177 Elliott Wave and Zigzag (5-3-5)
A single zigzag in a bull market is a simple three-wave declining pattern labeled A-B-C. The subwave sequence is 5-3-5, and the top of wave B is noticeably lower than the start of wave A, as illustrated in Figures 1-22 and 1-23.
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In a bear market, a zigzag correction takes place in the opposite direction, as shown in Figures 1-24 and 1-25. For this reason, a zigzag in a bear market is often referred to as an inverted zigzag.
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Occasionally zigzags will occur twice, or at most, three times in succession, particularly when the first zigzag falls short of a normal target. In these cases, each zigzag is separated by an intervening "three," producing what is called a double zigzag (see Figure 1-26) or triple zigzag. These formations are analogous to the extension of an impulse wave but are less common. The correction in the Dow Jones Industrial Average from July to October 1975 (see Figure 1-27) can be labeled as a double zigzag, as can the correction in the Standard and Poor’s 500 stock index from January 1977 to March 1978 (see Figure 1-28). Within impulses, second waves frequently sport zigzags, while fourth waves rarely do.
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R.N. Elliott’s original labeling of double and triple zigzags and double and triple threes (see later section) was a quick shorthand. He denoted the intervening movements as wave X, so that double corrections were labeled A-B-C-X-A-B-C. Unfortunately, this notation improperly indicated the degree of the actionary subwaves of each simple pattern. They were labeled as being only one degree less than the entire correction when in fact, they are two degrees smaller. We have eliminated this problem by introducing a useful notational device: labeling the successive actionary components of double and triple corrections as waves W, Y and Z, so that the entire pattern is counted "W-X-Y (-X-Z)." The letter W now denotes the first corrective pattern in a double or triple correction, Y the second, and Z the third of a triple. Each subwave thereof (A, B or C, as well as D or E of a triangle — see later section) is now properly seen as two degrees smaller than the entire correction. Each wave X is a reactionary wave and thus always a corrective wave, typically another zigzag.
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Figure 1-24 Figure 1-25

Flat (3-3-5)
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A flat correction differs from a zigzag in that the subwave sequence is 3-3-5, as shown in Figures 1-29 and 1-30. Since the first actionary wave, wave A, lacks sufficient downward force to unfold into a full five waves as it does in a zigzag, the B wave reaction, not surprisingly, seems to inherit this lack of countertrend pressure and terminates near the start of wave A. Wave C, in turn, generally terminates just slightly beyond the end of wave A rather than significantly beyond as in zigzags.

Figure 1-29 Figure 1-30
In a bear market, the pattern is the same but inverted, as shown in Figures 1-31 and 1-32.
A flat correction usually retraces less of the preceding impulse wave than does a zigzag. It tends to occur when the larger trend is strong, so it virtually always precedes or follows an extension. The more powerful the underlying trend, the briefer the flat tends to be. Within an impulse, the fourth wave frequently sports a flat, while the second wave rarely does.

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What might be called a "double flat" does occur. However, Elliott categorized such a formation as a "double three," a term we discuss [i][/i]later in this chapter.
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The word "flat" is used as a catch-all name for any A-B-C correction that subdivides 3-3-5. In Elliott literature, however, three types of 3-3-5 corrections have been named by differences in their overall shape. In a regular flat correction, wave B terminates about at the level of the beginning of wave A, and wave C terminates a slight bit past the end of wave A, as we have shown in Figures 1-29 through 1-32. Far more common, however, is the variety we call an expanded flat, which contains a price extreme beyond that of the preceding impulse wave. Elliott called this variation an "irregular" flat, although the word is inappropriate as they are actually far more common than "regular" flats.
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In expanded flats, wave B of the 3-3-5 pattern terminates beyond the starting level of wave A, and wave C ends more substantially beyond the ending level of wave A, as shown for bull markets in Figures 1-33 and 1-34 and bear markets in Figures 1-35 and 1-36. The formation in the DJIA from August to November 1973 was an expanded flat correction in a bear market, or an "inverted expanded flat" (see Figure 1-37).
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In a rare variation on the 3-3-5 pattern, which we call a running flat, wave B terminates well beyond the beginning of wave A as in an expanded flat, but wave C fails to travel its full distance, falling short of the level at which wave A ended, as in Figures 1-38 through 1-41. Apparently in this case, the forces in the direction of the larger trend are so powerful that the pattern is skewed in that direction. The result is akin to the truncation of an impulse.
It is always important, but particularly when concluding that a running flat has taken place, that the internal subdivisions adhere to Elliott’s rules. If the supposed B wave, for instance, breaks down into five waves rather than three, it is more likely the first wave up of the impulse of next higher degree. The power of adjacent impulse waves is important in recognizing running corrections, which tend to occur only in strong and fast markets.
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We must issue a warning, however. There are hardly any examples of this type of correction in the price record. Never label a correction prematurely this way, or you’ll find yourself wrong nine times out of ten. A running triangle, in contrast, is much more common (see next section).

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131 Elliott Wave Principle and Depth of Corrective Waves
No market approach other than the Wave Principle gives a satisfactory answer to the question, "How far down can a bear market be expected to go?" The primary guideline is that corrections, especially when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus.
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Example #1: The 1929-1932 Bear Market
Our analysis of the period from 1789 to 1932 uses the chart of stock prices adjusted to constant dollars developed by Gertrude Shirk and presented in the January 1977 issue of Cycles magazine. Here we find that the 1932 Supercycle low bottomed within the area of the previous fourth wave of Cycle degree, an expanding triangle spanning the period between 1890 and 1921.(see Figure 5-4)
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Figure 5-4
Example #2: The 1942 Bear Market Low
In this case, the Cycle degree bear market from 1937 to 1942 was a zigzag that terminated within the area of the fourth Primary wave of the bull market from 1932 to 1937. (see Figure 5-5)

