related services such as account administration transaction settlements the collection and distribution of dividends and interest payments tax support and foreign exchange management a custodian bank may handle investment activities for customers this could involve placing orders with a brokerage to buy or sell securities transferring funds to and from accounts overseeing investment account activities and reporting account activity to customers custodians may also prepare the necessary tax filings related to investment activities for customers the fees for their services depend on exactly what they provide and can be based on the value of assets held a custodian bank may have the right to take possession of assets if required often in conjunction with a power of attorney this allows the custodian bank to perform actions on behalf of a client such as making payments or altering investments 1custodian banks vs traditional banksthe difference between custodian banks and traditional banks is their primary roles custodian banks are responsible for above all the safekeeping of financial assets belonging to individuals or institutions 2 they may also offer services related to that primary role however they don t offer the same types of services provided by traditional banks traditional banks are financial institutions with the primary role of taking and holding deposits for customers and extend loans to them bank customers should be familiar with such activities and the products that represent them these products can include checking and savings accounts certificate of deposit accounts cds money market accounts personal loans car loans and mortgage loans all are related to their primary role traditional banks may offer other related and beneficial services such as check cashing credit cards investment services and business banking a traditional bank may also offer custody services and therefore function as a custodian bank as well custodian banks vs mutual fund custodiansa custodian bank takes on the responsibility of safeguarding the financial assets of individuals and institutions 2 it may provide additional related services as needed mutual fund custodians are third party institutions that protect the securities in which mutual funds invest a mutual fund custodian is often a custodian bank but mutual fund custodians are focused on mutual fund company assets the separation between mutual fund and mutual fund custodian is important should a fund s management declare bankruptcy the mutual fund custodian which has maintained control over the fund s assets will return investments to the shareholders in addition to safeguarding the assets mutual fund custodians can handle settlements track investors transactions and ensure that money is deposited in the custodial account or sent to investors or their brokerages the mutual fund custodian also pays fund expenses related to share transactions and monitors the companies in which the fund invests to ensure the mutual fund companies are in compliance with u s securities and exchange commission sec regulations 3the mutual fund custodian must also maintain transaction records and report activities to the sec as required 4other custodian banking casesin cases where investment advisors are responsible for customer funds the advisor must follow custody rules set forth by the sec 1in particular the person or entity must be considered a qualified custodian that limits the field to banks registered brokers registered dealers and certain other individuals or entities 1notices must be provided to customers when certain activities are conducted on their behalf regular account statements must also be provided to the customers 5jpmorgan chase co is one of the oldest banking institutions and one of the largest custodian banks in the u s 6custodians for minorsif an account beneficiary is a minor a custodian is often required i e a custodial account in such cases the custodian may be a responsible individual rather than an institution the custodian has the authority to make investment decisions regarding the assets in the account but the funds are ultimately intended for use only by the named beneficiary by a certain age 7each account can have only one beneficiary the minor accountholder and one custodian a designated adult representative the custodian remains in place until the beneficiary reaches adulthood other people can contribute to a minor s account but they have no authority over how the funds are managed once they are deposited | |
what purpose does a custodian financial institution serve | a custodian financial institution keeps the securities owned by individuals and organizations safe 2 this serves an important purpose since financial securities must be cleared and settled properly with various regulatory and accounting procedures met these are often far too complex or time consuming for investors or traders | |
what other services do custodian banks offer | custodians today do more than maintain the security of assets they also provide accounting and settlement services such as managing dividends or interest that has been distributed to the account or managing stock splits the custodian bank performs such actions in the client s name and the sec ensures that custodians will notify customers when certain activities are conducted on their behalf in addition to sending regular account statements 1 | |
what are some of the largest custodian banks | bank of new york bny mellon jpmorgan chase state street and citigroup are among the largest custodian banks in the u s some of the best known custodian banks overseas include the bank of china credit suisse and ubs switzerland deutsche bank germany barclays england and bnp paribas france | |
why are custodian banks important | custodian banks are important because the security services they offer are needed by both individuals and institutions they can be of valuable assistance to holders of financial accounts and assets who don t want to or can t play a role in the day to day management of their accounts transactions and other activities custodian banks also can manage assets handle reporting and ensure compliance with regulations they can also address tax management goals | |
are there custodians other than banks | yes a custodian can be an individual other types of firms such as a law firm or an accounting firm can be custodians as well the bottom linecustodian banks play an important role in holding and protecting the financial assets owned by individuals and institutions they perform related activities such as account administration transaction settlements the collection and distribution of dividends and fixed income interest payments tax support and foreign exchange management custodians can also be appointed to aid in the oversight and management of financial accounts held by minors and adults unable to care for their affairs due to age illness or physical debilitation | |
what is a customer | a customer is an individual or business that purchases another company s goods or services customers are important because they drive revenues businesses can neither survive nor thrive without them all businesses compete with other companies to attract customers either by aggressively advertising their products lowering prices to expand their customer bases or developing unique products and experiences that customers love think apple tesla and google understanding customersbusinesses often honor the adage the customer is always right because happy customers are more likely to repeat their business with companies that meet or exceed their needs many companies closely monitor their customer relationships as a result to gather information about customer behavior and solicit feedback from customers on ways to improve product lines customers are categorized in many ways they re commonly classified as external or internal 1external customers are dissociated from business operations and are often the parties who are interested in purchasing the final goods and services produced by a company internal customers are individuals or businesses integrated into business operations they often exist as employees or other functional groups within the company customers differ from purchasing agents who use corporate capital to buy wholesale goods for commercial or industrial use studying customersbusinesses frequently study their customers profiles and behaviors to finetune their marketing approaches and tailor their inventory to attract more customers customers are often grouped according to demographics such as age race gender ethnicity income level and geographic location all these factors can help businesses cultivate a snapshot of the ideal customer or customer persona 2 this information helps companies deepen existing customer relationships and reach untapped consumer populations to increase traffic customers are so important to businesses that colleges and universities offer consumer behavior courses that are dedicated to the study of customer behavioral patterns choices and idiosyncrasies these courses focus on why people buy and use goods and services and how those decisions impact companies and economies understanding customers enables businesses to create effective marketing and advertising campaigns it helps them deliver products and services that address needs and wants and retain customers for long term repeat business customer servicecustomer service strives to ensure positive experiences it s key to a successful seller customer dynamic loyalty in the form of favorable online reviews referrals and future business can be won or lost based on a good or bad customer service experience customer service has evolved to include real time interactions via instant message chats texting and other means of communication the market is saturated with businesses offering the same or similar products and services what truly distinguishes one from the other is customer service which has become the basis of competition for many businesses customer service is a key element of the quality improvement methodology six sigma 3customers vs consumersthe terms customer and consumer are nearly synonymous and are often used interchangeably but there s a slight difference consumers are defined as individuals or businesses that consume or use goods and services customers are the economy s purchasers who buy goods and services they can exist as consumers or simply as customers | |
what are the basic types of customers | customers can be broken down into 12 types prospective window shoppers determined promotion driven churned new impulse angry loyal brand advocates referred customers and international churned customers are those on the tail end of a relationship with your company or store but have moved on 4 | |
what is the best type of customer | loyal customers are the best because they make repeat purchases over the long term sometimes decades they re likely to recommend your business to friends social media connections and or business associates | |
what do customers value most | customers most appreciate high quality products or services as well as low prices good service and the opportunity to give feedback that the company acknowledges the bottom linea company s most valuable asset is its customers they re out of business without them the most successful companies go to great lengths to study and understand customer behaviors and desires so they can address issues that displease buyers and promote the products and services they like | |
what is crm customer relationship management | crm stands for customer relationship management and refers to the principles practices and guidelines that an organization follows when interacting with its customers from the organization s point of view this entire relationship encompasses direct interactions with customers such as sales and service related processes forecasting and the analysis of customer trends and behaviors ultimately crm serves to enhance the customer s overall experience understanding crm customer relationship management elements of crm range from a company s website and emails to mass mailings and telephone calls social media is one way that companies adapt to trends that benefit their bottom line the entire point of crm is to build positive experiences with customers to keep them coming back so that a company can create a growing base of returning customers increasingly the term crm is being used to refer to the technological systems that managers and companies use to manage external interactions with customers it is useful at all points during the customer life cycle from discovery to education purchase and post purchase with an estimated global market value of over 40 billion in 2018 crm technology is widely cited as the fastest growing enterprise software category which largely encompasses the broader software as a service saas market five of the largest players in the crm market today are cloud computing giant salesforce microsoft sap oracle and adobe systems crm includes all aspects in which a company interacts with customers but more commonly refers to the technology used to manage these relationships benefits of crma crm system helps businesses organize and centralize their information on customers allowing for easier access and customer support businesses use crm systems to optimize sales and marketing and improve customer retention data analytics is also much easier where businesses can track the success of various projects or campaigns identify trends infer associations and create visually intuitive data dashboards customers enjoy better service and are thus more likely to report higher satisfaction customer interactions including complaints are stored and can be easily recalled so that customers do not have to constantly repeat themselves crm technologyspecial crm software aggregates customer information in one place to give businesses easy access to data such as contact data purchase history and any previous contact with customer service representatives this data helps employees interact with clients anticipate customer needs recognize customer updates and track performance goals when it comes to sales crm software s main purpose is to make interactions more efficient and productive automated procedures within a crm module include sending sales team marketing materials based on a customer s selection of a product or service programs also assess a customer s needs to reduce the time it takes to fulfill a request cloud based systems provide real time data to sales agents at the office and in the field as long as a computer smartphone laptop or tablet connects to the internet such systems boast heightened accessibility to customer information and eliminate the sometimes complicated installation process involved with other crm products or software the convenience of this type of system however has a tradeoff if a company goes out of business or faces an acquisition then access to customer information may become compromised a business might have compatibility issues when and if it migrates to a different vendor for this kind of software also cloud based crm programs typically cost more than in house programs all of the computer software in the world to help with crm means nothing without proper management and decision making from humans plus the best programs organize data in a way that humans can interpret readily and use to their advantage for successful crm companies must learn to discern useful information and superfluous data and must weed out any duplicate and incomplete records that may give employees inaccurate information about customers despite this human need industry analysts are increasingly discussing the impact that artificial intelligence ai applications may have on crm management and the crm market in the near future ai is expected to strengthen crm activities by speeding up sales cycles optimizing pricing and distribution logistics lowering costs of support calls increasing resolution rates and preventing loss through fraud detection tangible ai applications for crm are in the early stages of adoption but salesforce and microsoft have already started to integrate ai components into their existing crm systems industry research estimates that the crm market was valued at 65 6 billion in 2023 and will grow at an average annualized growth rate of 13 9 through 2030 1types of crmtoday many comprehensive crm platforms integrate all parts of the customer relationship that the business may have however some crms are still designed to target a specific aspect of it | |
