Stock Trading: How Old Do You Have To Be?

In every state in the United States, there is a minimum age to buy and sell securities like buy stocks, Exchange Traded Funds (ETFs), bonds, etc. This is due to two reasons.

Reasons Why Minors Aren't Allowed to Trade Stocks

The first reason is because states and brokers alike agree that children and minors generally aren’t capable of making good decisions involving securities and trading assets.

The second reason is liability exposure. Brokers do not want to be responsible for the (probably poor) financial decisions minors can make through their systems, so they rightfully keep people who aren’t of age from trading.

Minimum Age For Trading Stocks in the USA

What is this minimum age for stock trading in the United States? It depends on the state. If you live in California, the District of Columbia, Kentucky, Louisiana, Maine, Michigan, Nevada, New Jersey, South Dakota, Oklahoma, or Virginia, you can’t trade stocks until you reach the age of 18. For every other state, you have to be at least 21 years of age – and brokerages do verify the identity and age of each person attempting to open an account.

How Can Minors Get Around the Minimum Age Requirement?

You can, however, get what is called a custodial account. This is an account that has the assets in the minor’s name, but the minor’s parents or legal guardians actually administer the account. The only people allowed to place orders for that account are those who are at least 18 years of age (or 21, depending on the state).

For more information see How Old Do You Have To Be To Buy Stocks?

What is Cash Flow Coverage Ratio (CFCR)?

The cash flow coverage ratio is an indicator of the ability of a company to pay interest and principal amounts when they become due. This ratio tells the number of times the financial obligations of a company are covered by its earnings. A ratio equal to one or more than one means that the company is in good financial health and it can meet its financial obligations through the cash generated by operating activities. A ratio of less than one is an indicator of bankruptcy of the company within two years if it fails to improve its financial position.

To calculate the cash coverage ratio, take the earnings before interest and taxes (EBIT) from the income statement, add back to it all non-cash expenses included in EBIT (such as depreciation and amortization), and divide by the interest expense. The formula is:

Earnings Before Interest and Taxes + Non-Cash Expenses
Interest Expense

Variations:A more conservative cash flow figure calculation in the numerator would use a company's free cash flow (operating cash flow minus the amount of cash used for capital expenditures).

A more conservative total debt figure would include, in addition to short-term borrowings, current portion of long-term debt, long-term debt, redeemable preferred stock and two-thirds of the principal of non-cancel-able operating leases.

What is Equity Multiplier?

Equity multiplier is a financial leverage ratio which is calculated by dividing total assets by the shareholders equity. It tells about assets in dollar per dollar of equity. The higher the ratio the lower the financial leverage and the lower the ratio the higher the financial leverage.

The formula for equity multiplier is total assets divided by stockholder's equity. Equity multiplier is a financial leverage ratio that evaluates a company's use of debt to purchase assets.

Equity multiplier is an important input in the DuPont return on equity analysis. DuPont return on equity analysis breaks up ROE into net profit margin, asset turnover and financial leverage (represented by equity multiplier as shown below:

ROE Under DuPont Analysis =	Net Income	×	Sales	×	Total Assets	=	Net Income
	Sales		Total Assets		Total Equity		Total Equity

The equity multiplier is a ratio used to analyze a company's debt and equity financing strategy. A higher ratio means that more assets were funding by debt than by equity. In other words, investors funded fewer assets than by creditors.

When a firm's assets are primarily funded by debt, the firm is considered to be highly leveraged and more risky for investors and creditors. This also means that current investors actually own less of the company assets than current creditors.

Lower multiplier ratios are always considered more conservative and more favorable than higher ratios because companies with lower ratios are less dependent on debt financing and don't have high debt servicing costs.

What is Asset Coverage Ratio?

Asset coverage ratio measures the ability of a company to cover its debt obligations with its assets. The ratio tells how much of the assets of a company will be required to cover its outstanding debts. The asset coverage ratio gives a snapshot of the financial position of a company by measuring its tangible and monetary assets against its financial obligations. This ratio allows the investors to reasonably predict the future earnings of the company and to asses the risk of insolvency.

Calculation (formula)

The asset coverage ratio is calculated in three steps:

• Step 1: The current liabilities are added up and short term debt obligations are subtracted from this sum.
• Step 2: The book value of tangible and monetary assets of a company is calculated by subtracting the value of intangible assets (such as goodwill) from the book value of total assets. The figure calculated in Step 1 is subtracted from this figure.
• Step 3: The resulting figure of Step 2 is divided by the total outstanding debt of the company.

