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Finance GlossaryMoving Average (SMA/EMA)
Moving Average (SMA/EMA)
Definition of Moving Average (SMA/EMA)
Moving Average (SMA/EMA) is a trend-following indicator that reduces noise by averaging past prices. Simple moving average (SMA) takes an equal average of prices over a chosen period, while Exponential moving average (EMA) emphasises recent prices, allowing it to react faster to changes in market direction.
Related Terms
Dividend Stripping
Dividend stripping is a strategy of buying a company’s stock days before it announces a dividend and then selling the same stock at a lower price once the current holder is entitled to get the dividend previously announced.
The resulting loss in capital gains is generally offset by the profits from dividends. Dividend stripping was once non-taxable, which made the strategy lucrative for smart investors. However, dividends in India are now subject to tax.
The resulting loss in capital gains is generally offset by the profits from dividends. Dividend stripping was once non-taxable, which made the strategy lucrative for smart investors. However, dividends in India are now subject to tax.
Narrow Market
A narrow market describes a situation where only a few stocks or sectors influence market movement, while the majority of stocks have low trading volume. It has few active participants on either the buy or sell side of the market. This limited participation suggests that the market trend is not broadly supported across the entire market.
Donchian Channels
A Donchian Channel is the area between upper (highest price) and lower (lowest price) bands formed around the median as a result of calculating the moving average of a security’s price over a period of time. Visually, the Donchian Channel will have three lines.
Capital Gains Exemption
Capital gains exemption is the tax break that a government offers on profits earned by selling assets. Generally, an investor must pay a tax on the short-term capital gains or long-term capital gains earned.
But in certain cases, the government allows investors to offset taxes. For example, if an investor sells property and reinvests the entire amount back again into another property, they can avail of capital gains exemption.
But in certain cases, the government allows investors to offset taxes. For example, if an investor sells property and reinvests the entire amount back again into another property, they can avail of capital gains exemption.
52 Week High
A 52-week high is the highest closing price of a stock or ETF in the last 365 days. Say for example you’re checking the history of a stock on 01-01-2022. Then its 52 week high will be the highest price it closed at between 01-01-2021 and 01-01-2022. 52 week highs are used as technical indicators by traders.
Premium
In finance, a premium is the excess amount that the price of a security or asset is over its nominal value, intrinsic value, or its price in another market or context. For options, the premium is the price that a buyer pays for an option contract. In insurance, a premium is the sum of money that an individual or business is required to pay for an insurance policy. A stock may trade at a premium if the market price is higher than its book value, which often reflects strong growth potential or market optimism.
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