how much does a crm system cost | crm pricing will depend on the size of the business scope of features in the platform number of users and software vendor setup and implementation fees can run in the thousands of dollars crm is then typically billed on a per user per month basis and can range from 15 to 300 or more per user per month depending on the complexity of the implementation 2 | |
how do businesses choose which crm to go with | today there are several vendors of crm platforms so choosing a crm boils down to cost service and functionality that means you want the best bang for your buck and not to spend extra money on added features that you won t use establish a budget that revolves around the business s goals and then select the features or functions that you require then shop around and research vendors customer reviews and feedback | |
what is an example of customer relationship management | crm can come in many forms from tracking customers purchasing behavior to fielding complaints and returns one example of crm might be sending out a tailored thank you note to customers after making a key purchase both to improve their experience with the company but also in an attempt for a cross sale or to upsell them in the future the bottom linecustomer relationship management crm serves to enhance a customer s overall experience the term refers to an organization s principles practices and guidelines that it follows when interacting with its customers | |
what is customer service | customer service is the support assistance and advice provided by a company to its customers both before and after they buy or use its products or services customer service is a critical factor in ensuring buyer satisfaction retaining customers and growing a business customer service is also considered a key aspect of servant leadership investopedia jessica olah | |
how customer service works | at most companies customer service representatives are the only employees who have direct contact with buyers or users the buyers perceptions of the company and the product are shaped in part by their experience in dealing with that person this is why many companies work hard to increase customer satisfaction levels successful small business owners understand the need for good customer service instinctively larger businesses study the subject in depth and have reached some basic conclusions about the key components customer service should be a one stop process for the consumer whenever possible benefits of customer servicethere are many reasons why businesses should invest in good customer service the following are just some of the main benefits of implementing a customer service program within a company traits of good customer serviceit isn t enough to have a customer service plan in place it also needs to be effectively executed in order to reap the benefits but before we look at how to be effective it s important to explore bad customer service bad customer service is any communication or experience where a consumer feels as though they are let down this includes negative experiences such as long wait or hold times not being able to speak to an agent being transferred many times or not being heard this can lead customers to provide negative reviews and or begin shopping with a competitor so how can this be turned around there are a few key traits that businesses can apply to their customer service to make it a better experience consider the following the bureau of labor statistics projected customer service representative job growth decline by 5 between 2022 and 2032 1 | |
how to deliver great customer service | studies of customer service have centered on creating the perfect online experience the first and most difficult factor is the multiplicity of channels today s customers expect to get service through whatever app or device they happen to be using at the moment that may be a mobile device or a laptop a social media site a text app or live chat once again the focus has been on packaging how to content and related resources that are designed for self service increasingly sophisticated data analytics also are being used to identify dissatisfied or low engagement customers but as always the most effective customer service needs to incorporate human contact if only as a last resort customer service channelsthere are a number of different channels to deliver customer service many companies especially larger ones use more than one way for consumers to reach them smaller businesses may use one or just a few of them and in the age of social media it s become even easier to get in touch with businesses to get questions answered and problems resolved the following chart highlights some of the most common customer service channels companies can use customer service automationfor decades businesses in many industries have sought to reduce personnel costs by automating their processes to the greatest extent possible this led many companies to implement systems online and by phone that answer as many questions or resolve as many problems as they can without a human presence but in the end there are customer service issues for which human interaction is indispensable creating a competitive advantage amazon is an example of a company that is trying to automate a vast and complex operation it has to given that it delivered a staggering seven billion packages with same or next day shipping in 2023 2 nevertheless amazon still offers 24 hour customer service by phone in addition to email and live chat services most successful businesses recognize the importance of providing outstanding customer service courteous and empathetic interaction with a trained customer service representative can mean the difference between losing or retaining a customer the average annual salary for a customer service representative in 2023 according to glassdoor3customer services job requirementsmuch is expected of customer service representatives yet the pay for the job is low the estimated total pay for as of 2023 is 42 135 per year with an average salary of 39 599 3some of the job expectations | |
why is customer service so important | customer service is a very important part of the business structure having a good customer service plan in place contributes to sales increases brand loyalty generates referrals helps retain customers and provides businesses with a competitive advantage over others in the same industry | |
what are some of the most important skills of a customer service agent | effective customer service agents are skilled at listening and being empathetic they re also very good at problem solving and being proactive it s important for them to have a level of professionalism which means that when things get heated they can take a step back and not take anything to heart | |
what are some examples of good customer service | some of the ways to provide effective customer service include providing a friendly and warm experience listening and empathizing it s also important for customers to feel as though their concerns and problems are valid and that they re being accommodated being proactive not taking anything personally and following up are also some examples of good customer service the bottom linehaving a customer service plan in place can make or break a company putting in a good plan with the right people proper training and appropriate channels can lead to more sales customer loyalty and referrals even though things may be moving in the right direction corporations shouldn t rest on their laurels keeping one step ahead of the game means continuing to find ways to improve and provide an even greater customer experience | |
what is customer to customer c2c | customer to customer c2c is a business model whereby customers can trade with each other typically in an online environment two implementations of c2c markets are auctions and classified advertisements c2c marketing has soared in popularity with the arrival of the internet and companies such as ebay etsy and craigslist | |
how customer to customer c2c works | c2c represents a market environment where one customer purchases goods from another customer using a third party business or platform to facilitate the transaction c2c companies are a type of business model that emerged with ecommerce technology and the sharing economy customers benefit from the competition for products and often find items that are difficult to locate elsewhere also margins can be higher than traditional pricing methods for sellers because there are minimal costs due to the absence of retailers or wholesalers c2c sites are convenient because there is no need to visit a brick and mortar store sellers list their products online and the buyers come to them the amazon effect is named after the popular global online retailer and refers to the competitive gains that ecommerce businesses have made as more shoppers make purchases online instead of at brick and mortar stores types of customer to customer c2c businessescraigslist is an ecommerce platform that connects people advertising products services or situations craigslist not only provides a platform for buying selling and trading products but also posts monthly classified ads such as employment opportunities and property listings this platform requires the seller to deliver items directly to the buyer in person etsy allows company owners to create their custom website on which to market their products to consumers the c2c site offers guidance and tools for growing a business that ranges in price according to a company s stage of development 1 there s also an etsy seller app that helps to manage orders listings and customer queries efficiently 2ebay features two types of product listings fixed price items and auction items fixed price items can be purchased quickly by selecting the buy it now button auction items feature a place bid button for entering bids and show a current bid price these items are open to bids for a predetermined time and are declared sold to the highest bidder 3revenue and growth of the c2c marketc2c websites and similar platforms make money from fees charged to sellers for listing items for sale adding on promotional features and facilitating credit card transactions these c2c transactions typically involve used products sold through a classified or auction system the c2c market is projected to grow in the future because of its cost effectiveness the cost of using third parties is declining and the number of products for sale by consumers is steadily rising retailers consider it to be an essential business model because of the popularity of social media and other online channels these channels showcase specific products already owned by consumers and increase demand which drives increased online traffic to c2c platforms however c2c has problems such as a lack of quality control or payment guarantees in some cases there is little support for credit card transactions although the emergence of paypal and other such payment systems over the years has helped simplify payments on c2c platforms special considerationsthe c2c marketplace has increased over time as more companies have entered the space to facilitate c2c transactions many companies target niche markets and list specific products to attract unique consumers the c2c marketplace is increasing in popularity among sellers looking to maximize their sales potential by connecting with customers who they otherwise would not reach using traditional selling methods online platforms such as etsy ebay and craigslist appeal to customers who can locate almost any product or service at a price they are willing to pay however despite the increasing popularity of the c2c marketplace some companies have issues these include a lack of quality control and payment guarantees for example some c2c e commerce sellers have complained of being scammed by customers and craigslist is mostly unmoderated | |
what are some examples of c2c companies | in ecommerce some big names in c2c include ebay etsy craigslist ali express and amazon marketplace some c2c payment companies include venmo paypal and zelle | |
how does c2c differ from p2p | c2c stands for customer to customer p2p stands for peer to peer both concepts involve consumers or individuals dealing with one another the main difference is that with c2c there is a company or other third party between the buyer and the seller or sender and receiver in a p2p platform counterparties transact directly with one another without that intermediary | |
what is a b2c company | most companies are b2c business to consumer this means that a business produces and markets a product for household consumption this differs from b2b business to business or c2c customer to customer the bottom linein the customer to customer c2c business model customers trade directly with each other typically online auctions and classified ads are two versions of c2c markets and companies like craiglist ebay and etsy and the internet in general have helped c2c marketing soar in popularity | |
what is a cyclical industry | a cyclical industry is a type of industry that is sensitive to the business cycle such that revenues generally are higher in periods of economic prosperity and expansion and are lower in periods of economic downturn and contraction companies in cyclical industries can deal with this type of volatility by implementing employee layoffs and cuts to compensate during bad times and paying bonuses and hiring en masse in good times understanding cyclical industrycyclical industries are sensitive to business cycles so downturns in the cycle force consumers to prioritize expenses and potentially pare some costs that are not essential therefore industries that focus on nonessential products face the biggest risk of revenue loss when economic contraction takes hold by contrast industries such as utilities tend to weather economic storms much better because no matter how bad times are most people find a way to pay their light bill the business cyclethe business cycle is comprised of four discrete phases during the expansionary phase productivity grows unemployment shrinks and stock markets tend to rise because more people are employed during this phase and their investment portfolios are growing they have more discretionary income and are less reticent about spending it the peak follows the expansionary phase at this point the economy has reached the end of expansion and subsequently begins its contractionary phase discretionary income falls during contraction as more people are unemployed and productivity is lower recessions occur during the contractionary phase though not all periods of contraction result in recessions in the united states two consecutive quarterly declines in gross domestic product gdp represent the most common criteria of an economic recession the final phase of the business cycle is the trough this phase is where the economy bottoms out before starting the cycle anew and commencing another contractionary phase examples of cyclical industriesindustries involved in the production of durable goods such as raw materials and heavy equipment tend to be cyclical consumer discretionary goods a sector focused on products and services that people buy with discretionary income also is highly sensitive to the business cycle because discretionary expenses are easier to cut from a consumer s budget during hard times rather than essential costs for example the airline industry is a fairly cyclical industry in good economic times people have more disposable income so they are more willing to take vacations and make use of air travel conversely during bad economic times people are much more cautious about spending as a result they tend to take more fiscally conservative vacations closer to home if they go at all and avoid expensive air travel | |