Figure 5-5
Example #3: The 1962 Bear Market Low
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The wave ④ plunge in 1962 brought the averages down to just above the 1956 high of the five-wave Primary sequence from 1949 to 1959. Ordinarily, the bear would have reached into the zone of wave (4), the fourth wave correction within wave ③. This narrow miss nevertheless illustrates why this guideline is not a rule. The preceding strong third wave extension and the shallow A wave and strong B wave within (4) indicated strength in the wave structure, which carried over into the moderate net depth of the correction.(see Figure 5-5)
Example #4: The 1974 Bear Market Low
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The final decline into 1974, ending the 1966-1974 Cycle degree wave IV correction of the entire wave III rise from 1942, brought the averages down to the area of the previous fourth wave of lesser degree (Primary wave ④).Again, Figure 5-5 shows what happened.
Example #5: London Gold Bear Market, 1974-1976
Here we have an illustration from another market of the tendency for a correction to terminate in the area of travel of the preceding fourth wave of one lesser degree.(see figure 6-11)
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Figure 6-11
Our analysis of small degree wave sequences over the last twenty years further validates the proposition that the usual limitation of any bear market is the travel area of the preceding fourth wave of one lesser degree, particularly when the bear market in question is itself a fourth wave. However, in a clearly reasonable modification of the guideline, it is often the case that if the first wave in a sequence extends, the correction following the fifth wave will have as a typical limit the bottom of the second wave of lesser degree. For example, the decline into March 1978 in the DJIA bottomed exactly at the low of the second wave in March 1975, which followed an extended first wave off the December 1974 low.
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On occasion, a flat correction or triangle, particularly if it follows an extension, will fail, usually by a slim margin, to reach into the fourth wave area (see Example #3). A zigzag, on occasion, will cut deeply and move down into the area of the second wave of lesser degree, although this almost exclusively occurs when the zigzag is itself a second wave. "Double bottoms" are sometimes formed in this manner.


Behavior Following Fifth Wave Extensions
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Having cumulatively observed the hourly changes in the DJIA for over twenty years, the authors are convinced that Elliott imprecisely stated some of his findings with respect to both the occurrence of extensions and the market action following an extension. The most important empirically derived rule that can be distilled from our observations of market behavior is that when the fifth wave of an advance is an extension, the ensuing correction will be sharp and find support at the level of the low of wave two of the extension. Sometimes the correction ends there, as illustrated in Figure 2-6, and sometimes only wave A ends there. Although a limited number of real life examples exist, the precision with which A waves have reversed at this level is remarkable. Figure 2-7 is an illustration showing both a zigzag and an expanded flat correction. An example involving a zigzag can be found in Figure 5-5 at the low of wave Ⓐ of II and an example involving an expanded flat can be found in Figure 2-16 at the low of wave a of A of 4. As you may be able to discern in Figure 5-5, wave a of (IV) bottoms near wave (2) of ⑤, which is an extension within the wave V from 1921 to 1929.
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Since the low of the second wave of an extension is commonly in or near the price territory of the immediately preceding fourth wave of one larger degree, this guideline implies behavior similar to that of the preceding guideline. It is notable for its precision, however. Additional value is provided by the fact that fifth wave extensions are typically followed by swift retracements. Their occurrence, then, is an advance warning of a dramatic reversal to a specific level, a powerful combination of knowledge. This guideline need not apply when the market is ending a fifth wave at more than one degree, yet the action in Figure 5-5 (see above reference) suggests that we should still view this level as at least potential or temporary support.
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255 Wave Personality
The idea of wave personality is a substantial expansion of the Wave Principle. It has the advantage of bringing human behavior more personally into the equation.
free forex signals and The personality of each wave in the Elliott sequence is an integral part of the reflection of the mass psychology it embodies. The progression of mass emotions from pessimism to optimism and back again tends to follow a similar path each time around, producing similar circumstances at corresponding points in the wave structure. As the Wave Principle indicates, market history repeats but not exactly. Every wave has siblings (same-directional waves of the same degree within a larger wave) and cousins (samedegree and same-numbered waves within different larger waves) but no wave has a twin. Related waves — particularly cousins — have similar market and social characteristics. The personality of each wave type is manifest whether the wave is of Grand Supercycle degree or Subminuette. Waves’ properties not only forewarn what to expect in the next sequence but at times can help determine the market’s present location in the progression of waves, when for other reasons the count is unclear or open to differing interpretations. As waves are in the process of unfolding, there are times when several different wave counts are perfectly admissible under all known Elliott rules. It is at these junctures that a knowledge of wave personality can be invaluable. Recognizing the character of a single wave can often allow you to interpret correctly the complexities of the larger pattern. The following discussions relate to an underlying bull market picture, as illustrated in Figures 2-14 and 2-15. These observations apply in reverse when the actionary waves are downward and the reactionary waves are upward.
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1) First waves — As a rough estimate, about half of first waves are part of the "basing" process and thus tend to be heavily corrected by wave two. In contrast to the bear market rallies within the previous decline, however, this first wave rise is technically more constructive, often displaying a subtle increase in
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Figure 2-14
volume and breadth. Plenty of short selling is in evidence as the majority has finally become convinced that the overall trend is down. Investors have finally gotten "one more rally to sell on," and they take advantage of it. The other fifty percent of first waves rise from either large bases formed by the previous correction, as in 1949, from downside failures, as in 1962, or from extreme compression, as in both 1962 and 1974. From such beginnings, first waves are dynamic and only moderately retraced.
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2) Second waves — Second waves often retrace so much of wave one that most of the profits gained up to that time are eroded away by the time it ends. This is especially true of call option purchases, as premiums sink drastically in the environment of 79 fear during second waves. At this point, investors are thoroughly convinced that the bear market is back to stay. Second waves often end on very low volume and volatility, indicating a drying up of selling pressure.
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3) Third waves — Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Increasingly favorable fundamentals enter the picture as confidence returns. Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series. It follows, of course, that the third wave of a third wave, and so on, will be the most volatile point of strength in any wave sequence. Such points invariably produce breakouts, "continuation" gaps, volume expansions, exceptional breadth, major Dow Theory trend confirmations and runaway price movement, creating large hourly, daily, weekly, monthly or yearly gains in the market, depending on the degree of the wave. Virtually all stocks participate in third waves. Besides the personality of B waves, that of third waves produces the most valuable clues to the wave count as it unfolds.
4) Fourth waves — Fourth waves are predictable in both depth (see page 66) and form, because by alternation they should differ from the previous second wave of the same degree. More often than not they trend sideways, building the base for the final fifth wave move. Lagging stocks build their tops and begin declining during this wave, since only the strength of a third wave was able to generate any motion in them in the first place. This initial deterioration in the market sets the stage for non-confirmations and subtle signs of weakness during the fifth wave.
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5) Fifth waves — Fifth waves in stocks are always less dynamic than third waves in terms of breadth. They usually display a slower maximum speed of price change as well, although if a fifth wave is an extension, speed of price change in the third of the fifth can exceed that of the third wave. Similarly, while it is common for volume to increase through successive impulse waves at Cycle degree or larger, it usually happens in a fifth wave below Primary degree only if the fifth wave extends. Otherwise, look for lesser volume as a rule in a fifth wave as opposed to the third. Market dabblers sometimes call for "blowoffs" at the end of long trends, but the stock market has no history of reaching maximum acceleration at a peak. Even if a fifth wave extends, the fifth of the fifth will lack the dynamism that preceded it. During advancing fifth waves, optimism runs extremely high despite a narrowing of breadth. Nevertheless, market action does improve relative to prior corrective wave rallies. For example, the year-end rally in 1976 was unexciting in the Dow, but it was nevertheless a motive wave as opposed to the preceding corrective wave advances in April, July and September, which, by contrast, had even less influence on the secondary indexes and the cumulative advance-decline line. As a monument to the optimism that fifth waves can produce, the advisory services polled two weeks after the conclusion of that rally turned in the lowest percentage of "bears," 4.5%, in the history of the recorded figures despite that fifth wave’s failure to make a new high!
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6) A waves — During the A wave of a bear market, the investment world is generally convinced that this reaction is just a pullback pursuant to the next leg of advance. The public surges to the buy side despite the first really technically damaging cracks in individual stock patterns. The A wave sets the tone for the B wave to follow. A five-wave A indicates a zigzag for wave B, while a three-wave A indicates a flat or triangle.
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7) B waves — B waves are phonies. They are sucker plays, bull traps, speculators’ paradise, orgies of odd-lotter mentality or expressions of dumb institutional complacency (or both). They often involve a focus on a narrow list of stocks, are often "unconfirmed" (see Dow Theory discussion in Chapter 7) by other averages, are rarely technically strong, and are virtually always doomed to complete retracement by wave C. If the analyst can easily say to himself, "There is something wrong with this market," chances are it’s a B wave. X waves and D waves in expanding triangles, both of which are corrective wave advances, have the same characteristics. Several examples will suffice to illustrate the point.
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The Fibonacci Sequence
In Liber Abaci, a problem is posed that gives rise to the sequence of numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on to infinity, known today as the Fibonacci sequence. The problem is this:
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How many pairs of rabbits placed in an enclosed area can be produced in a single year from one pair of rabbits if each pair gives birth to a new pair each month starting with the second month?
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In arriving at the solution, we find that each pair, including the first pair, needs a month’s time to mature, but once in production, begets a new pair each month. The number of pairs is the same at the beginning of each of the first two months, so the sequence is 1, 1. This first pair finally doubles its number during the second month, so that there are two pairs at the beginning of the third month. Of these, the older pair begets a third pair the following month so that at the beginning of the fourth month, the sequence expands 1, 1, 2, 3. Of these three, the two older pairs reproduce, but not the youngest pair, so the number of rabbit pairs expands to five. The next month, three pairs reproduce so the sequence expands to 1, 1, 2, 3, 5, 8 and so forth. Figure 3-1 shows the Rabbit Family Tree with the family growing with exponential acceleration. Continue the sequence for a few years and the numbers become astronomical. In 100 months, for instance, we would have to contend with 354,224,848,179,261,915,075 pairs of rabbits. The Fibonacci sequence resulting from the rabbit problem has many interesting properties and reflects an almost constant relationship among its components.

