Author name: Vidfin

If you are connected to the financial or business world, chances are you would have heard about exponential growth. This concept is generally used for representing an increase over a specific period.  A lot of professionals have been using exponential functions to comprehend variables in their studies, support diverse business decisions and discover factors that are influencing enough for a gamut of data. However, before anything else, it is essential to understand how such an increase can occur exponentially, especially if you are working in a certain industry that repeatedly depends upon statistical information.  In this post, let’s explore the meaning of exponential growth, who can use it, why it is essential and how it can be calculated with an example.  What is Exponential Growth? Exponential growth is referred to a data pattern that shows greater increases with time. Thus, it creates an upward trending curve on the graph, known as the exponential growth curve.  In the field of mathematics, when a function includes an exponent (or a power), the calculation will increase exponentially. For instance, if hens laid eggs thrice every year and tripled per year, in the second year, the number would be 27, and it will be 81 in the third year.  Understanding Exponential Growth In the world of finance, compound returns lead to exponential growth. The power of compounding is one of the powerful forces in this industry. This one concept lets investors create more considerable sums with minimal initial capital. One of the most common examples of exponential growth is market-linked investments carrying a compound interest rate. Your investments see exponential growth because of compound interest when you invest money in a market-linked investment option for an extended period. This shows how you grow your investment exponentially with minimal initial outlay. If the account offers a compound interest rate, you will get interested in the principal and the interest amount received from the preceding period. For instance, in the first year, you might get 8% interest on a bond with a face value of Rs.100  that matures in 30 years. Thus, you will get Rs.8.  In the following year, this 8% interest rate will be applied to Rs.108 and not Rs.100, keeping in mind the interest payment you received in the previous year. Hence, with every passing year, interest payments continue to amass and will be considered in the calculations of yearly interest payments by the time your financial instrument reaches maturity. Exponential Growth Formula On a graph or a chart, the exponential curve begins slowly. It remains closely flat for a time before swiftly increasing to become almost vertical. The exponential growth formula is as follows: V=S×(1+R)^T where,  S is the starting value  R is the rate of interest and  T is the elapsed number of periods Importance of Exponential Growth  Data that generally increases exponentially is vital for several careers. Apart from this, it is specifically essential in the following domains: Finance and accounting Business and data analytics Scientific studies Research and development Jotted down below are some additional (but equally important) value-added points of exponential growth: Encourages Technological Innovation A lot of applications in the information technology and computer science industries depend upon statistical information for growth analysis. When developing artificial intelligence processes, machine learning algorithms, and automated software, programmers and data scientists may calculate exponential increases in results over time for a specific input in an environment that is surrounded by digitization.  For example, if a developer uses a specific algorithm as an input to create outputs over a certain period, calculating the growth can help comprehend whether or not the increase in value is an exponential function. Assists Professionals in Discovering Trends Whether in finance and business, technology, science or health care, exponential increases in any sort of information can communicate growing trends. For example, clinical researchers might use this factor to graph an increase in positive health results with new medications. On the other hand, business leaders might also use this function to discover trends in consumer markets, costs of advertising and brand development. Evaluates Important Financial Metrics The accounting and financial industries generally depend upon growth functions to figure out return projections for specific periods. One of the metrics is a compound return. It is an investment return type that accumulates on starting investment principal and any growth the investment comes across.  When compound returns accumulate, your investment account increases exponentially every time there is an increase in the principal. Such an exponential increase can also occur with loans in case of the interest compounds over time and is at an adaptable rate.  Exponential Growth Uses Often, exponential growth is used in financial modelling. While the concept is quite common in a high-interest savings account, the interest rates do not fluctuate or waver as much during several economic situations. But, when keeping stocks in mind, returns aren’t as smooth as anticipated.  Not just that, the technology sector uses growth rate calculations, such as AI design, machine learning and software development. Moreover, researchers and scientists use mathematical concepts, like exponential growth, to experiment and study several data.  This factor helps in: Classifying factors and trends that can cause a multiplying increase in varying financial metrics, such as assets and liabilities, expenses, revenues, investments and compounding interest Overall, the models of exponential growth are beneficial in predicting the returns of an investment when the growth rate is consistent and doesn’t oscillate recurrently. Final Thoughts Regardless of the industry, it is evident that exponential growth is a highly essential factor that helps you draw conclusions to varying hypotheses. It does not just help financiers but scientists and IT personnel as well, among others. So, whenever you wish to take a huge business or investment decision regarding growth, make sure you consider the exponential growth formula and calculate it thoroughly. 