what is a cyclical stock | the price of a cyclical stock is affected by macroeconomic or systematic changes in the overall economy cyclical stocks are known for following the cycles of an economy through expansion peak recession and recovery most cyclical stocks involve companies that sell consumer discretionary items that consumers buy more during a booming economy but they spend less on them during a recession understanding cyclical stockscompanies with cyclical stocks include car manufacturers airlines furniture retailers clothing stores hotels and restaurants consumers can afford to buy new cars upgrade their homes shop and travel when the economy is doing well these discretionary expenses are some of the first things consumers cut when an economy does poorly cyclical stocks can become completely worthless if a recession is severe enough and companies may go out of business investors should be careful about their positions in cyclical stocks but they shouldn t avoid them entirely cyclical stocks rise and fall with the economic cycle this predictability in the movement of their prices can lead some investors to attempt to time the market they buy the shares at a low point in the business cycle and sell them at a high point investors should use caution about the weight of cyclical stocks in their portfolios at any point in time but this doesn t mean investors should steer clear of these stocks completely special considerationscyclical stocks are seen as more volatile than noncyclical or defensive stocks which tend to be more stable during periods of economic weakness however they offer greater potential for growth because they tend to outperform the market during periods of economic strength investors seeking long term growth with managed volatility tend to balance their portfolios with a mix of cyclical stocks and defensive stocks investors frequently choose exchange traded funds etfs to gain exposure to cyclical stocks during expanding economic cycles the spdr etf series offers one of the most popular cyclical etf investments in the consumer discretionary select sector fund xly 1cyclical vs noncyclical stocksthe performance of cyclical stocks tends to correlate with the economy but the same can t be said about noncyclical stocks these stocks tend to beat the market regardless of the economic trend even when there s a slowdown in the economy noncyclical stocks are also referred to as defensive stocks they encompass the consumer staples category with goods and services that people continue buying through all types of business cycles even economic downturns companies that deal with food gas and water such as walmart are examples of those that have noncyclical stocks adding noncyclical stocks to a portfolio can be a great strategy for investors because it helps hedge against losses sustained by cyclical companies during an economic slowdown example of cyclical stockscyclical stocks are often further delineated by durables nondurables and services durable goods companies are involved in the manufacture or distribution of physical goods that have an expected life span of more than three years companies that operate in this segment include automakers such as ford appliance manufacturers like whirlpool and furniture makers such as ethan allen 2the measure of durable goods orders is an indicator of future economic performance it may be an indication of stronger economic activity in the ensuing months when durable goods orders are up in a particular month nondurable goods companies produce or distribute soft goods that have an expected life span of fewer than three years examples of companies that operate in this sector are coca cola and procter gamble 3services is a separate category of cyclical stocks because these companies don t manufacture or distribute physical goods they instead provide services that facilitate travel entertainment and other leisure activities for consumers walt disney dis is one of the best known companies operating in this space also falling into this category are companies that operate in the digital area of streaming media such as netflix nflx | |
how can i collect income from investing in stocks | a stock is essentially an ownership interest in a company you own a small percentage of the enterprise when you purchase one or more of its stocks you ll receive monetary dividends as payment when and if the company does well you can use them to reinvest and purchase more shares or you can take dividends as cash payments you can also sell your stocks you ll have capital gains income if you can sell your shares for more than your investment in them including any trading fees 4 | |
what are some of the best cyclical stocks | the best of any type of stock is the one that most closely accommodates your goals and your risk tolerance that said numerous sources will rate individual stocks for you based on other factors yahoo finance recommends cyclical stocks of companies with names that we re all familiar with like costco expedia ups airbnb and kohl s 5 | |
what is a counter cyclical stock | as the term counter implies a counter cyclical stock is noncyclical its price is inclined to move in the opposite direction from that in which the economy appears to be headed the prices of these stocks tend to go up when the economy is struggling and a recession is looming or has already begun 6the bottom linea cyclical stock moves in sync with trends in the economy the price soars when the economy is flourishing but it can just as easily tank in times of recession these stocks tend to be companies that produce and sell products that are discretionary rather than necessary components of life think restaurant chains rather than groceries cyclical stocks tend to produce high returns but this is confined to times of economic strength they ll tank when the economy struggles they re volatile and should be balanced with noncyclical stocks in a portfolio | |
what is cyclical unemployment | cyclical unemployment is the component of overall unemployment that results directly from cycles of economic upturn and downturn unemployment typically rises during recessions and declines during economic expansions moderating cyclical unemployment during recessions is a major motivation behind the study of economics and the goal of the various policy tools that governments employ to stimulate the economy investopedia jiaqi zhouunderstanding cyclical unemploymentcyclical unemployment relates to the irregular ups and downs or cyclical trends in growth and production as measured by the gross domestic product gdp that occur within the business cycle most business cycles eventually reverse with the downturn shifting to an upturn followed by another downturn economists describe cyclical unemployment as the result of businesses not having enough demand for labor to employ all those who are looking for work at that point within the business cycle when demand for a product and service declines there can be a corresponding reduction in supply production to compensate as the supply levels are reduced fewer employees are required to meet the lower standard of production volume those workers who are no longer needed will be released by the company resulting in their unemployment | |
when economic output falls the business cycle is low and cyclical unemployment will rise conversely when business cycles are at their peak cyclical unemployment will tend to be low because there is a high demand for labor | example of cyclical unemploymentduring the financial crisis in 2008 the housing bubble burst and the great recession began as more and more borrowers failed to meet the debt obligations associated with their homes and qualifications for new loans become more stringent the demand for new construction declined with the overall number of unemployed climbing and more borrowers unable to maintain payments on their homes additional properties were subject to foreclosure driving demand for construction even lower as a result approximately 1 5 million workers in the construction field became unemployed 1 this rise in unemployment was cyclical unemployment as the economy recovered over the following years the financial sector returned to profitability and began to make more loans people began buying homes again or remodeling existing ones causing the prices of real estate to climb once again construction jobs returned to meet this renewed demand in the housing sector and cyclical unemployment declined multiple types of unemployment often exist at the same time cyclical vs other types of unemploymentcyclical unemployment is one of the main classes of unemployment as recognized by economists other types include structural seasonal frictional and institutional unemployment rather than being caused by the ebbs and flows of the business cycle structural unemployment is caused by fundamental shifts in the makeup of the economy for example jobs lost in the buggy whip sector once automobiles came to dominate it is a mismatch between the supply and demand for certain skills in the labor market frictional unemployment is short term joblessness caused by the actual process of leaving one job to start another including the time needed to look for a new job it naturally occurs even in a growing stable economy and is actually beneficial as it indicates that workers are seeking better positions institutional unemployment consists of the component of unemployment attributable to institutional arrangements such as high minimum wage laws discriminatory hiring practices or high rates of unionization it results from long term or permanent institutional factors and incentives in the economy seasonal unemployment occurs as demands shift from one season to the next this category can include any workers whose jobs are dependent on a particular season official unemployment statistics will often be adjusted or smoothed to account for seasonal unemployment this is known as a seasonal adjustment for example teachers may be considered seasonal based on the fact that most schools in the u s cease or limit operations during the summer similarly construction workers living in areas where construction during the cold months is challenging may lose work in winter certain retail stores hire seasonal workers during the winter holiday season to better manage increased sales then release those workers after the holidays when demand lessens special considerationsin most cases several types of unemployment exist at the same time with the exception of cyclical unemployment the other classes can occur even at the peak ranges of business cycles when the economy is said to be at or near full employment | |
how is the rate of unemployment calculated | the u s unemployment rate is calculated by dividing the number of unemployed persons by the number of persons in the labor force employed or unemployed and multiplying that figure by 100 2 | |
what is considered a high rate of unemployment | unemployment rates that reach 10 are considered high during the height of the covid 19 pandemic the unemployment rate reached 14 8 3 | |
what is the difference between unemployment and underemployment | underemployment is a measurement of the number of laborers in an economy who are unwillingly working in low skill and low paying jobs in addition to those only working part time who are unable to secure full time jobs | |
what is dagmar | dagmar defining advertising goals for measured advertising results is a marketing model used to establish clear objectives for an advertising campaign and measure its success the dagmar model was introduced by russell colley in a 1961 report to the association of national advertisers and was expanded upon in 1995 by solomon dutka 12understanding dagmarthe dagmar approach advocates a marketing strategy that guides the consumer through four phases awareness comprehension conviction and action that path has become known by its acronym as the acca formula the four steps of the campaign are as follows the dagmar method contains two goals the first is to develop a communication task that accomplishes those specific acca steps the second is to make sure that the success of those goals can be measured against a baseline 3colley believed that effective advertising seeks to communicate rather than sell he specified four basic requirements for evaluating the effectiveness of an advertising campaign identifying a target market to implement dagmarthe target market is the subset of consumers who have the highest likelihood of purchasing the product the target market may be narrow or broad it may be women in general or young professional single women who live in urban areas identification of a target market can include demographic geographic and psychographic segmentation target markets can be separated into primary and secondary groups primary markets are the initial focus of a campaign and hopefully the first customers to buy and use the new product secondary markets are the larger population that may buy the product once the brand becomes established after identifying the target market the company establishes the message it wants to communicate in its advertising campaign dagmar benchmark and time framethe dagmar method requires marketers to establish a benchmark in order to measure the success of a campaign today s businesses rarely set out to sell a product to everybody they aim for a particular share of a market or a substantial share of a market segment the cosmetics industry offers a clear example there are mass market products available in drugstores and high end products some made by the same companies that are sold only in department stores there are products that are branded packaged and promoted only for teenagers and others for mature women a company introducing a new product aims at one or more of these market segments but not all of them at once in any case setting a benchmark for product success helps advertisers define the market and create an effective campaign to reach it the time frame attempts to set a reasonable deadline for judging the success or failure of a new product s introduction | |