Figure 3-1
The sum of any two adjacent numbers in the sequence forms the next higher number in the sequence, viz., 1 plus 1 equals 2, 1 plus 2 equals 3, 2 plus 3 equals 5, 3 plus 5 equals 8, and so on to infinity.
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The Golden Ratio
After the first several numbers in the sequence, the ratio of any number to the next higher is approximately .618 to 1 and to the next lower number approximately 1.618 to 1. The further along the sequence, the closer the ratio approaches phi (denoted ϕ) which is an irrational number, .618034.... Between alternate numbers in the sequence, the ratio is approximately .382, whose inverse is 2.618. Refer to Figure 3-2 for a ratio table interlocking all Fibonacci numbers from 1 to 144.
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Phi is the only number that when added to 1 yields its inverse: 1 + .618 = 1 ÷ .618. This alliance of the additive and the multiplicative produces the following sequence of equations:
.6182 = 1 - .618,
.6183 = .618 - .6182,
.6184 = .6182 - .6183,
.6185 = .6183 - .6184, etc.
or alternatively,
1.6182 = 1 + 1.618,
1.6183 = 1.618 + 1.6182,
1.6184 = 1.6182 + 1.6183,
1.61855 = 1.6183 + 1.6184, etc.
Some statements of the interrelated properties of these four main ratios can be listed as follows:
1.618 - .618 = 1,
1.618 x .618 = 1,
1 - .618 = .382,
.618 x .618 = .382,
2.618 - 1.618 = 1,
2.618 x .382 = 1,
2.618 x .618 = 1.618,
1.618 x 1.618 = 2.618.
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Besides 1 and 2, any Fibonacci number multiplied by four, when added to a selected Fibonacci number, gives another Fibonacci number, so that:

Figure 3-2
3 x 4 = 12; + 1 = 13,
5 x 4 = 20; + 1 = 21,
8 x 4 = 32; + 2 = 34,
13 x 4 = 52; + 3 = 55,
21 x 4 = 84; + 5 = 89, and so on.
As the new sequence progresses, a third sequence begins in those numbers that are added to the 4x multiple. This relationship is possible because the ratio between second alternate Fibonacci numbers is 4.236, where .236 is both its inverse and its difference from the number 4. Other multiples produce different sequences, all based on Fibonacci multiples.
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We offer a partial list of additional phenomena relating to the Fibonacci sequence as follows:
1) No two consecutive Fibonacci numbers have any common factors.
2) If the terms of the Fibonacci sequence are numbered 1, 2, 3, 4, 5, 6, 7, etc., we find that, except for the fourth Fibonacci number (3), each time a prime Fibonacci number (one divisible only by itself and 1) is reached, the sequence number is prime as well. Similarly, except for the fourth Fibonacci number (3), all composite sequence numbers (those divisible by at least two numbers besides themselves and 1) denote composite Fibonacci numbers, as in the table below. The converses of these phenomena are not always true.
Fibonacci: Prime vs. Composite
P P P X P P P P

1 1 2 3 5 8 13 21 34 55 89 144 233 377 610 987
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
X C C C C C C C C
3) The sum of any ten numbers in the sequence is divisible by 11.
4) The sum of all Fibonacci numbers in the sequence up to any point, plus 1, equals the Fibonacci number two steps ahead of the last one added.
5) The sum of the squares of any consecutive sequence of Fibonacci numbers beginning at the first 1 will always equal the last number of the sequence chosen times the next higher number.
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6) The square of a Fibonacci number minus the square of the second number below it in the sequence is always a Fibonacci number.
7) The square of any Fibonacci number is equal to the number before it in the sequence multiplied by the number after it in the sequence plus or minus 1. The plus 1 and minus 1 alternate along the sequence.