Developed by Gerald Appeal in the late 1970s, Moving Average Convergence Divergence (MACD) is a popular momentum indicator or tool that is prevalently used in technical analysis. This tool helps understand the momentum and the directional strength by evaluating the difference between two time periods.  For those unfamiliar with this tool and who wish to make the most out of their trading and investments, this article covers MACD in detail. Let’s read further and find out more about this tool.  What is Moving Average Convergence Divergence? Moving Average Convergence Divergence (MACD) is a technical indication tool that is majorly used to discover moving averages that indicate a new trend, whether bearish or bullish. With the help of a MACD chart, you will get to see three numbers used for the settings. The first one is the number of periods that helps calculate the faster-moving average. The second number is that of periods used in the slower moving average. The third one is the number of bars used to evaluate the moving average of the difference between slower and faster moving averages.  For instance, if there were 14, 26, and 9 as the MACD parameters, you will interpret it as: The 14 signifies a moving average of the last 14 bars. The 26 signifies a moving average of the last 26 bars. The 9 signifies a moving average of the difference between the two moving averages as mentioned above. What is MACD in Stock Market? In the stock market, the MACD is used to interpret the positives and negatives. In the chart, whenever the 12-period EMA is above the 26-period EMA, the MACD offers a positive value. And, if the 12-period EMA is below the 26-period EMA, it offers a negative value. The more distant the MACD is below or above the baseline, it signifies the growing distance between the two EMAs.  Often, MACD is showcased with a histogram, which outlines the distance between the MACD and the signal line. In a situation when the MACD is above the signal line, the histogram will be above the baseline of the MACD. If the MACD goes below the signal line, the histogram will also go below the baseline. When to Use MACD? If you are waiting for the best time to use MACD, know there is no best time. The MACD offers insights on possible divergence in any given time frame on the chart. Also, the best time frame you can use with MACD depends on the instrument, trade type, and stock you wish to create and execute a strategy for.  Moving Average Convergence Divergence Formula (MACD Formula) The formula to calculate MACD is: MACD = 12-Period EMA – 26-Period EMA This indicator is calculated by subtracting the long-term EMA, 26 periods, from the short-term EMA, 12 periods. An Exponential Moving Average (EMA) is a kind of Moving Average (MA) that puts a greater weight and importance on the latest data points.  The EMA is also known as the exponentially weighted moving average. It reacts more suggestively to the latest price changes than a Simple Moving Average (SMA), which smears an equal weight to every observation in the period. How to Calculate MACD? The MACD showcases the changing relation of short-term exponential moving averages to long-term exponential moving averages. In a MACD chart, the short-term and long-term moving averages come close together (converge), move apart (diverge) and cross over each other. This equation is used to calculate the moving average convergence divergence.  Typically, analysts and traders use closing prices for 12-day and 26-day periods to create EMAs used to evaluate the MACD. After this, a 9-day moving average for the MACD line is plotted along the indicator that acts as a signalling line, helping to illuminate when a market might be turning.    The image above specifies the MACD line, the signalling line and the MACD histogram. These represent the difference between the MACD and the 9-day moving average. The histogram turns positive when the MACD Oscillator line crosses and moves beyond the 9-day average, which is the signalling line. On the contrary, the histogram turns negative when the MACD goes below the signalling line. 12-period and 26-period values are used settings to evaluate the MACD. Any change in the time period used for the calculation can be made to put up the specific trade goals of a trader or a specific trading style. MACD Trading Strategy Traders generally use MACD to discover changes in the severity or direction of a stock’s price trend. At first glance, the entire concept of MACD may turn out to be a complicated one as it depends on extra statistical concepts, such as EMA.  However, primarily, MACD assists traders in finding out when the latest momentum in the price of a stock might signal a change in the underlying trend. This, in turn, helps traders decide when to enter, exit or add to a position.  Using MACD with other Indicators Since it is a versatile trading tool that helps reveal price momentum, MACD is also helpful in determining the direction and price trends. Although the MACD indicator is strong enough to work as a standalone tool, its predictive functionality isn’t absolute. Thus, MACD can improve your advantage as a trader when used with other indicators. If you have to comprehend the trend strength and a stock’s direction, overlaying the moving average lines onto the MACD histogram will be extremely useful.   Conclusion Now that you have understood the meaning of moving average convergence divergence and know how to use it, you can move forward and calculate to comprehend how stocks are performing. This way, you bring momentum and trend into one indicator. As an investor, you can apply this trend to daily, weekly and monthly charts. 