what is the dark cloud cover | dark cloud cover is a bearish reversal candlestick pattern where a down candle typically black or red opens above the close of the prior up candle typically white or green and then closes below the midpoint of the up candle the pattern is significant as it shows a shift in the momentum from the upside to the downside the pattern is created by an up candle followed by a down candle traders look for the price to continue lower on the next third candle this is called confirmation understanding dark cloud coverthe dark cloud cover pattern involves a large black candle forming a dark cloud over the preceding up candle as with a bearish engulfing pattern buyers push the price higher at the open but sellers take over later in the session and push the price sharply lower this shift from buying to selling indicates that a price reversal to the downside could be forthcoming most traders consider the dark cloud cover pattern useful only if it occurs following an uptrend or an overall rise in price as prices rise the pattern becomes more important for marking a potential move to the downside if the price action is choppy the pattern is less significant since the price is likely to remain choppy after the pattern the five criteria for the dark cloud cover pattern are the dark cloud cover pattern is further characterized by white and black candlesticks that have long real bodies and relatively short or non existent shadows these attributes suggest that the move lower was both highly decisive and significant in terms of price movement traders might also look for a confirmation in the form of a bearish candle following the pattern the price is expected to decline following the dark cloud cover so if it doesn t that indicates the pattern may fail the close of the bearish candle may be used to exit long positions alternatively traders may exit the following day if the price continues to decline pattern confirmed if entering short on the close of the bearish candle or the next period a stop loss can be placed above the high of the bearish candle there is no profit target for a dark cloud cover pattern traders utilize other methods or candlestick patterns for determining when to exit a short trade based on dark cloud cover traders may use the dark cloud cover pattern in conjunction with other forms of technical analysis for example traders might look for a relative strength index rsi greater than 70 which provides a confirmation that the security is overbought a trader may also look for a breakdown from a key support level following a dark cloud cover pattern as a signal that a downtrend may be forthcoming example of dark cloud coverthe following chart shows an example of the dark cloud cover pattern in the velocityshares daily 2x vix short term etn tvix in this example the dark cloud cover occurs when the third bullish candle is followed by a bearish candle that opens higher and closes below the midpoint of the last bullish candle the pattern successfully predicted a downturn in the following session where the price moved nearly seven percent lower that session provided confirmation traders who were long could consider exiting near the close of the bearish candle or on the following day confirmation day when the price continued dropping traders could also enter short positions at these junctures as well if entering short the initial stop loss could be placed above the high of the bearish candle following the confirmation day the stop loss could be dropped to just above the confirmation day high in this case traders would then establish a downside profit target or continue to trail their stop loss down if the price continues to fall investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is a dark pool | a dark pool is a privately organized financial forum or exchange for trading securities dark pools allow institutional investors to trade without exposure until after the trade has been executed and reported dark pools are a type of alternative trading system ats that gives certain investors the opportunity to place large orders and make trades without publicly revealing their intentions during the search for a buyer or seller understanding the dark pooldark pools emerged in the 1980s when the securities and exchange commission sec allowed brokers to transact large blocks of shares electronic trading and an sec ruling in 2005 that was designed to increase competition and cut transaction costs have stimulated an increase in the number of dark pools 12 dark pools can charge lower fees than exchanges because they are often housed within a large firm and not necessarily a bank for example bloomberg lp owns the dark pool bloomberg tradebook which is registered with the sec 3 dark pools were initially mostly used by institutional investors for block trades involving a large number of securities however dark pools are no longer used only for large orders a 2013 report by celent found that as a result of block orders moving to dark pools the average order size dropped about 50 from 430 shares in 2009 to approximately 200 shares in four years 4the primary advantage of dark pool trading is that institutional investors making large trades can do so without exposure while finding buyers and sellers this prevents heavy price devaluation which would otherwise occur if it were public knowledge for example that an investment bank was trying to sell 500 000 shares of a security the security would almost certainly have decreased in value by the time the bank found buyers for all of their shares devaluation has become an increasingly likely risk and electronic trading platforms are causing prices to respond much more quickly to market pressures if the new data is reported only after the trade has been executed however the news has much less of an impact on the market dark pools and high frequency tradingwith the advent of supercomputers capable of executing algorithmic based programs over the course of just milliseconds high frequency trading hft has come to dominate daily trading volume hft technology allows institutional traders to execute their orders of multimillion share blocks ahead of other investors capitalizing on fractional upticks or downticks in share prices when subsequent orders are executed profits are instantly obtained by hft traders who then close out their positions this form of legal piracy can occur dozens of times a day reaping huge gains for hft traders 5eventually hft became so pervasive that it grew increasingly difficult to execute large trades through a single exchange because large hft orders had to be spread among multiple exchanges it alerted trading competitors who could then get in front of the order and snatch up the inventory driving up share prices all of this occurred within milliseconds of the initial order being placed to avoid the transparency of public exchanges and ensure liquidity for large block trades several of the investment banks established private exchanges which came to be known as dark pools for traders with large orders who are unable to place them on the public exchanges or want to avoid telegraphing their intent dark pools provide a market of buyers and sellers with the liquidity to execute the trade as of feb 28 2022 there were 64 dark pools operating in the united states run mostly by investment banks 6critiques of dark poolsalthough considered legal anonymous trading in dark pools is able to operate with little transparency those who have denounced hft as an unfair advantage over other investors have also condemned the lack of transparency in dark pools which can hide conflicts of interest due to complaints the sec conducted research and presented their 2015 report scrutinizing dark pools for illegal front running when institutional traders place their order in front of a customer s order to capitalize on the uptick in share prices 7 advocates of dark pools insist they provide essential liquidity allowing the markets to operate more efficiently examples of dark poolsthere are several different types of dark pools broker or dealer owned exchanges such as morgan stanley s ms pool and goldman sachs sigma x independently owned exchanges offering private trading to their clients and private exchange markets operated by public exchanges such as the new york stock exchange s euronext a privately owned market will have price discovery within their own markets but a dark pool operated by a broker derives its prices from public exchanges because of their sinister name and lack of transparency dark pools are often considered by the public to be dubious enterprises in reality dark pools are tightly regulated by the sec 89 however there is a real concern that because of the sheer volume of trades conducted on dark markets the public values of certain securities are increasingly unreliable or inaccurate there is also mounting concern that dark pool exchanges provide excellent fodder for predatory high frequency trading | |
what is the dark web | the dark web refers to encrypted online content and allows individuals to hide their identity and location from others dark web content is not indexed by conventional search engines to access the dark web users must install a private browser like the tor browser use a virtual private network vpn and ensure their computer remains safe and secure | |
how the dark web works | due to anonymity on the dark web many consider it a place where online marketplaces for drugs exchanges for stolen data and other illegal activities occur despite this there may be legitimate reasons people choose to use the dark web including political dissidents and those who want to keep certain information private the dark web can provide legal authorities with the additional tools they need to apprehend the perpetrators of unethical activities 12the dark web is a secret network and a series of websites hidden from the general public and unaccessible through traditional search engines like google 12traditional search engines return results from indexes of links to websites ranked based on keywords and relevancy the dark web uses information unavailable on other search engines such as content from individual accounts email social media banking personal and professional databases and medical and legal documents 3the tor network or the onion routing project is a secure encrypted protocol that can ensure privacy for data and communications on the web the tor technology was initially developed and solely used by the u s navy to protect sensitive government communications | |
what is darvas box theory | darvas box theory is a trading strategy developed by nicolas darvas that targets stocks using highs and volume as key indicators darvas trading technique involves buying into stocks that are trading at new highs and drawing a box around the recent highs and lows to establish an entry point and placement of the stop loss order a stock is considered to be in a darvas box when the price action rises above the previous high but falls back to a price not far from that high 1 | |
what does darvas box theory tell you | the darvas box theory is a type of momentum strategy it uses market momentum theory along with technical analysis to determine when to enter and exit the market darvas boxes are a fairly simple indicator created by drawing a line along lows and highs as you update the highs and lows over time you will see rising boxes or falling boxes darvas box theory suggests only trading rising boxes and using the highs of the boxes that are breached to update the stop loss orders despite being a largely technical strategy darvas box theory as originally conceived did mix in some fundamental analysis to determine what stocks to target darvas believed his method worked best when applied to industries with the greatest potential to excite investors and consumers with revolutionary products he also preferred companies that had shown strong earnings over time particularly if the market overall was choppy 1the darvas box theory in practicethe darvas box theory encourages traders to focus on growth industries meaning industries that investors expect to outperform the overall market when developing the system darvas selected a few stocks from these industries and monitored their prices and trading every day while monitoring these stocks darvas used volume as the main indication as to whether a stock was ready to make a strong move once darvas noticed an unusual volume he created a darvas box with a narrow price range based on the recent highs and lows of the trading sessions inside the box the stock s low for the given time period represents the floor and the highs create the ceiling | |
when the stock broke through the ceiling of the current box darvas would buy the stock and use the ceiling of the breached box as the stop loss for the position as more boxes were breached darvas would add to the trade and move the stop loss order up the trade would generally end when the stop loss order was triggered 1 | darvas developed his theory in the 1950s while traveling the world as a professional ballroom dancer the origin of darvas box theorynicolas darvas fled his native hungary ahead of the nazis in the 1930s eventually he reunited with his sister and soon after following world war ii they began dancing professionally in europe by the late 1950s nicolas darvas was one half of the highest paid dance team in show business he was in the middle of a world tour dancing before sold out crowds while traveling as a dancer darvas obtained copies of the wall street journal and barron s but only used the listed stock prices to determine his investments by drawing boxes and following strict trading rules darvas turned a 10 000 investment into 2 million over an 18 month period his success led him to write how i made 2 000 000 in the stock market in 1960 popularizing the darvas box theory 2today there are variations to the darvas box theory that focus on different time periods to establish the boxes or simply integrate other technical tools that follow similar principles such as support and resistance bands darvas initial strategy was created at a time when information flow was much slower and there was no such thing as real time charting despite that the theory is such that trades can be identified and entry and exit points set applying the boxes to the chart even now limitations of the darvas box theorycritics of the darvas box theory technique attribute darvas initial success to the fact that he traded in a very bullish market and assert that his results cannot be attained if using this technique in a bear market it is fair to say that following the darvas box theory will produce small losses overall when the trend doesn t develop as planned the use of a trailing stop loss order and following the trend momentum as it develops has become a staple of many technical strategies developed since darvas as with many trading theories the true value in the darvas box theory may actually be the discipline it develops in traders when it comes to controlling risk and following a plan darvas emphasized the importance of logging trades in his book and later dissecting what went right and wrong | |
