ATR (Average True Range): A Better Way to Understand Volatility Than Looking at Percentage Moves Alone
A 1% move in EUR/USD makes for a busy day on a currency desk. In Bitcoin, the same move can come and go before lunch without anyone noticing. Percentage changes tell you how far a market moved today, but they don’t tell you if that’s normal for it. The Average True Range, or ATR, does […]
ADX Indicator: Is a Market Trending or Just Moving Around?
A market can move a lot in a week and end up exactly where it started. Price swings up, drops back, jumps again on a headline and settles, and a trader looking at any one of those moves might think a trend is under way. The ADX indicator was designed for that moment. It measures […]
VWAP: Why Professional Traders Pay Attention to the Average Price
When a pension fund needs to buy two million shares of a company, buying them all at once would push the price up against itself. It spreads the order through the day and judges how well it did against one number, the volume-weighted average price. That’s why VWAP appears on so many intraday charts. It […]
RSI Divergence: Real Warning Signal or Something Traders See Everywhere?
RSI divergence is one of those patterns that gets easier to find the longer you stare at a chart, which is part of the problem. It appears when price makes a new high or low and the RSI doesn’t follow, and J. Welles Wilder, who created the indicator, saw it as a strong sign that […]
Ichimoku Cloud: Useful Trading System or Too Much Information on One Chart?
Open an Ichimoku chart for the first time and it looks a bit like someone dropped five highlighters across the price. The Ichimoku Cloud packs five lines and a shaded band onto a single chart, and once you know what each part does, it can show trend direction and likely support at a glance. It […]
How Much Debt Is Too Much? Reading a Company Balance Sheet
Two companies can owe exactly the same amount and be in completely different positions. A water utility with $2 billion of debt and customers who pay every month is usually fine. A fashion retailer with the same debt and a bad Christmas may not be. Reading a company balance sheet means comparing what a business […]
How to Read an Earnings Report Beyond Revenue and EPS
Earnings headlines tend to squeeze a whole quarter into two numbers, revenue and earnings per share, plus a verdict on how they compared with forecasts. They make a decent first glance and a poor guide to what happens next. Knowing how to read an earnings report past those two lines tells you far more about […]
What Makes Inflation Sticky?
The price of gasoline can change on your drive home, while a car insurance premium usually changes about once a year. That gap is the starting point for understanding sticky inflation, the slow-moving part of rising prices that keeps going long after a fuel spike has passed. In September, the Atlanta Fed’s flexible-price index was […]
How Inflation Works: CPI Is Only the Headline
Inflation gets reported as a single number, 3.7% for the US in September, as if every price in the country rose by the same amount. In reality the spread was enormous. Gasoline cost 34% more than a year earlier, while used cars got cheaper and car insurance fell 5%. Understanding how inflation works means looking […]
Free Cash Flow vs Net Profit: Which One Tells You More About a Business?
A company can report a record profit and still be running short of money, which sounds like an accounting riddle until you look at how the two numbers are worked out. Net profit follows accounting rules that record a sale when it’s made, even if the customer hasn’t paid yet. Free cash flow only counts […]