8) The square of one Fibonacci number Fn plus the square of the next Fibonacci number Fn+1 equals the Fibonacci number of F2n+1. The formula Fn2 + Fn+12 = F2n+1 is applicable to right-angle triangles, for which the sum of the squares of the two shorter sides equals the square of the longest side. At right is an example, using F5, F6 and F−−√F11.
9) One formula illustrating a relationship between the two most ubiquitous irrational numbers in mathematics, pi and phi, is as follows:
Fn ≈ 100 x π2 x ϕ(15-n), where ϕ = .618..., n represents the numerical position of the term in the sequence and Fn represents the term itself. In this case, the number "1" is represented only once, so that F1 ≈ 1, F2 ≈ 2, F3 ≈ 3, F4 ≈ 5, etc.
For example, let n = 7. Then,
F7 ≈ 100 x 3.14162 x .6180339(15-7)
≈ 986.97 x .61803398
≈ 986.97 x .02129 ≈ 21.01 ≈ 21
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10) One mind stretching phenomenon, which to our knowledge has not previously been mentioned, is that the ratios between Fibonacci numbers yield numbers which very nearly are thousandths of other Fibonacci numbers, the difference being a thousandth of a third Fibonacci number, all in sequence (see ratio table, Figure 3-2). Thus, in ascending direction, identical Fibonacci numbers are related by 1.00, or .987 plus .013; adjacent Fibonacci numbers are related by 1.618, or 1.597 plus .021; alternate Fibonacci numbers are related by 2.618, or 2.584 plus .034; and so on. In the descending direction, adjacent Fibonacci numbers are related by .618, or .610 plus .008; alternate Fibonacci numbers are related by .382, or .377 plus .005; second alternates are related by .236, or .233 plus .003; third alternates are related by .146, or .144 plus .002; fourth alternates are related by .090, or .089 plus .001; fifth alternates are related by .056, or .055 plus .001; sixth through twelfth alternates are related by ratios which are themselves thousandths of Fibonacci numbers beginning with .034. It is interesting that by this analysis, the ratio then between thirteenth alternate Fibonacci numbers begins the series back at .001, one thousandth of where it began! On all counts, we truly have a creation of "like from like," of "reproduction in an endless series," revealing the properties of "the most binding of all mathematical relations," as its admirers have characterized it.
Finally, we note that (5√5 + 1)/2 = 1.618 and (5√5 - 1)/2 = .618, where 5√5 = 2.236. 5 is the most important number in the Wave Principle, and its square root is a mathematical key to phi.
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1.618 (or .618) is known as the Golden Ratio or Golden Mean. Its proportions are pleasing to the eye and ear. It appears throughout biology, music, art and architecture. William Hoffer, writing for the December 1975 Smithsonian Magazine, said:
...the proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it "the golden mean."
Fibonacci’s abracadabric rabbits pop up in the most unexpected places. The numbers are unquestionably part of a mystical natural harmony that feels good, looks good and even sounds good. Music, for example, is based on the 8-note octave. On the piano this is represented by 8 white keys, 5 black ones — 13 in all. It is no accident that the musical harmony that seems to give the ear its greatest satisfaction is the major sixth. The note E vibrates at a ratio of .62500 to the note C.* A mere .006966 away from the exact golden mean, the proportions of the major sixth set off good vibrations in the cochlea of the inner ear — an organ that just happens to be shaped in a logarithmic spiral.
The continual occurrence of Fibonacci numbers and the golden spiral in nature explains precisely why the proportion of .618034 to 1 is so pleasing in art. Man can see the image of life in art that is based on the golden mean.
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Nature uses the Golden Ratio in its most intimate building blocks and in its most advanced patterns, in forms as minuscule as microtubules in the brain and the DNA molecule (see Figure 3-9) to those as large as planetary distances and periods. It is involved in such diverse phenomena as quasi crystal arrangements, reflections of light beams on glass, the brain and nervous system, musical arrangement, and the structures of plants and animals. Science is rapidly demonstrating that there is indeed a basic proportional principle of nature. By the way, you are holding this book with two of your five appendages, which have three jointed parts, five digits at the end, and three jointed sections to each digit, a 5-3-5-3 progression that mightily suggests the Wave Principle.


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GBP USD
SELL from 1.2460
Take profit 1.2300
Stop loss 1.2540
type order Market Execution is entering this trade at any price from 1.2460
technical analysis and forex signals for GBP USD
waves in the same direction will tend toward equality SO GBPUSD WILL resume bearish wave to level 1.2130
Riding Wave C in a Zigzag
Trend continues till gives a reversal signal
on hourly chart the Last wave determine the end of the pattern and Consists of zigzag that generate sell GBPUSD forex signals
reversal candlestick pattern on daily chart is shooting star
The price behavior is the result of Environmental pattern
Current surrounding Repetitive pattern is zigzag Wave C = 1.618 Wave A
History Repeats Itself that the future is just a repetition of the past
The bearish movement from level 1.3510 to level 1.1410 appeared before on price chart at 19-6-2015 and followed with bullish movement equal the current bullish movement from level 1.2240 to 1.2520 that give forex trading signals to sell GBP USD and according to this movement GBP USD will decline to 1.0580
Also The bearish movement from level 1.2650 to level 1.2240 appeared before on price chart at 9-7-2018 and followed with bullish movement equal the current bullish movement from level 1.1410 to 1.2650 that give forex trading signals to sell GBP USD so the gbp usd will decline near to level 1.1970
surrounding Repetitive pattern before this movement expanded flat Wave C = 1.618 Wave A
We expect price will repeat the same movement again and gbp usd price will go down toward 1.1970
Maybe the correction equal only one wave of previous correction
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Definitions of diversification and asset allocation strategies