what is data analytics | the term data analytics refers to the science of analyzing raw data to make conclusions about information many of the techniques and processes of data analytics have been automated into mechanical processes and algorithms that work over raw data for human consumption data analytics can be used by different entities such as businesses to optimize their performance and maximize their profits this is done by using software and other tools to gather and analyze raw data understanding data analyticsdata analytics is a broad term that encompasses many diverse types of data analysis any type of information can be subjected to data analytics techniques to get insight that can be used to improve things data analytics techniques can reveal trends and metrics that would otherwise be lost in the mass of information this information can then be used to optimize processes to increase the overall efficiency of a business or system for example manufacturing companies often record the runtime downtime and work queue for various machines and then analyze the data to better plan workloads so the machines operate closer to peak capacity data analytics can do much more than point out bottlenecks in production gaming companies use data analytics to set reward schedules for players that keep the majority of players active in the game content companies use many of the same data analytics to keep you clicking watching or re organizing content to get another view or another click data analytics is important because it helps businesses optimize their performances implementing it into the business model means companies can help reduce costs by identifying more efficient ways of doing business a company can also use data analytics to make better business decisions and help analyze customer trends and satisfaction which can lead to new and better products and services steps in data analysisthe process involved in data analysis involves several steps types of data analyticsdata analytics is broken down into four basic types data analytics underpins many quality control systems in the financial world including the ever popular six sigma program it s nearly impossible to optimize something if you aren t properly measuring it whether it s your weight or the number of defects per million in a production line the sectors that have adopted the use of data analytics include the travel and hospitality industry where turnarounds can be quick this industry can collect customer data and figure out where problems if any lie and how to fix them healthcare combines the use of high volumes of structured and unstructured data and uses data analytics to make quick decisions similarly the retail industry uses copious amounts of data to meet the ever changing demands of shoppers the information that retailers collect and analyze can help them identify trends recommend products and increase profits the average total pay for a data analyst in the united states was just over 90 000 in april 2024 1 although data analytics doesn t have a separate listing under the bureau of labor statistics s bls handbook the responsibilities fall under the category of data scientist the agency estimates as many as 59 400 jobs created in this field between 2022 and 2032 at a rate of 35 which is much faster than average 2data analytics techniquesdata analysts can use several analytical methods and techniques to process data and extract information some of the most popular methods include data analytics toolsdata analytics has rapidly evolved in technological capabilities in addition to a broad range of mathematical and statistical approaches to crunching numbers data analysts have a broad range of software tools to help acquire data store information process data and report findings data analytics has always had loose ties to spreadsheets and microsoft excel data analysts also often interact with raw programming languages to transform and manipulate databases data analysts also have help when reporting or communicating findings both tableau and power bi are data visualization and analysis tools used to compile information perform data analytics and distribute results via dashboards and reports other tools are also emerging to assist data analysts sas is an analytics platform that can assist with data mining apache spark is an open source platform useful for processing large sets of data data analysts have a broad range of technological capabilities to further enhance the value they deliver to their company the role of data analyticsdata analytics can enhance operations efficiency and performance in numerous industries by shining a spotlight on patterns implementing these techniques can give companies and businesses a competitive edge let s take a look at the process of data analysis divided into four basic steps as the name suggests this step involves collecting or gathering data and information from across a broad spectrum of sources various forms of information are then recreated into the same format so they can eventually be analyzed the process can take a good bit of time more than any other step data requires a database to contain manage and provide access to the information tht has been gathered the next step in data analytics is therefore the creation of such a database to manage the information while some people or organizations may store data in microsoft excel spreadsheets excel is limited for this purpose and is more a tool for basic analysis and calculations such as in finance relational databases are a much better option than excel for data storage they allow for the storage of much greater volumes of data and allow for efficient access the relational structure allows for tables to easily be used together structured query language known by its initials sql is the computer language used to work on and query from relational databases created in 1979 sql allows for easy interaction with relational databases enabling datasets to be queried built and analysized 3the third step is statistical analysis it involves the interpretation of the gathered and stored data into models that will hopefully reveal trends that can be used to interpret future data this is achieved through open source programming languages such as python more specific tools for data analytics like r can be used for statistical analysis or graphical modeling the results of the data analytics process are meant to be shared the final step is formatting the data so it s accessible to and understandable by others particularly those individuals within a company who are responsible for growth analysis efficiency and operations having access can be beneficial to shareholders as well importance and uses of data analyticsdata analytics provide a critical component of a business s probability of success gathering sorting analyzing and presenting information can significantly enhance and benefit society particularly in fields such as healthcare and crime prevention but the uses of data analytics can be equally beneficial for small enterprises and startups that are looking for an edge over the business next door albeit on a smaller scale | |
why is data analytics important | implementing data analytics into the business model means companies can help reduce costs by identifying more efficient ways of doing business a company can also use data analytics to make better business decisions | |
what are the 4 types of data analytics | data analytics is broken down into four basic types descriptive analytics describes what has happened over a given period diagnostic analytics focuses more on why something happened predictive analytics moves to what is likely going to happen in the near term finally prescriptive analytics suggests a course of action who uses data analytics data analytics has been adopted by several sectors where turnarounds can be quick such as the travel and hospitality industry healthcare is another sector that combines the use of high volumes of structured and unstructured data and data analytics can help in making quick decisions the retail industry also uses large amounts of data to meet the ever changing demands of shoppers the bottom linedata analytics helps individuals and organizations make sure of their data in a world that s increasingly becoming reliant on information and gathering statistics a set of raw numbers can be transformed using a variety of tools and techniques resulting in informative educational insights that drive decision making and thoughtful management | |
what is data mining | data mining is the process of searching and analyzing a large batch of raw data in order to identify patterns and extract useful information companies use data mining software to learn more about their customers it can help them to develop more effective marketing strategies increase sales and decrease costs data mining relies on effective data collection warehousing and computer processing investopedia julie bang | |
how data mining works | data mining involves exploring and analyzing large blocks of information to glean meaningful patterns and trends it is used in credit risk management fraud detection and spam filtering it also is a market research tool that helps reveal the sentiment or opinions of a given group of people the data mining process breaks down into four steps data warehousing and mining softwaredata mining programs analyze relationships and patterns in data based on user requests it organizes information into classes for example a restaurant may want to use data mining to determine which specials it should offer and on what days the data can be organized into classes based on when customers visit and what they order in other cases data miners find clusters of information based on logical relationships or look at associations and sequential patterns to draw conclusions about trends in consumer behavior warehousing is an important aspect of data mining warehousing is the centralization of an organization s data into one database or program it allows the organization to spin off segments of data for specific users to analyze and use depending on their needs cloud data warehouse solutions use the space and power of a cloud provider to store data this allows smaller companies to leverage digital solutions for storage security and analytics data mining techniquesdata mining uses algorithms and various other techniques to convert large collections of data into useful output the most popular types of data mining techniques include association rules classification clustering decision trees k nearest neighbor neural networks and predictive analysis the data mining processto be most effective data analysts generally follow a certain flow of tasks along the data mining process without this structure an analyst may encounter an issue in the middle of their analysis that could have easily been prevented had they prepared for it earlier the data mining process is usually broken into the following steps before any data is touched extracted cleaned or analyzed it is important to understand the underlying entity and the project at hand what are the goals the company is trying to achieve by mining data what is their current business situation what are the findings of a swot analysis before looking at any data the mining process starts by understanding what will define success at the end of the process once the business problem has been clearly defined it s time to start thinking about data this includes what sources are available how they will be secured and stored how the information will be gathered and what the final outcome or analysis may look like this step also includes determining the limits of the data storage security and collection and assesses how these constraints will affect the data mining process data is gathered uploaded extracted or calculated it is then cleaned standardized scrubbed for outliers assessed for mistakes and checked for reasonableness during this stage of data mining the data may also be checked for size as an oversized collection of information may unnecessarily slow computations and analysis with a clean data set in hand it s time to crunch the numbers data scientists use the types of data mining above to search for relationships trends associations or sequential patterns the data may also be fed into predictive models to assess how previous bits of information may translate into future outcomes the data centered aspect of data mining concludes by assessing the findings of the data model or models the outcomes from the analysis may be aggregated interpreted and presented to decision makers that have largely been excluded from the data mining process to this point in this step organizations can choose to make decisions based on the findings the data mining process concludes with management taking steps in response to the findings of the analysis the company may decide the information was not strong enough or the findings were not relevant or the company may strategically pivot based on findings in either case management reviews the ultimate impacts of the business and recreates future data mining loops by identifying new business problems or opportunities different data mining processing models will have different steps though the general process is usually pretty similar for example the knowledge discovery databases model has nine steps the crisp dm model has six steps and the semma process model has five steps 1applications of data miningin today s age of information almost any department industry sector or company can make use of data mining data mining encourages smarter more efficient use of capital to drive revenue growth consider the point of sale register at your favorite local coffee shop for every sale that coffeehouse collects the time a purchase was made and what products were sold using this information the shop can strategically craft its product line once the coffeehouse knows its ideal line up it s time to implement the changes however to make its marketing efforts more effective the store can use data mining to understand where its clients see ads what demographics to target where to place digital ads and what marketing strategies most resonate with customers this includes aligning marketing campaigns promotional offers cross sell offers and programs to the findings of data mining for companies that produce their own goods data mining plays an integral part in analyzing how much each raw material costs what materials are being used most efficiently how time is spent along the manufacturing process and what bottlenecks negatively impact the process data mining helps ensure the flow of goods is uninterrupted the heart of data mining is finding patterns trends and correlations that link data points together therefore a company can use data mining to identify outliers or correlations that should not exist for example a company may analyze its cash flow and find a reoccurring transaction to an unknown account if this is unexpected the company may wish to investigate whether funds are being mismanaged human resources departments often have a wide range of data available for processing including data on retention promotions salary ranges company benefits use of those benefits and employee satisfaction surveys data mining can correlate this data to get a better understanding of why employees leave and what entices new hires customer satisfaction may be caused or destroyed by many events or interactions imagine a company that ships goods a customer may be dissatisfied with shipping times shipping quality or communications the same customer may be frustrated with long telephone wait times or slow e mail responses data mining gathers operational information about customer interactions and summarizes the findings to pinpoint weak points and highlight what the company is doing right advantages and disadvantages of data miningit drives profitability and efficiencyit can be applied to any type of data and business problemit can reveal hidden information and trendsit is complexresults and benefits are not guaranteedit can be expensiveeven large companies or government agencies have challenges with data mining consider the fda s white paper on data mining that outlines the challenges of bad information duplicate data underreporting or overreporting 2data mining and social mediaone of the most lucrative applications of data mining has been undertaken by social media companies platforms like facebook tiktok instagram and x formerly twitter gather reams of data about their users based on their online activities that data can be used to make inferences about their preferences advertisers can target their messages to the people who appear to be most likely to respond positively data mining on social media has become a big point of contention with several investigative reports and expos s showing just how intrusive mining users data can be at the heart of the issue is that users may agree to the terms and conditions of the sites not realizing how their personal information is being collected or to whom their information is being sold examples of data miningdata mining can be used for good or it can be used illicitly here is an example of both ebay collects countless bits of information every day from sellers and buyers the company uses data mining to attribute relationships between products assess desired price ranges analyze prior purchase patterns and form product categories 3ebay outlines the recommendation process as a cautionary example of data mining is the facebook cambridge analytica data scandal during the 2010s the british consulting firm cambridge analytica ltd collected personal data from millions of facebook users this information was later analyzed for use in the 2016 presidential campaigns of ted cruz and donald trump it is suspected that cambridge analytica interfered with other notable events such as the brexit referendum 4in light of this inappropriate data mining and misuse of user data facebook agreed to pay 100 million for misleading investors about its uses of consumer data the securities and exchange commission claimed facebook discovered the misuse in 2015 but did not correct its disclosures for more than two years 5 | |
