Archive for the ‘finance’ tag
THE ROAD TO SUCCESSFUL TRADING no comments
Achieving trading success is not easy. In fact, just getting started can be an overwhelming process. The road to wealth can take many paths. To deter- mine your optimal trading approach, start by making an honest assessment of your financial capabilities. Successful traders only use funds that are readily available and can be invested in a sound manner. It is also critical to accurately assess your time constraints to determine the style of trading that suits you best. If you want to trade aggressively, you can do so using various short-term strategies. If you want to take a hands-off approach, you can structure trades to meet that time frame. All of these choices are less difficult to make if you respect the following trading guidelines.
1. Gain the knowledge to succeed over the long run.
2. Start with acceptable trading capital.
3. Establish a systematic approach to the markets.
4. Be alert for trading opportunities at all times.
5. Develop the fine art of patience.
6. Build a strong respect for risk.
7. Develop a delta neutral trading approach.
8. Reduce your stress level.
Economies and Diseconomies of Scale – 2 no comments
Economic theory explains why, at least initially, larger firms have lower unit costs than comparable smaller firms. Declining unit costs mean that economies of scale are present over the initial range of outputs. The long-run ATC curve is falling.
What about diseconomies of scale?As output continues to expand, is there reason to believe that larger firms will eventually have higher average total costs than smaller ones? The underlying causes of diseconomies of scale are less obvious, but they do occur. As a firm gets bigger and bigger, beyond some point bureaucratic inefficiencies may result. Inflexible procedures tend to replace managerial genius. Innovation requires clearance from more levels of management and becomes more difficult and costly. Motivating the work- force, carrying out managerial directives, and monitoring results of plans are also more complex when the firm is larger, and principal-agent problems grow as the number of employees increases and more levels of communication and monitoring are needed.
Circumstances vary, so diseconomies of scale set in at lower levels of firm size for some kinds of firms than for others. For example, firms in the fast-food industry can be very large and remain efficient; economies of scale apparently outweigh the diseconomies, even for giants like McDonald’s. But in the fine-dining segment of the restaurant industry, the best restaurants seem to be small. Customers demand individual attention, and a constantly changing, innovative menu that takes advantage of the constantly changing array of locally available fresh ingredients, with consistently high quality as the only constant, is important. There are few truly gourmet restaurant chains because diseconomies seem to set in at a much smaller size at these firms. The bottom line for diseconomies of scale is this: for some firms, bureaucratic inefficiencies, principal- agent problems, difficulties with innovation, and similar problems that increase with firm size cause long-run average total costs to rise beyond some output level. However. there is considerable variation among industries and even among firms in the same industry concerning the precise output level at which diseconomies of scale begin to occur .
It is important to note that scale economies and diseconomies stem from sources different from those of increasing and diminishing returns. Economies and diseconomies of scale are long-run concepts. They relate to coriditioris of prodiictiori when all factors are variable. In contrast, increasing and diminishing returns are short-run concepts, applicable only when the firm has at least one fixed factor of production.