Although the assumptions of modern portfolio theory are likely somewhat flawed, asset allocation using MPT is still a proven method to reduce volatility in an investment portfolio. A simple example using separate investors can help explain the value of diversification.
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Our first investor, Investor A, has invested his entire portfolio in the shares of only one company. By comparison, Investor B’s portfolio B invested equally in the shares of 30 different companies. Investors risk that the entire stock market will decline and adversely affect their portfolios. However, Investor A also has risks associated with one company that owns its shares. If something specific happens to that company (i.e. profits disappointment, product recall, investor fraud, etc.), Investor A may lose a large portion of his investment. On the other hand, if this same scenario occurs for one of the thirty stocks in Investor B's portfolio, it will not be devastating to the entire portfolio value. In the worst-case scenario, investor A could lose his investment entirely if the company goes out of business. Investor B will only lose 1/30 of its portfolio.
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The previous example identifies two different types of risks associated with investing in financial markets. The first type of risk is the risk associated with the entire market or systemic risk. Regular risk affects all stocks in the entire market together, as a whole, and cannot be diversified away within that market. For example, if the entire US economy is weakening, it will affect all stocks within the S&P 500 to some extent. Diversifying your portfolio with other stocks within the S&P 500 will not reduce the overall risk in the portfolio significantly since other stocks share the same equity characteristics.
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Another type of risk is the risk that is specifically related to individual security, or irregular risks. Asymmetric risks can be diversified easily, as seen in the previous example of diversification. If one invested equally among the shares of thirty different companies, and one of those companies went completely out of business, the loss in the total portfolio would be only 3.3%.
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Asset allocation strategies
Asset allocation to portfolio management can be applied in different ways. Most asset allocation techniques fall into two distinct strategies - strategic asset allocation and tactical asset allocation.

Strategic asset allocation is a more traditional approach to asset allocation that uses the principles and assumptions of modern portfolio theory in a passive investment style. The goal of allocating strategic assets is to create a portfolio that is based on investment objectives and carries risks for the investor. Usually changes in the investment portfolio are made only when the portfolio becomes "unbalanced" due to market fluctuations, or the risk / return profile of the changes the investor requires, requiring an adjustment in the allocation.
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Making changes to the portfolio when it becomes "unbalanced" is in line with the "value investing" philosophy that chooses investments because of its perceived lower value against an estimated substantial value. For example, if the allocation of international shares to the portfolio is less than the performance of allocating local shares, over time, the international allocation will form a smaller portion of the total portfolio, given that there are fewer unrealized gains that contribute to total investment in dollars. To reallocate the portfolio and return to the original asset mix ratios, one may need to sell some local shares and buy more international stocks. This is in line with the value investment, because you will buy unfavorable shares (perhaps undervalued) while selling the shares that are in favor (perhaps overvalued).
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Tactical asset allocation is similar to strategic asset allocation, with some noteworthy differences. Like strategic asset allocation, the allocation of tactical assets depends on the assumptions of modern portfolio theory. However, unlike strategic asset allocation, it uses a more active investment approach that includes concepts of relative strength, sector rotation, and momentum. Rather than reallocating the portfolio when it becomes unbalanced due to market fluctuations, the allocation deliberately increases its weight in market sectors that outperform the market as a whole.
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The strategy of allocating tactical assets differs from investing value in it. Instead of buying shares with poor performance, one buys or adds to positions that outperform the broad market. Therefore, in a tactically dedicated portfolio based on relative strength, one can largely concentrate in specific market segments. The idea behind this type of asset allocation is to remain somewhat diversified, but to focus more portfolio in areas of the economy that are improving. Research studies have shown that when one sector of the economy outperforms the market in general, there is a tendency for this sector to outperform for a long period of time.
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The following graph shows the performance of the nine ETFs (representing the nine sectors of the S&P 500) compared to the performance of the S&P 500 over a period of one year. As can be seen from the graph, the three highest performing sectors are consumer goods, healthcare and utilities. The two worst performing sectors are basic materials and energy, where energy is the weakest sector. An investor can use this information by using a tactical asset allocation strategy to choose investments that outperform the broader market and avoid investments that are not performing well in the broader market.
Asset allocation limits
Even with all the benefits it provides, using asset allocation as a risk management strategy has limitations. Realizing these limitations will help investors understand when other tools can be used to reduce risk in their portfolios.
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One of the main criticisms of asset allocation is that "black swan" events (unexpected events with catastrophic consequences) appear to occur more in financial markets statistically than if markets really follow the normal distribution. If true, the use of standard deviation as a measure of risk may be misleading, and the statistical correlation between asset classes may be distorted. Also, the correlation tends to increase between asset classes during the crisis period, making asset allocation less useful as a risk management strategy specifically when it is most needed.
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Another criticism of asset allocation is that it does not inform the investor when to buy or sell the security. Buying and selling decisions are based on reallocating the portfolio (usually arbitrarily) when it appears that it needs to rebalance due to investor risk parameters, regardless of changing market conditions. Tactical asset allocation strategies can be used to address some of the timing of buying and selling decisions, which are not usually part of strategic investment decisions for asset allocation.
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Finally, asset allocation as a risk management tool does not address the risk of portfolio withdrawal. Withdrawal is defined as the minimum value for an individual investment or investment portfolio reached after a previous peak in value. During secular bears' markets, wallet withdrawals can be significant. Simply spreading a person’s investments across multiple asset classes may not provide adequate risk protection.
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Irrational Exuberance part two

Amplification Mechanisms and Forex trading Signals
As if the structural factors listed above were not enough, Shiller argues that amplification mechanisms intensified the effects. First, there was a change in investor attitudes toward stocks. By the late 1990s stocks were considered a long-term investment that could not go wrong. Jeremy Siegel first published Stocks for the Long Run in 1994. Subsequent editions have appeared in 1998, 2002 and 2007. Stocks indeed performed well from 1995 until 2000, when the S&P 500 peaked around 1550. The S&P 500 then went on a 10-year stretch of underperformance. In fact, the S&P 500 was trading below its 2000 level in early 2011. This means 11 years of negative returns for buy-and-hold investors that bought in 2000.