All of these three steps can be expressed in the following formula for asset coverage ratio.

Asset Coverage Ratio = ((Total Assets – Intangible Assets) – (Current Liabilities – Short-term Debt)) / Total Debt Obligations

Usually a minimum level of asset coverage ratio is defined in the covenants so that a company does not overextend its debts beyond a certain limit. The company would not be tempted to take too much loans; therefore chances of its insolvency are less. As a rule of thumb, industrial and publicly held companies should maintain an asset coverage ratio of 2 and utilities companies should maintain an asset coverage ratio of 1.5.

When calculating the asset coverage ratio, investors should exercise caution with respect to asset value. Using the book value of assets may result in an inaccurate asset coverage ratio if the actual liquidation value of assets is significantly less. As a rule of thumb, utilities should have an asset coverage ratio of at least 1.5, and industrial companies should have a ratio of at least 2.

Candlestick Charting and Reversal Patterns - The Doji

By B.M. Davis

Candlestick charting is more popular than ever before, with a legion of new traders and investors being introduced to the concept by some of today's hottest investment gurus. Once mastered, candlesticks can provide unique visual cues that make reading price action easier and also help the trader in identifying turning points in a trend as it occurs, before a new price trend starts. Reversal patterns in western analysis often take many periods to form but the vast majority of candlesticks formations take only one to three time periods, and give traders more of a real time picture of market sentiment.
Many traders still don't know the major reversal patterns used in candlestick analysis and there is much misunderstanding concerning the practice. This article series will try to explain the different major candles, patterns and also when these signals are valid. We will start with the major candles and then graduate to the major reversal patterns. This is the first article in this series and we will be discussing the doji candle.
The Doji
Doji's are powerful reversal indicating candlesticks and are formed when the security opens and closes at the same level, implying indecision in the stock price. Depending on the location and length of the shadows (lines above and below the open and close), Doji's can be categorized into the following formations: doji, long legged-doji, dragonfly doji and gravestone doji.
As previously mentioned, the standard doji consists of a candle that closes and opens at the same price level. Doji's become more significant when seen after an extended rally of long bodied candles (bullish or bearish) and are confirmed with an engulfing candle. A long legged-doji is formed when the stock opens at a level, trades in a considerable trading range only to close at the same level as it opened. Long legged-doji's become more powerful when proceeded by small candles, as a sudden burst of volatility in a relatively nonvolatile stock; can imply a trend change is coming. Dragonfly Doji's are doji's that opened at the high of a session, had a considerable intraday decline, then find support to rally back to close at the same level as the open. Dragonfly Doji's are often seen after a moderate decline, and are bottom reversal indicators when confirmed with a bullish engulfing. Gravestone Doji's are the opposite of the Dragonfly Doji and are top reversal indicators when confirmed with bearish engulfing candle pattern. As the name implies, gravestone doji's look like a gravestone, and could signal impending end of a trend for a stock.
While the doji is one of the most powerful candles, it's best to wait until the next candle for confirmation before considering a trade. The doji by itself can mean a brief resting period or beginning of a price consolidation rather than a full blown trend reversal.

B.M. Davis is an active trader, trading coach and the publisher of Candlestick Trading For Maximum Profits. If you would like more information about candlestick trading or charting please visit http://www.candlestickcourse.com

Article Source: http://EzineArticles.com/?expert=B.M._Davis

See also:   Gravestone Doji's and trend reversals.

Few Types About Doji

By Sebastian Litrell

There are two kinds of standard Doji Stars: Evening Star and Morning Star.
An Evening Star is at above after the long candlestick body during an uptrend market; while for the Morning Star, it is at below after the long candlestick body during a downtrend market.

Doji Star:

A Doji star is likely a sign to show that the current trend is going to change to another opposite trend. So, it is considered as a reversal sign indicates the current trend is likely to be end. The Doji Morning Star somehow is a sign of lowest bottom while a Doji Evening Star is a sign of the highest top.

A trader should have waited for the chart pattern to be completed before he or she takes the next move. The chart's pattern only can be considered as a complete chart when a candlestick body occurs after the short Doji. Although Doji is a reversal sign, but it could not stands well on its own. The candlestick body occurs after the short Doji would help much in determine the market trend. When there is a red body occurs after the Doji, it indicates the trend is in downtrend and if the candlestick body after the Doji is green, then it shows that the bulls is taking over the control. So, there should be a gap before the candlestick body turns up.