International trading is nothing but trading between two different countries. It is one of the most important factors in raising the standard of living, creating employment and providing consumers with various goods and services that are not easily accessible in their home countries. International trade has been there for generations, but in the past few decades, international trade has become increasingly important in increasing the GDP of a nation. A large part of our country’s GDP depends on its imports and exports. Let us now understand what international trade theory is. What’s the International Trade Theory The proposition of international trade simply explains how international trade works in different ways. Trading is the exchange of goods or services between two or more parties. The purpose of trading is for people to profit from the business. The goods or services may be demanded or wanted by them. International trade is the cross-border exchange of goods and services. Over time, several regulations have been developed to cover domestic dealers and the trade itself. The international trade proposition is dominated by how countries use their resources efficiently. Export and Import  Products vended on the global request are called exports, and products bought on the global request are called imports. The imports and exports are recorded in the current account section of the country’s balance of payments. Global trade allows developed countries to use their resources like labour, technology, and capital more efficiently. Different countries are endowed with different means and natural resources, similar as land, labour, capital, and technology. The efficient use of resources allows countries to produce some goods more efficiently and at a lower cost. However, if a country cannot produce an item efficiently, it can be obtained through trade with other countries. This is known as international trade specialization.  How International Trade Works? International trade is carried out along incredibly intricate supply chains that connect the countries which supply the raw materials, the manufacturing countries that make and process those materials, and the consumer countries that use the finished goods.  An import is a product that is purchased from the global market, whereas an export is a product that is sold to the global market. The network of supply routes, suppliers, processors, and consumers behaves like a living thing when trade is allowed to flourish. The chain will be affected when any one link changes, such as when an iron ore miner declares bankruptcy or when the price of the metal suddenly rises.  Numerous stimuli have the potential to cause change. The most frequent ones include shifting consumer demand for products, technological advancements, and new methods of transporting goods around the world. Why do we need international trade laws? In cross-border transactions, two or more entities trade internationally with each other beyond the territorial limits of a country or transact in a domestic trade where one or more of the parties is located outside the country of the transaction. Here are some of the reasons why countries need international trade laws: For financing cross-border transactions A cross-border financial arrangement is one that crosses national boundaries. The terms of this agreement include loans, letters of credit, banker’s acceptances, bank guarantees, depository receipts, etc. that require international trade laws. Buying or selling products or services It involves buying and selling goods and services. We need international trade laws for production and sales that take place outside the jurisdictional borders of a country. Combined research/shared services etc. Increasingly, businesses are utilizing shared services. To accomplish this, joint research programs are being established as an industry cartel or chamber of commerce. As these shared service centers provide services across borders, they are concerned with international trade if they are located in different parts of the world. Why is it important?  International trade theory explains and promotes international trade. A wrong or unwise view of international trade can seriously affect a country’s long-term financial stability. For example, various international trade theories compete over the idea that: Can countries ban products from other countries – through slavery or child labour? A trading theory focusing solely on financial ratios and statistics favours such businesses. Another trade theory would argue that the long-term effects of child labour would cause more harm to both countries involved in the trade. A third trade theory argues that trade based on slavery and child labour is inherently neither good nor bad for traders. Rather, it depends.  International trade theory is a very controversial and powerful theory, so it is important to study it well. Policymakers should be familiar with all possible theories and apply the most appropriate ones to their country’s specific circumstances.   Benefits of International trade Let us now understand some of the benefits of international trade laws: It creates job opportunities  International trade has the primary benefit of creating a wide range of job opportunities. Through international trade, new industries are developed to meet product demands in different countries, resulting in more jobs. Countries will certainly be able to reduce unemployment rates under this condition. Therefore, it will be easier for someone who does not have a job to find one. Leads to the prosperity of a country Each country’s income is also increased by international trade. In other words, the goods they need can be sold and obtained by countries that have advantages and disadvantages of an item. It is through international trade activities that needs will be met, and income will be increased. As a result, a country’s income will increase due to its prosperity. The needs of life are easier to fulfill International trade will also aid countries in meeting their needs if those needs are not produced in their home country. Having a wealth of natural resources is a necessity for every country. First, we must consider the geographical conditions, the climate, the level of skill and knowledge in science and technology, and so on. In the future, countries can produce their own products. Expanding markets and increasing income In addition to expanding the market