what are the types of data mining | there are two main types of data mining predictive data mining and descriptive data mining predictive data mining extracts data that may be helpful in determining an outcome description data mining informs users of a given outcome | |
how is data mining done | data mining relies on big data and advanced computing processes including machine learning and other forms of artificial intelligence ai the goal is to find patterns that can lead to inferences or predictions from large and unstructured data sets | |
what is another term for data mining | data mining also goes by the less used term knowledge discovery in data or kdd | |
where is data mining used | data mining applications have been designed to take on just about any endeavor that relies on big data companies in the financial sector look for patterns in the markets governments try to identify potential security threats corporations especially online and social media companies use data mining to create profitable advertising and marketing campaigns that target specific sets of users the bottom linemodern businesses have the ability to gather information on their customers products manufacturing lines employees and storefronts these random pieces of information may not tell a story but the use of data mining techniques applications and tools helps piece together information the ultimate goal of the data mining process is to compile data analyze the results and execute operational strategies based on data mining results | |
what is data smoothing | data smoothing is done by using an algorithm to remove noise from a data set this allows important patterns to more clearly stand out data smoothing can be used to help predict trends such as those found in securities prices as well as in economic analysis data smoothing is intended to ignore one time outliers and take into account the effects of seasonality understanding data smoothing | |
when data is compiled it can be manipulated to remove or reduce any volatility or any other type of noise this is called data smoothing | the idea behind data smoothing is that it can identify simplified changes in order to help predict different trends and patterns it acts as an aid for statisticians or traders who need to look at a lot of data that can often be complicated to digest to find patterns they would not otherwise see to explain with a visual representation imagine a one year chart for company x s stock each individual high point on the chart for the stock can be reduced while raising all the lower points this would make a smoother curve thus helping an investor make predictions about how the stock may perform in the future smoothed data is generally preferred by economists because it better identifies changes in trends compared to unsmoothed data which may appear more erratic and create false signals methods for data smoothingthere are different methods in which data smoothing can be done some of these include the randomization method using a random walk calculating a moving average or conducting one of several exponential smoothing techniques a simple moving average sma places equal weight on both recent prices and historical ones while an exponential moving average ema puts more weight on recent price data the random walk model is commonly used to describe the behavior of financial instruments such as stocks some investors believe that there is no relationship between past movement in a security s price and its future movement random walk smoothing assumes that future data points will equal the last available data point plus a random variable technical and fundamental analysts disagree with this idea they believe future movements can be extrapolated by examining past trends often used in technical analysis the moving average smooths out price action while it filters out volatility from random price movements this process is based on past prices making it a trend following or lagging indicator as can be seen in the price chart below the moving average ema has the general shape and trend of the underlying daily price data depicted by the candlesticks the more days incorporated into the moving average the more smoothed the line becomes advantages and disadvantages of data smoothingdata smoothing can be used to help identify trends in the economy in securities such as stocks and consumer sentiment data smoothing can also be used for other business purposes for example an economist can smooth out data to make seasonal adjustments for certain indicators like retail sales by reducing the variations that may occur each month like holidays or gas prices there are downfalls to using this tool however data smoothing doesn t always provide an explanation of the trends or patterns it helps identify it also may lead to certain data points being ignored by emphasizing others helps identify real trends by eliminating noise from the dataallows for seasonal adjustments of economic dataeasily achieved through several techniques including moving averagesremoving data always comes with less information to analyze increasing the risk of errors in analysissmoothing may emphasize analysts biases and ignore outliers that may be meaningfulexample of data smoothing in financial accountingan often cited example of data smoothing in business accounting is to make an allowance for doubtful accounts by changing bad debt expense from one reporting period to another for example a company expects not to receive payment for certain goods over two accounting periods 1 000 in the first reporting period and 5 000 in the second reporting period if the first reporting period is expected to have a high income the company may include the total amount of 6 000 as the allowance for doubtful accounts in that reporting period this would increase the bad debt expense on the income statement by 6 000 and reduce net income by 6 000 this would thereby smooth out a high income period by reducing income it s important for companies to use judgment and legal accounting methods when adjusting any accounts investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is a data warehouse | a data warehouse is the secure electronic storage of information by a business or other organization the goal of a data warehouse is to create a trove of historical data that can be retrieved and analyzed to provide useful insight into the organization s operations a data warehouse is a vital component of business intelligence that wider term encompasses the information infrastructure that modern businesses use to track their past successes and failures and inform their decisions for the future | |
how a data warehouse works | the need to warehouse data evolved as businesses began relying on computer systems to create file and retrieve important business documents the concept of data warehousing was introduced in 1988 by ibm researchers barry devlin and paul murphy 1data warehousing is designed to enable the analysis of historical data comparing data consolidated from multiple heterogeneous sources can provide insight into the performance of a company a data warehouse is designed to allow its users to run queries and analyses on historical data derived from transactional sources data added to the warehouse does not change and cannot be altered the warehouse is the source that is used to run analytics on past events with a focus on changes over time warehoused data must be stored in a manner that is secure reliable easy to retrieve and easy to manage there are certain steps that are taken to maintain a data warehouse one step is data extraction which involves gathering large amounts of data from multiple source points after a set of data has been compiled it goes through data cleaning the process of combing through it for errors and correcting or excluding any that are found the cleaned up data is then converted from a database format to a warehouse format once stored in the warehouse the data goes through sorting consolidating and summarizing so that it will be easier to use over time more data is added to the warehouse as the various data sources are updated a key book on data warehousing is w h inmon s building the data warehouse a practical guide that was first published in 1990 and has been reprinted several times 2today businesses can invest in cloud based data warehouse software services from companies including microsoft google amazon and oracle among others 3data miningbusinesses warehouse data primarily for data mining that involves looking for patterns of information that will help them improve their business processes a good data warehousing system makes it easier for different departments within a company to access each other s data for example a marketing team can assess the sales team s data in order to make decisions about how to adjust their sales campaigns the data mining process breaks down into five steps investopedia theresa chiechithe concept of the data warehouse was introduced by two ibm researchers in 1988 4data warehouse architecturedesigning a data warehouse is known as data warehouse architecture and depending on the needs of the data warehouse can come in a variety of tiers typically there are tier one tier two and tier three architecture designs single tier architecture single tier architecture is hardly used in the creation of data warehouses for real time systems they are often used for batch and real time processing to process operational data a single tier design is composed of a single layer of hardware with the goal of keeping data space at a minimum two tier architecture in a two tier architecture design the analytical process is separated from the business process the point of this is to increase levels of control and efficiency three tier architecture a three tier architecture design has a top middle and bottom tier these are known as the source layer the reconciled layer and the data warehouse layer this design is suited for systems with long life cycles when changes are made in the data an extra layer of review and analysis of the data is completed to ensure there have been no errors regardless of the tier all data warehouse architectures must meet the same five properties separation scalability extensibility security and administrability data warehouse vs databasea data warehouse is not the same as a database for example a database might only have the most recent address of a customer while a data warehouse might have all the addresses of the customer for the past 10 years data mining relies on the data warehouse the data in the warehouse is sifted for insights into the business over time data warehouse vs data lakeboth data warehouses and data lakes hold data for a variety of needs the primary difference is that a data lake holds raw data of which the goal has not yet been determined a data warehouse on the other hand holds refined data that has been filtered to be used for a specific purpose data lakes are primarily used by data scientists while data warehouses are most often used by business professionals data lakes are also more easily accessible and easier to update while data warehouses are more structured and any changes are more costly data warehouse vs data marta data mart is just a smaller version of a data warehouse a data mart collects data from a small number of sources and focuses on one subject area data marts are faster and easier to use than data warehouses data marts typically function as a subset of a data warehouse to focus on one area for analytical purposes such as a specific department within an organization data marts are used to help make business decisions by helping with analysis and reporting advantages and disadvantages of data warehousesa data warehouse is intended to give a company a competitive advantage it creates a resource of pertinent information that can be tracked over time and analyzed in order to help a business make more informed decisions it also can drain company resources and burden its current staff with routine tasks intended to feed the warehouse machine some other disadvantages include the following provides fact based analysis on past company performance to inform decision making serves as a historical archive of relevant data can be shared across key departments for maximum usefulness creating and maintaining the warehouse is resource heavy input errors can damage the integrity of the information archived use of multiple sources can cause inconsistencies in the data | |
what is a data warehouse and what is it used for | a data warehouse is an information storage system for historical data that can be analyzed in numerous ways companies and other organizations draw on the data warehouse to gain insight into past performance and plan improvements to their operations | |
what is a data warehouse example | consider a company that makes exercise equipment its best seller is a stationary bicycle and it is considering expanding its line and launching a new marketing campaign to support it it goes to its data warehouse to understand its current customer better it can find out whether its customers are predominantly women over 50 or men under 35 it can learn more about the retailers that have been most successful in selling their bikes and where they re located it might be able to access in house survey results and find out what their past customers have liked and disliked about their products all of this information helps the company to decide what kind of new model bicycles they want to build and how they will market and advertise them it s hard information rather than seat of the pants decision making | |
what are the stages of creating a data warehouse | there are at least seven stages to the creation of a data warehouse according to itpro today an industry publication they include | |