A Doji is known as an 'abandoned baby' or 'island' as it is isolated from the main flow candlestick body patterns.

Double Doji

This formation is formed by two similar Doji that appears one after another. It can be considered as a common phenomena and it is more useful if compare with single Doji as double Doji show us more about the indecision market. So, with this double Doji, it can be strongly sure that there would be a breakout for the current trend.

Dragonfly Doji

A 'Dragonfly' Doji has a long lower shadow and a very tiny candlestick body (sometimes it does not have a candlestick body). It is formed when the open, close and high prices are at the same level. This formation is rarely to be found. The current market first opened at a high price, then dropped during the trading session (because selling is more than buying), and then finally closed at the same high level with the opened price (indicates the bulls have the strength to force the prices up again). This formation is a bullish signs which normally found at the bottom of a downtrend market.

Gravestone Doji

As we can assume from the name, a 'Gravestone' Doji is a threatening sign for traders. The 'Gravestone' Doji has a long upward shadow and a very tiny candlestick body (sometimes it does not have). It is formed when the open, close and lows price are at the same level. During the trading session, the price did go up but return back to the opening level at the close. So, this 'Gravestone' Doji is a bearish sign. It is threatening the traders especially it occurs at the uptrend.

For more reading, Go Learn Forex Trading

Litrell Sebastian
Professional Forex Trader -
Learn Forex Trading

Article Source: http://EzineArticles.com/?expert=Sebastian_Litrell

The Evening Star doji candlestick pattern is fully described at StockMarketStudent.com

Why Most Forex Traders Use Technical Analysis

By Pauline Go

Fundamental analysis has been popular among forex traders for such a long time. However, the necessity for a bulk of information prompted several forex traders to quit using fundamental analysis and to resort to technical analysis.

In general, technical analysis revolves around its three underlying principles. First, the actual price movements and the market action are more important than their underlying causes. Next, patterns will emerge in the market that can identify the potential trend of the price of the currency. Last, the previous and future reactions of people can also shape the movement of the currency and the changes that may take place in human psychology from time to time are minimal.

These principles of this technical analysis have not received positive acceptance from the loyalists of fundamental analysis. These traditionalists would still prefer the old school perspective that an analysis of the movement of the market should focus on the factors that can influence such movement and on the actual influence itself. For those on the side of the contemporary approach of technical analysis, such information may not be necessary at all times. A technical analysis may already be sufficient to ensure the success of trading.

In using this type of analysis, you need to gather historical price data and enter these data into a computer. After feeding the data collected, the computer will then develop a graphical format of describing the patterns existing in the data. Looking for price data would not be a problem at all because the supply is abundant in the foreign exchange market. This graphical representation developed by the computer can already identify the current and future movements of the currency. How the currency is expected to move in the future can already be predicted through a comparison of its present and past movements.

The forex technical analysis theory uses five different categories. These categories are taken into consideration in developing forex charts. The five categories are indicators, number theory, waves, gaps and trends. Indicators, also known as oscillators, refer to the Relative Strength Index (RSI), Stochastic oscillator, and Moving Average Convergence Divergence (MACD). RSI measures the ratio of up-moves to down-moves, while Stochastic oscillator indicates if the
condition has been overbought or oversold. MACD plots two lines of momentum to signify the likelihood of a change in the trend.

The number theory encompasses Fibonacci and Gann numbers. The Fibonacci number sequence follows a pattern of adding the first two numbers to get the third, while Gann numbers use angles and lines in charts. Waves refer to the wave theory popularized by Elliot, which uses repetitive wave patterns in developing market analysis. Gaps are high-low or open-closing
and indicators of an absence of any trading. Trends indicate the direction that the prices are most likely to take. The two most commonly used tools of technical analysis are the Coppock
Curve and the Directional Movement Indicator (DMI).

Technical analysis has become increasingly popular with the advent of technology and computers. Aside from that, through this analysis, several markets can be studied and evaluated simultaneously by experienced analysts.

Pauline Go is an online leading expert in the finance industry. She also offers top quality articles like : Old Currency Value, Currency Exchange Rates

Article Source: http://EzineArticles.com/?expert=Pauline_Go

Visit stockmarketstudent.com for information on Coppock Curve, Directional Movement Indicator and many other technical analysis indicators.