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Second, as inferred above, Shiller asserts that public attention to the stock market hit new levels in the 1990s. This heightened awareness made more money available for stocks. The media fed this infatuation with increased coverage. Dinner party conversations invariably turned to the stock market. Stock tips and advice were also readily shared among acquaintances.
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Third, the consistent rise in stock prices provided a feedback loop that kept public attention on stocks. As the media reported the rise in the stock market, new money found its way into the stock market and pushed prices even higher. Higher prices led to more news and more news led to more investment money. A feedback loop evolved where price increases were feeding more price increases. Shiller calls these mechanisms naturally occurring Ponzi schemes because they feed on the perception of prior success.
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Cultural Factors
The news media and new era thinking are among the cultural factors cited by Shiller. Yes, the media seems to keep popping up in the book - maybe that is why technical analysts only look at price charts!
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The speculative bubble was clearly aided and abetted by the news media. Newspapers, television, radio and Internet media compete for public attention. Sensational stories with sound bites are more likely to attract attention than drab analysis with numbers and facts. Despite an inattention to detail, the news media was always there with specific reasons for a stock market move. The media always found the perfect excuse or news event to justify the move - after the fact. It is kind of like a solution in search of a problem.

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Shiller notes that news of price changes is influential on investor behavior. In his survey after the crash on October 19th, 1987, Shiller listed all the recent news events that seemed relevant and asked respondents to rate the stories. News of the October 14th price decline was also included in this list. At the time, this was the single largest one-day point decline in the Dow Industrials. Surprisingly, the stories relating to the past price declines were deemed the most significant news events. In Shiller's words:
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Thus it appears that the stock market crash had substantially to do with a psychological feedback loop among the general investing public from price declines to selling and thus to further price declines, along the lines of a negative bubble. The crash apparently had nothing particularly to do with any news story other than that of the crash itself, but rather with theories about other investors' reasons for selling and about their psychology.
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New era economic thinking was also cited by Shiller as a cultural factor that contributed to the stock market bubble. New era thinking is not new. Stock market advances in the late 1800s, 1920s and 1960s were also facilitated by new era thinking. At the 1901 peak, new era thinking centered around railroads, big industrial trusts and the age of optimism. The roaring 20s were marked by the electrical age for big cities and the widening use of autos. The 1960s were punctuated by a baby boom, the proliferation of television and low inflation. And finally, the 1990s saw the Internet boom, low inflation, the new economy and the alleged end of the business cycle.
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Psychological Factors
Shiller asserts that there is a human tendency towards “overconfidence in one's beliefs,” and that people often rely on intuition when making investment decisions. The decision process is not based on carefully considered facts backed by numbers and evidence. Instead, investors make investment decisions based on the opinion of others, stemming from the need to conform. Investors make decisions based on “good stories” or stories that seem logical. Because people get their information from the same sources, there is little or no evidence of independent behavior. Instead, individuals getting the same information react the same way to produce a herd mentality.
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Conclusion and Critiques
Shiller identified several credible factors that influenced investment decisions during the bubble years. Many of these factors exist today and his analysis provides food for thought when considering behavioral finance. Not all factors or influences are listed here. Shiller offers more factors and detailed evidence in the book. After examining efficient markets, random walks, bubbles and investor attitudes, Shiller also offers several remedies to contain “speculative volatility in a free society”.
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Behavioral finance can help us understand what is happening, but understanding may not help with making money in the stock market. While the first edition coincided with the stock market peak in 2000, the stock market rose another 30% after the second edition was published in February 2005. There is an argument to be made for historical valuations, but markets can remain irrational a lot longer than traders can remain solvent. In other words, one would have left a lot of money on the table by selling in early 2005 or one would have gone broke shorting stocks in early 2005. To his credit, Shiller does provide evidence of past mispricing in the stock market. It can and does happen.
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Furthermore, who is to say how much a stock is actually worth? The value of any asset is only what someone is willing to pay for it. Valuations are set every day as stocks change hands on Wall Street. Just as prices trend, valuations also trend from overvaluation to undervaluation. Sometimes these trends get extreme on both sides. Stocks were severely overvalued in early 2000 and severely undervalued in March 2009. It would appear that some sort of timing mechanism is needed to avoid the big declines and participate in the big advances. Hmm … sounds like technical analysis!
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Next up, click here to read our investment psychology article on the 11 most common cognitive biases that affect us both in daily life and when investing in the financial markets.

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What is constant proportion portfolio insurance (CPPI)?
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Understanding Constant Proportion Portfolio Insurance (CPPI)
Constant Proportion Portfolio Insurance (CPPI) allows an investor to maintain exposure to the upside potential of a risky asset while offering a capital guarantee against downside risk. The result of the CPPI strategy is somewhat similar to buying a call option, but it does not use option contracts. Therefore, CPPI is sometimes referred to as a convex strategy, as opposed to a "concave strategy" as a constant mix. Financial institutions sell CPPI products on a variety of risk assets, including stocks and credit default swaps.
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KEY TIPS
CPPI is a strategy to combine the advantage of exposure to the equity market with investments in a conservative financial instrument. This is done by assigning a specifically calculated investment percentage to a risk account.
A multiplier is used to determine the amount of risk an investor is willing to take.
Investors can rebalance their positions on a monthly or quarterly basis.
How Constant Proportion Portfolio Insurance (CPPI) Works
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The investor will make an initial investment in the risk asset equal to the value of: (Multiplier) x (value of the cushion in dollars) and will invest the rest in the conservative asset. The value of the multiplier is based on the investor's risk profile and is obtained by first asking what the maximum loss in a day of the risk investment could be. The multiplier will be the inverse of that percentage. As the value of the portfolio changes over time, the investor will rebalance according to the same strategy.
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CPPI consists of two accounts: a risk account and a security account. As their names indicate, both accounts serve specific purposes in an individual's overall investment strategy. The risk account is leveraged with futures holdings to hedge against the downside of significant exposure to equities. The funds are dynamically transferred between the two accounts based on the economic environment.

The schedule for rebalancing is up to the investor, with monthly or quarterly examples being frequently cited. Typically, CPPI is implemented over five-year periods. Ideally, the value of the cushion will grow over time, allowing more money to flow into the risk asset. However, if the buffer falls, the investor may need to sell a portion of the risk asset to keep the asset allocation targets intact.
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One of the problems with implementing a CPPI strategy is that you do not immediately "de-risk" your holdings when markets move in the opposite direction. A hypothetical CPPI strategy on a five-year investment time horizon would have underperformed the S&P 500 for several years after the 2008 financial crisis.
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CPPI example
Consider a hypothetical portfolio of $ 100,000, of which the investor decides that $ 90,000 is the absolute floor. If the portfolio falls to $ 90,000 in value, the investor would move all assets to cash to preserve capital.
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If one decides that 20 percent is the maximum chance of "falling", the value of the multiplier will be (1 / 0.20), or 5. Multiplier values between 3 and 6 are very common. Based on the information provided, the investor would allocate 5 x ($ 100,000 - $ 90,000) or $ 50,000 to the risk asset, with the remainder going to the cash or conservative asset.