is sql a data warehouse | sql or structured query language is a computer language that is used to interact with a database in terms that it can understand and respond to it contains a number of commands such as select insert and update it is the standard language for relational database management systems 6a database is not the same as a data warehouse although both are stores of information a database is an organized collection of information a data warehouse is an information archive that is continuously built from multiple sources 7 | |
what is etl in a data warehouse | etl stands for extract transform and load etl is a data process that combines data from multiple sources into one single data storage unit which is then loaded into a data warehouse or similar data system it is used in data analytics and machine learning the bottom linethe data warehouse is a company s repository of information about its business and how it has performed over time created with input from employees in each of its key departments it is the source for analysis that reveals the company s past successes and failures and informs its decision making | |
what is a data universal numbering system duns number | a data universal numbering system or duns number is a unique nine digit series of numerals that identifies a business dun bradstreet d b creates the number which generates a business profile in its database and provides a company s name phone number address number of workers and line of business along with other relevant corporate information the duns number is the most widely used method for identifying companies in the united states dun bradstreet maintains up to date information on hundreds of millions global businesses 1 | |
how a duns number works | dun bradstreet created its data universal numbering system duns in 1963 to identify businesses as part of its business credit reporting system 2 in 1994 duns became the standard business identifier for federal government electronic commerce 3listed companies include major corporations small business owners nonprofit organizations and partnerships its users include the u s government the united nations and major retailers such as target tgt 42the duns number provides information related to a company such as its official business title name financial data trade name payment history economic status and executive names further the number allows a company to search for information about other companies and helps businesses find potential customers partners or vendors 1 the federal government requires all existing and potential contract vendors grant recipients and cooperative agreement applicants to have a duns number 5registering for a duns number is voluntary however the identifier is necessary to bid on local state or government contracts and apply for federal grants or other credit with a lender it also allows for the confirmation of the credibility of a business and helps with conducting business with retailers and some foreign countries 1applying for a duns numberapplying for a duns number is done through the duns website businesses based in the u s may request a duns number for free an authorized representative of the company must complete the application and receiving a duns number may take up to 30 days 1however the number can be obtained within 24 hours at no cost if applying as part of a federal government contract the authorized representative of the company will need to provide a legal company name headquarters company name and address physical address mailing address telephone number contact name and title and the number of employees at the physical location 5a duns number is specific to a physical location therefore a company would need a separate duns for each of its physical locations such as a branch division or headquarters it is the organization s responsibility to manage its duns numbers and verify that information is accurate 5the duns number lookup tool is used to check whether a business has a duns number the d b database allows for accessing the company s d b business credit score review and update an existing d b credit report view and print a copy of its d b credit report review and dispute payment history and update financial information special considerationsthe duns number is used to identify a business registered with dun bradstreet the listing of companies with another credit bureau such as experian will not be found on the d b database since the credit bureaus each maintain unique databases and do not share data with one another | |
what is a data universal numbering system duns number | a data universal numbering system or duns number is a unique nine digit series of numerals that identifies a business dun bradstreet d b creates the number which generates a business profile in its database and provides a company s name phone number address number of workers and line of business along with other relevant corporate information the duns number is the most widely used method for identifying companies in the united states dun bradstreet maintains up to date information on hundreds of millions global businesses 1 | |
how a duns number works | dun bradstreet created its data universal numbering system duns in 1963 to identify businesses as part of its business credit reporting system 2 in 1994 duns became the standard business identifier for federal government electronic commerce 3listed companies include major corporations small business owners nonprofit organizations and partnerships its users include the u s government the united nations and major retailers such as target tgt 42the duns number provides information related to a company such as its official business title name financial data trade name payment history economic status and executive names further the number allows a company to search for information about other companies and helps businesses find potential customers partners or vendors 1 the federal government requires all existing and potential contract vendors grant recipients and cooperative agreement applicants to have a duns number 5registering for a duns number is voluntary however the identifier is necessary to bid on local state or government contracts and apply for federal grants or other credit with a lender it also allows for the confirmation of the credibility of a business and helps with conducting business with retailers and some foreign countries 1applying for a duns numberapplying for a duns number is done through the duns website businesses based in the u s may request a duns number for free an authorized representative of the company must complete the application and receiving a duns number may take up to 30 days 1however the number can be obtained within 24 hours at no cost if applying as part of a federal government contract the authorized representative of the company will need to provide a legal company name headquarters company name and address physical address mailing address telephone number contact name and title and the number of employees at the physical location 5a duns number is specific to a physical location therefore a company would need a separate duns for each of its physical locations such as a branch division or headquarters it is the organization s responsibility to manage its duns numbers and verify that information is accurate 5the duns number lookup tool is used to check whether a business has a duns number the d b database allows for accessing the company s d b business credit score review and update an existing d b credit report view and print a copy of its d b credit report review and dispute payment history and update financial information special considerationsthe duns number is used to identify a business registered with dun bradstreet the listing of companies with another credit bureau such as experian will not be found on the d b database since the credit bureaus each maintain unique databases and do not share data with one another | |
david tepper is regarded as a prominent investor and hedge fund manager in 1993 tepper co founded appaloosa management l p | with a net worth exceeding 16 7 billion david tepper is recognized as one of the world s prominent billionaires 1investopedia julie bangearly life and educationdavid tepper was born in pittsburgh pennsylvania on sept 11 1957 he graduated from the university of pittsburgh in 1978 with a bachelor s degree in economics and earned an mba in 1982 from carnegie mellon university tepper s early career in finance began with positions at equibank republic steel and goldman sachs appaloosa management l p in 1985 david tepper joined goldman sachs as a credit analyst on the high yield debt team in new york as a head trader tepper remained at goldman sachs for seven years a specialist in distressed debt particularly bankruptcies and special debt situations tepper left goldman sachs in 1993 to launch appaloosa management l p with his former colleague jack walton investing in debtas a limited partnership hedge fund appaloosa brought together a small group of wealthy investors appaloosa used high risk methods such as investing with borrowed money to realize large capital gains targeting the debt of companies in distress appaloosa s first investment was in the now bankrupt algoma steel appaloosa would continue to bet and succeed on bond purchases of troubled companies like enron worldcom marconi corp and williams co these companies contributed to a 150 gain in tepper s portfolio position 3at its inception with 57 million in capital appaloosa delivered a 57 return on its assets within six months the fund s worth grew steadily from 300 million in 1994 to 800 million in 1996 and in 2022 appaloosa managed 3 82 billion worth of assets 4the crashdavid tepper s aggressive style and confidence are often seen as his best traits as a hedge fund manager following the 2008 subprime mortgage crash when panicked sellers were driving down the value of financial institutions like bank of america and citigroup tepper was investing in them the hedge fund tycoon purchased nearly 2 billion in face value commercial mortgage backed securities floated by aig when the u s government intervened in the survival of the banks appaloosa profited by 7 billion david tepper s investments following the 2008 market crash are often viewed as some of the greatest market trades ever made 5family officein 2019 david tepper announced that appaloosa would eventually move to a family office continually returning capital to its investors each year at the time appaloosa managed 14 billion worth of assets with 70 of that total belonging to david tepper 6as the fund moves into a family office appaloosa will return all capital balances to every investor who doesn t have a direct familial relationship with tepper this may entail closing the fund or creating a new private entity david tepper would then gain a greater degree of privacy flexibility and control over both his investment assets and personal affairs with which business sectors did appaloosa achieve success david tepper s investment in banks aig energy enron and telecommunications marconi helped define appaloosa s success 7 | |
what is david tepper s view of crypto currency | david tepper has equated holding crypto to holding gold he views crypto as a stored value and has said that he owns a small amount 8 | |
what is david tepper s interest in sports | david tepper showed an interest in baseball and football at a young age he had a penchant for memorizing baseball statistics in 2009 he purchased a share of the nfl team the pittsburgh steelers he bought another nfl team the carolina panthers in 2018 the bottom linedavid tepper is known as one of the leading hedge fund managers of his generation he is considered an expert in distressed debt investment garnering steady returns for client investors since its 1993 inception tepper s appaloosa fund has compounded at more than 25 per year | |
what is the dax stock index | the dax stock index is a stock index that represents 40 of the largest and most liquid german companies that trade on the frankfurt stock exchange the dax uses a free float methodology to calculate its weightings it was created in 1988 with a starting index level of 1 163 points dax member companies represent roughly 80 of the aggregate market capitalization that trades on the frankfurt exchange 1 the index was historically comprised of 30 companies but was expanded to 40 in 2021 2understanding the dax stock indexthe dax index tracks 40 large and actively traded german companies it is considered by many analysts to be a gauge of germany s economic health the companies listed in the dax are multinational corporations that influence both germany s economy and the global economy at large the success of these companies has greatly contributed to what is known as the german economic miracle or wirtschaftswunder a term that describes germany s rebirth after world war ii 3the companies in the dax index span a wide range of industries for example the prices used to calculate the dax index come through xetra an electronic trading system a free float methodology is used to calculate the index weightings along with a measure of the average trading volume the dax is also known as the deutscher aktien index or the ger40 special considerationsunlike most indices the dax is updated with futures prices for the next day even after the main stock exchange has closed changes are made on regular review dates but index members can be removed at any time if they no longer rank in the top 45 largest companies or added if they break the top 25 3the vast majority of shares on the frankfurt exchange now trade on the all electronic xetra system with a high adoption rate for the stocks of the 40 dax members as a blue chip stock market index the dax is very similar to the dow jones industrial average djia which also tracks large publicly owned companies dax stock index componentsthe following is a list of the companies listed on the dax this list in alphabetical order is updated as of june 14 2024 4dax stock index vs other stock indices | |
how can i invest in the dax | while you can t invest directly in the dax there are several ways you can choose other investment vehicles that track its performance for instance you may invest in exchange traded funds etfs that are specifically designed to mimic its performance or mutual funds that contain the same companies that are listed in the dax with their respective weightings | |
what does the dax measure | the dax is a stock market index that measures the performance of germany s 40 largest companies the index s components represent almost 80 of the frankfurt stock exchange s aggregate market capitalization | |
why is the dax so important | the dax is an important index because it measures the performance of the largest 40 publicly traded companies in germany as such it is considered a bellwether or barometer of the german economy the bottom linethe dax is a stock market index it is composed of the 40 largest companies in germany that trade on the frankfurt stock exchange like most stock market indices it is considered a bellwether of the german economy which is why analysts and investors look closely at how it performs if the index rises it typically indicates the economy is doing well but when it drops it may mean that investors should prepare for a rough economic patch | |
what is day count convention | a day count convention is the system used on debt securities such as bonds or swaps to calculate the amount of accrued interest or the present value when the next coupon payment is less than a full coupon period away understanding day count conventionthe day count conventions apply to swaps mortgages and forward rate agreements as well as bonds many of the rules and definitions for applying the day count convention are set forth by the international swap dealers association which provides documentation for a wide range of financial transactions for example an agreed upon day count convention would be used to calculate the amount of accrued interest or the present value pv when the next coupon payment is less than a full coupon period away among the most common conventions are 30 360 30 365 actual 360 actual 365 and actual actual each bond market and financial instrument has its own day count convention which varies depending on the type of instrument whether the interest rate is fixed or floating and the country of issuance bonds and notes issued by the u s treasury earn interest calculated on an actual actual basis this means all days in a period carry equal value it also means the length of coupon periods and the resultant payments vary the interest on most money market deposits and floating rate notes is calculated on an actual 360 day basis the major exception is those denominated in the british pound for which interest is calculated on the actual 365 basis currencies that are or have been closely related to the british pound such as the australian new zealand and hong kong dollars also use 365 days the fixed rate leg of an interest rate swap and most fixed rate bonds use either the 30 360 day convention or 30 365 this convention stipulates the month will always be treated as having 30 days in it and the year will consistently be treated as having either 360 or 365 days swap markets using the 30 360 convention for the fixed rate of a swap include the u s dollar the euro and the swiss franc swaps in the british pound and the japanese yen usually use the 30 365 convention australia new zealand and hong kong again follow the united kingdom the floating rate leg of most interest rate swaps uses some variation of an actual day count versus either a 360 or 365 day year the markets that use 30 360 for the fixed rate leg which include the u s dollar markets use actual 360 for the floating rate leg those that use 30 365 on the fixed rate leg use actual 365 on the floating rate leg the london interbank offered rate libor is the most commonly used benchmark interest rate and is posted daily at 11 45 a m london time the intercontinental exchange the authority responsible for libor will stop publishing one week and two month usd libor after dec 31 2021 all other libor will be discontinued after june 30 2023 1 for most currencies interest at libor is calculated on the actual 360 day basis the major exception is again the british pound which is calculated on the actual 365 day basis | |
what is a day order | a day order is a stipulation placed on an order to a broker to execute a trade at a specific price that expires at the end of the trading day if it is not completed a day order can be a limit order to buy or sell a security but its duration is limited to the remainder of that trading day understanding day ordersa day order is one of several different order duration types that determine how long the order is in the market before it is canceled in the case of a day order that duration is one trading session in other words if the trader s order is not executed or triggered the order on the day it was placed the order gets canceled two examples of other duration based orders are the good til canceled gtc order which remains active until it is manually canceled and the immediate or cancel ioc order which fills all or part of an order immediately and cancels the remaining part of the order if it cannot be fulfilled day order often serves as the default order duration on trading platforms therefore the trader must specify a different time frame for the expiration of the order or it will automatically be a day order that said day traders can use many different types of orders when placing trades by being the default however most market orders are in fact day orders using day ordersday orders can be particularly useful when used to order a security at a specific price point so that the trader does not need to monitor the security for the rest of the day waiting for the right time to execute the order this helps intraday traders monitor and trade multiple securities at one time which is common practice before the market opens traders analyze each individual security they trade and then place orders according to their strategies the trader takes further action over the course of the trading day as the individual orders are executed intraday traders often use strategies that dictate exiting positions before the market closes thus if an order is not filled by the end of the day the trader will cancel it because this happens automatically for day orders intraday traders tend to favor them watching day ordersday orders can be a source of stress for investors who are not professional traders if an investor is not monitoring the price of the security during the trading day a day limit order may take place without their knowledge if an investor makes a day order to sell a certain security and the security experiences an unforeseen price drop the order may be executed before the investor becomes aware of the situation leaving the investor with bigger loss than was expected in this scenario of course the loss would have been realized either way but the investors may have chosen to hold rather than sell at a loss depending on what was behind the drop as a rule it is a good idea to pay attention to the market when actively placing orders | |
what is a day trader | a day trader is a type of trader who executes a relatively large volume of short and long trades to capitalize on intraday market price action the goal is to profit from very short term price movements day traders can also use leverage to amplify returns which can also amplify losses while many strategies are employed by day traders the price action sought after is a result of temporary supply and demand inefficiencies caused due to purchases and sales of the asset typically positions are held from periods of milliseconds to hours and are generally closed out before the end of the day so that no risk is held after hours or overnight understanding day tradersthere is no special qualification required to become a day trader instead day traders are classified based on the frequency of their trading the financial industry regulatory authority finra and u s securities and exchange commission classify day traders based on whether they trade four or more times during a five day span provided the number of day trades is more than 6 of the customer s total trading activity during that period or the brokerage investment firm where they have opened an account considers them a day trader 12a day trader often closes all trades before the end of the trading day so as not to hold open positions overnight a day trader s effectiveness may be limited by the bid ask spread trading commissions as well as expenses for real time news feeds and analytics software successful day trading requires extensive knowledge and experience day traders employ a variety of methods to make trading decisions some traders employ computer trading models that use technical analysis to calculate favorable probabilities while some trade on their instinct day traders are subject to capital and margin maintenance requirements a day trader is primarily concerned with the price action characteristics of a stock this is unlike investors who use fundamental data to analyze the long term growth potential of a company to decide whether to buy sell or hold its stock price volatility and average day range are critical to a day trader a security must have sufficient price movement for a day trader to achieve a profit volume and liquidity are also crucial because entering and exiting trades quickly is vital to capturing small profits per trade securities with a small daily range or light daily volume would not be of interest to a day trader a pattern day trader pdt is a regulatory designation for those traders or investors that execute four or more day trades over the span of five business days using a margin account the number of day trades must constitute more than 6 of the margin account s total trade activity during that five day window if this occurs the trader s account will be flagged as a pdt by their broker the pdt designation places certain restrictions on further trading this designation is put in place to discourage investors from trading excessively day trader techniquesday traders are attuned to events that cause short term market moves trading the news is a popular technique scheduled announcements such as economic statistics corporate earnings or interest rates are subject to market expectations and market psychology markets react when those expectations are not met or are exceeded usually with sudden significant moves which can benefit day traders another trading method is known as fading the gap at the open when the opening price shows a gap from the previous day s close taking a position in the opposite direction of the gap is known as fading the gap for days when there is no news or there are no gaps early in the morning day traders will take a view on the general direction of the market if they expect the market to move up they would buy securities that exhibit strength when their prices dip if the market is trending down they would short securities that exhibit weakness when their prices bounce most independent day traders have short days working two to five hours per day often they will practice making simulated trades for several months before beginning to make live trades they track their successes and failures versus the market aiming to learn by experience day trader strategiesday traders use several intraday strategies these may include advantages and disadvantages of day tradingthe most significant benefit of day trading is that positions are not affected by the possibility of negative overnight news that has the potential to impact the price of securities materially such news includes vital economic and earnings reports as well as broker upgrades and downgrades that occur either before the market opens or after the market closes another advantage is the ability to use tight stop loss orders the act of raising a stop price to minimize losses from a long position another includes the increased access to margin and hence greater leverage day trading also provides traders with more learning opportunities intraday traders may have insufficient time for a position to see a profit there are also increased commission costs due to trading more frequently which eats away at the profit margins a trader can expect day traders that engage in short selling or use margin to leverage long positions can see losses amplify quickly leading to margin calls positions are usually closed at the end of each day and are so unaffected by risk from overnight news or off hours broker moves tight stop loss orders can protect positions from extreme movements regular traders have access to increased leverage and lower commissions numerous trades increase hands on learning experience frequent trades do mean multiple commission costs some assets are off limits like mutual funds there may not be sufficient time for a position to realize a profit before it has to be closed out losses can mount quickly especially if margin is used to finance purchases margin calls are a real risk example of day tradingzack is a day trader who uses technical analysis to make trades with his brokerage account by analyzing price trends over a single day he is able to predict short term movements to score a small profit several times per day during a typical trading day zack will watch metrics such as the relative strength index and the intraday momentum index to evaluate whether a particular stock is oversold or undersold he may also use margin trading to increase his profits he may also use stop loss orders to exit positions quickly if the market turns against him if zack is a successful day trader then he expects to have more profitable trades than losing ones over the course of the day however one bad trade could wipe out his margin position due to this risk day trading is sometimes compared to picking up pennies in front of a steamroller day trading vs other types of tradingday trading is one of several strategies for professional stock traders unlike other traders they look for predictable price patterns and small corrections over the course of a single trading day although the profits are relatively small they can accumulate over a long enough time frame day traders typically close out their positions at the end of the trading day reducing their exposure to swings in the overseas markets in contrast swing traders try to anticipate the peaks and troughs of a stock s price movements over a longer time frame often weeks or months with the right strategy swing traders can earn higher profits than intraday traders but they have to spend more time looking for suitable stocks similar to swing traders trend traders examine a stock s momentum and moving averages to determine whether a stock is likely to move higher or lower they then buy stocks with a strong upside or short those likely to trend lower trend traders are likely to look for chart patterns or technical indicators in their forecasts | |
how to become a day trader | becoming a successful day trader requires a great deal of personal discipline novice day traders should expect to lose money as they learn the ins and outs of the market and be psychologically prepared for further losses over the course of their careers day trading also involves a great deal of research not only into the fees and commissions on their trades but also the relevant taxes and regulations for example day traders should be cognizant of the wash sale rule which prohibits repeated transactions of the same security within a 30 day period they should also fully understand the risks especially of trading on margin can you get rich day trading while some day traders can make money studies suggest that the majority either lose money or underperform the market studies by professional economists suggest that most day trading strategies are no more effective than random chance 3 | |
what are the tax implications of day trading | intraday trades are considered short term capital gains meaning that they are taxed at the same level as your income you are required to pay taxes on each profitable trade but you can use your losing trades to offset the taxes on your gains you can also use up to 3 000 of losses to offset income tax on your salary and carry over additional losses to the next tax year 4 | |
how much can i make day trading | while most day traders lose money there are day traders who can make a profit zippia estimates that the average income of successful day traders is about 117 000 per year or about 56 per hour 5 however there are also risks solo day traders must also trade with their own money which comes with much greater risk than an ordinary salary the bottom lineday traders look for extremely short term price changes in the stock or forex market allowing them to accumulate profits over the course of a trading day although it can be profitable it also comes with a high degree of risk especially for traders on margin positions in addition to a thorough understanding of the stock market day traders must also exercise self control and avoid impulsive mistakes |
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