Tax-loss harvesting a strategy
Tax-loss harvesting is a strategy that can help investors minimize any taxes they may owe on capital gains or their regular income.
Sometimes an investment that has lost value can still help your portfolio; if an investment drops you can deduct that loss, which can also help boost your total investment returns.
For a married couple filing jointly, up to $3,000 per year in realized capital losses can be used to offset capital gains tax or taxes owed on ordinary income.
The IRS bans investors from deducting a capital loss on the sale of a security against the capital gain of the same security; This is called a wash sale.
A general rule is that you should only harvest the loss if the tax benefit outweighs the administrative cost.
Understanding Tax-Loss Harvesting

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An investment loss can be used to offset capital gains tax on realized gains in an investment portfolio; it can also be used to offset taxes on ordinary income. For a married couple filing jointly, up to $3,000 per year in realized losses can be used to offset ordinary income on federal income taxes.1


Even if an investor doesn't anticipate any capital gains this year, there are still benefits to the tax-loss harvesting strategy because capital losses can be used to offset ordinary income. In addition, losses can also be carried into the future indefinitely and used to offset future gains.

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Capital Loss
Sometimes an investment that has lost value can still help your portfolio. If an investment drops, you can deduct that loss, which can also help boost your total investment returns. For example, suppose an individual invests $10,000 in an exchange traded fund (ETF) at the beginning of the year. Then this ETF decreases in value by 10% and drops to a market value of $9,000. This is considered a capital loss of $1,000.


A capital loss occurs anytime an asset decreases in value. However, a loss is not considered realized for tax purposes until the investment has been sold for a price lower than the original purchase price.
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Suppose that the market reverses course and this investment closes out the year at $10,800. Pre-tax, this represents a 10% return (after adding in the typical 2% dividend yield). Assuming this investor is in the highest tax bracket, their after-tax return is 9.4%, which accounts for an approximately 8% gain, plus a dividend gain of approximately 1.4%.
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However, if this investor had decided to sell the investment immediately following the initial drop in price and purchased additional shares with the proceeds, they would be able to use this realized loss of $1,000 to offset either taxable capital gains they were reporting or taxes on their ordinary income. At the top tax rate, this could potentially save them $760 in income taxes. This would also add an additional 7.6% return to their original $10,000 investment.

Using tax-loss harvesting, this investor's net after-tax return on their investment would now be approximately 16.6%, or equal to 9% plus 7.6%.
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Limitations to Tax-Loss Harvesting
There are certain limitations to the effectiveness of this strategy, in addition to regulations put in place by the Internal Revenue Service (IRS).

Wash-Sale Rule
Investors cannot deduct a capital loss on the sale of a security against the capital gain of the same security. This is called a wash sale. Wash-sale rules prevent taxpayers from selling or trading a security at a loss and, within 30 days before or after this sale, buying the same stock or security—or a “substantially identical” one (or acquiring a contract or an option to do so). In the event of a wash sale, your tax write-off may be disallowed by the IRS.2

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For investors that want to harvest their losses, while also avoiding any wash-rule violations, one strategy for an individual stock that loses value is to replace it with a mutual fund or an exchange-traded fund (ETF) that targets the same industry. This will allow you to maintain a similar asset allocation in your portfolio.

Tax Liability Threshold
Up to $3,000 of realized capital loss can be used to reduce your taxable income in one year (if an investor uses the tax-filing status married filing jointly). An individual can deduct up to $1,500 in one year. Any additional loss can be carried forward for use on future tax returns.3
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Administrative Costs
Completing a transaction every time the market goes down can be onerous from a tax-preparation standpoint. A general rule is that you should only harvest the loss if the tax benefit outweighs the administrative cost.
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The Bottom Line
Tax laws create the opportunity to engage in tax-loss harvesting as an investment strategy. However, tax savings should never lessen or stand in the way of your investing goals. In some cases, your after-tax returns can be boosted by this strategy, resulting in quicker asset accumulation.


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What is the required rate of return - RRR?
The required rate of return is the minimum return that an investor would accept to own a company's shares, as compensation for a certain level of risk associated with holding the share. The legal support rate is also used in corporate finance to analyze the profitability of potential investment projects.
The required rate of return is also known as the obstacle rate, which like RRR, denotes the appropriate compensation needed for the current level of risk. More risky projects usually have higher obstacle or repeat request rates than less risky ones.
The formula and calculation of RRR
There are two methods of calculating the required rate of return. If an investor is considering buying equity shares in a dividend-paying company, the dividend-discount model is ideal. The dividend discount model is also known as the Gordon Growth Model.
Dividend Distribution Model - Discount to Equity Ratio for dividend stock is calculated by using the current share price, dividend payout per share, and projected earnings growth rate. The formula is as follows:
RRR = frac { text {expected dividend payment}} { text {participation rate}} + text {expected earnings growth rate} RRR =
Share price
Expected dividends
+ Projected profit growth rate
Calculate RRR using the profit discount model.
Take the expected dividend payment and divide it by the current share price.
Add the result to the expected profit growth rate.
How to calculate the required rate of return
Another way to calculate RRR is to use the Capital Asset Pricing Model (CAPM), which investors typically use for stocks that do not pay dividends.
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The CAPM model is used to calculate RRR the beta version of the original. Beta is the risk factor of holding. In other words, beta attempts to measure the risk of a stock or investment over time. Shares with a beta greater than 1 are considered riskier than the market as a whole (represented by the S&P 500), while stocks with a beta greater than 1 are considered less risky than the overall market.

The formula also uses the risk-free rate of return, which is usually the yield on short-term US Treasury notes. The final variable is the market rate of return, which is usually the annual return on the S&P 500. The RRR formula using the CAPM model is as follows:

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Calculate RRR using CAPM
Add your current risk-free rate of return to your security beta.
Take the market rate of return and subtract the risk-free rate of return.
Add results to achieve the desired rate of return.
Subtract the risk-free rate of return from the market rate of return.
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Take this score and hit it in the beta version of Safety.
Add the result to the current risk-free rate of return to determine the desired rate of return.
What does RRR say to you?
The required rate of return is a fundamental concept in valuing equity and corporate finance. It is a difficult metric to define due to the different investment objectives and risk tolerance of individual and corporate investors. Risk and return preferences, inflation expectations and a firm's capital structure all play a role in determining the required rate for the company. Each of these factors and others can have significant impacts on the intrinsic value of security.
For investors using the CAPM equation, the required rate of return for a share with a higher beta as compared to the market should be a higher interest rate. A higher high percentage ratio compared to other low beta investments is necessary to compensate investors for the additional level of risk associated with investing in higher beta stocks.
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In other words, RRR is calculated in part by adding the risk premium to the risk-free expected rate of return to calculate additional volatility and ex post risk.
For capital projects, RRR is useful in determining whether to pursue one project versus another. Program requirements (RRR) are required to advance the project although some projects may not meet the requirements of the program requirements but serve the interests of the company in the long run.

What is the book value of the common share?
Book value per common share (or simply book value per share - BVPS) is a method of calculating the book value per share of a company based on the equity of the common shareholders in the company. A company's book value is the difference between that company's total assets and total liabilities, not its market share price.

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In the event of the dissolution of the company, the book value of each ordinary share indicates the remaining dollar value of the ordinary shareholders after all assets are liquidated and all debtors are paid.

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Understand the book value

The equation for the book value of a common share is:
Book value per ordinary share (formula below) is an accounting measure based on historical transactions:

What does BVPS tell you?
The book value of ordinary shares in the numerator reflects the original returns that the company receives from the issuance of ordinary shares, which are increased by profits or decreased due to losses, and decreased by dividends paid. Company share buybacks reduce the book value and the total number of common shares. Stock buybacks occur at current stock prices, which can lead to a significant reduction in the company's book value per common stock. The number of common shares used in the denominator is usually the average number of diluted ordinary shares of the past year, which takes into account any additional shares other than the number of underlying shares that could arise from stock options, guarantees, preferred shares, and other convertible instruments.
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Example of BVPS
As a hypothetical example, suppose XYZ Manufacturing's common stock balance is $ 10 million, and one million shares of common stock outstanding, which means that BVPS is ($ 10 million / 1 million shares), or $ 10 per share. If XYZ manages to generate higher profits and uses those profits to buy more assets or reduce liabilities, the company's common stock increases. For example, if a company makes a profit of $ 500,000 and uses $ 200,000 of the profits to purchase the assets, the common stock increases along with the BVPS. On the other hand, if XYZ uses $ 300,000 in dividends to reduce liabilities, the common stock also increases.

The difference between the market value of the share and the book value of the share
The market value per share is the company's current share price, and it reflects the value that market participants are willing to pay for their regular share. Book value per share is calculated using historical costs, but market value per share is a forward-looking measure that takes into account the firm's future earnings strength. With increases in the company's estimated profitability, projected growth, and soundness of its business, the market value per share grows higher. Material differences arise between the book value per share and the market value per share due to the ways in which accounting principles classify certain transactions.

For example, consider a company's brand value, which was created through a series of marketing campaigns. US Generally Accepted Accounting Principles (GAAP) require marketing costs to be spent promptly, which reduces the book value per share.1 However, if the advertising efforts enhance the company's product image, the company can charge premium rates and create brand value. Market demand may lead to an increase in the share price, which creates a large discrepancy between the market and the book values per share.
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The difference between book value of common stock and net asset value (NAV)
Whereas, BVPS considers the residual equity per share of the company's shares, net asset value, or NAV, to be the value per share computed for a mutual fund, exchange-traded fund, or ETF. For any of these investments, the net asset value is calculated by dividing the total value of all fund securities by the total number of fund shares outstanding. NAV is created daily for mutual funds. A number of analysts consider total annual return to be a better and more accurate measure of mutual fund performance, but net asset value is still used as an easy-to-use interim valuation tool.
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BVPS limits
Because the book value per share only takes into account book value, it fails to incorporate other intangible factors that may increase the market value of the company's shares, even upon liquidation. For example, high-tech banks or software companies often have very little tangible assets in relation to their intellectual property and human capital (workforce). These intangible assets will not always be taken into account in the book value calculation.

Market value
A company's market value is a good indicator of investors' perceptions about its business prospects. The range of market values in the market is enormous, from less than a million dollars for the smallest companies to hundreds of billions for the largest and most successful companies in the world.
Market value is determined by valuations or multipliers that investors provide to companies, such as price to sales, price to earnings, company value to EBITDA, etc. The higher the valuations, the higher the market value.
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The dynamic nature of market values
Market value can fluctuate dramatically over periods of time and is greatly influenced by the business cycle. Market values decline during bear markets associated with recessions and rallies during emerging markets that occur during economic expansions.
Market value also depends on many other factors, such as the sector in which the company operates, its profitability, debt burden, and the broad market environment. For example, Company X and Company B may have $ 100 million in annual sales, but if Company X is a rapidly growing technology company while B is a massive retailer, then the market value of X will generally be much higher than that of Company B.
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In the example above, Company X might trade at a sales multiplier of 5, giving it a market value of $ 500 million, while Company B might trade at a sales multiple of 2, giving it a market value of $ 200 million.
The company's market value may differ significantly from book value or shareholder equity. A stock is generally considered undervalued if its market value is much lower than the book value, which means that the stock is traded at a significant discount from the book value per share. This does not mean that the share is overestimated if it is traded at a premium over the book value, as this again depends on the sector and the extent of the premium in relation to the share's peers.
Book value is also known as explicit value, and it can greatly affect the implied value of the company (i.e. personal perceptions, investor and analyst research), which in turn affects whether the company's share price rises or falls.
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Market value (also known as OMV, or "open market valuation") is the price that an asset will bring in the market, or the value that the investment community gives to a particular stock or company. Market value is also commonly used to denote the market value of a public joint stock company, and is calculated by multiplying the number of its outstanding shares by the current share price. It is easiest to determine the market value of exchange-traded instruments such as stocks and futures, since their market prices are widely spread and readily available, but it is difficult to ascertain the over-the-counter instruments such as fixed income securities. However, the greatest difficulty in determining market value is in estimating the value of illiquid assets such as real estate and companies, which may require the use of real estate appraisers and business valuation experts respectively.
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