Each stock trader needs to learn about the financial corporate structure. Today we will discuss the recapitalization definition.

What is recapitalization?
Recapitalization is a corporate restructuring strategy where a company reorganizes its capital structure by replacing equity with debt or adding more equity to improve its financial stability. In simple words, the recapitalization transaction is when the company changes its debt-to-equity ratio by adding more debt or equity to its capital.

Recapitalization is one strategy to enhance the financial base of the company’s financial system and structure. It can sort out the rough and messy financial quality structure and enhance a company’s financial health. Usually, this method can make your capital structure more stable and constant. If you see from a practical angle, then you can understand that money is the capital. Owners usually put it to run the whole enterprise. Recapitalization is a process to make strong your firm and organization. It allows a business to grow in the future.

Different types of recapitalization:

There are four types of recapitalization. These are as follows:

1. Leveraged recapitalization:

A leveraged recapitalization represents a capitalization structure change by replacing most of its equity with a package of debt securities (senior bank debt and subordinated debt).

So, in a leveraged recapitalization model, a firm replaces its portion of equity with debt. This method can offer two units of debt against the common stock, senior bank debt and subordinated debt. In this way, you can change the financial structure of a company. The debt percentage will increase in this way, and the equity percentage will reduce as well. In this way, you can restrict the fall of the share price.

The effect of recapitalization can be positive and negative on profitability (returns on assets). Sometimes higher debt levels increase a company’s risk level, and the company becomes less attractive to investors. If interest rates change, a leveraged recapitalization may negatively affect the company in increased interest expense.

2.Leverage buyout: It is a separate term used for the acquisition of a firm. In this method, the company is buying or borrowing a third party’s funds to meet the acquisition cost. Due to these borrowings, the debt obligation of a particular company will increase. The overall capital structure will change, as well. This can give birth to a new way of recapitalization.

3.Recapitalization private equity

Recapitalization of private equity is a financial acquisition alternative to a complete sale of a company where the original owner can continue to work as a partner or manager of the company.

It is one of the most common forms of all types. In this method, a particular company can raise and increase new funds by authorizing common stocks. This new fund will help the company to repurchase the debt instrument. In this way, the debt will reduce, and the equity will increase as well. It is a positive sign for a company or firm. The lower debts will ensure the flow of cash. Higher equity will ensure fewer obligations, as well.

4. Capital infusion: This method is done while the national economy will get affected due to bankruptcy and all other issues. In this method, the Government will invest capital to buy the potential stock of a company. It is not done for changing the capital structure of a company. Actually, recapitalization is the result of capital infusion.

Now let us see bank recapitalization explained:

What is the recapitalization of banks?
Banks recapitalization represents a restructuring strategy where the banks usually adding more capital to improve their financial stability. For example, the government can infuse banks’ capital by either buying new shares or issuing bonds.

Now, after the types of recapitalization, you should know the reasons behind this.

Various reasons for it:

There are so many reasons behind this. Recapitalization benefits are:

Reduce debt obligation: Many companies take debt, which actually creates a burden on the company and its liability. This obligation also comes with a regular repayment schedule and structure. As a company head or a financial advisor, you will have to balance its debt structure. It is a balancing act to maintain the debt structure. The company also wants to get rid of this debt obligation as soon as possible. So, to get rid of this debt structure, it is an easy method to follow.

Fall of the stock price: the declining effect of a company’s stock price is the main reason. The management of a company will then consider this method to reduce the fall of the stock price.

Prevent the competitive takeover: It is also essential to prevent or restrict the competitive takeover by another influential company. In this method, the management will issue some more debts to make their company less attractive to the competitive and potential company.

To avoid bankruptcy: It is a tool used by many companies to avoid the matter of bankruptcy. It is a re-organizing strategy for a company. This capital structure will reorganize the whole matter and the capital structure of a company. It is an extreme method to avoid it. The inevitability of the raising factor will determine the issue of this method.

Increase capital growth: Capital infusion is a great method to increase the capital growth of a company. The company may go to a capital venture to raise the fund through equity and debt.

Interest reduction and tax planning: In many conditions, the company wants to replace the high-interest debt instrument. For example, many companies may issue callable bonds with calling back the unfavorable interest rates. The company also wants to introduce new debt structures to reduce the amount of taxes. This is another reason to recapitalize. It is a pretty good option for a company as well.

In the recapitalize method, the shareholders are willing to extract cash from a company without selling the company and its stocks publicly. They actually do this by levering up the debt portion. They use the borrowed cash to pay the shareholders. This can also enable us to pull the future dividends of a company. The borrowed cash will also be distributed to different shareholders in the two following ways. These are as follows:

Distributing cash through the dividend. Borrowed capital to process the buyback method.

This method can also boost up your business. This method can consider some unique strategies to build a strong and efficient company. It also makes the company more professional. This method can fulfill the company’s potentialities.

For the public sector banks, recapitalizing is the main strategy to enhance a company’s financial base. It can also increase and ensure financial health as well. With this method’s help, the shareholders or the firm’s owners can make their company strong enough than before. It can also:

The increasing value of bad assets. The bad assets can lead to the erosion of capital. Expanding credit needs to acquire a higher amount of profit.

It is undoubtedly a supportive measure for any such organization. It is also a reliable option to meet the funds. It is an extremely profitable and helpful method to achieve the best and possible outcomes.

People often mistake the stock market and forex trading for gambling, but it is not. Trading and gambling are two different terms but are used interchangeably by mistake. Though one thing is common in trading and gambling, and that is taking the risk. In both, you indulge or lose money to win it in multi-folds.

Is Forex Gambling?

Forex trading is not gambling because gambling is based on taking risky action in the hope of a desired result. Trade is a methodical and systematic process not based on luck – it is based on analysis and testing. However, many traders that trade because of excitement has hidden gambling tendencies. Poor risk management without analysis and testing can change the trading process into gambling.

When you gamble, you prefer luck to have a driving seat, just like you roll a dice; you never know what would be the outcome. It is just mere taking chances. Though when you trade, you don’t enter the market with luck as the market discounts everything. A trader analyzes the market conditions, and based on his/her analysis, concludes what would happen.

As a forex trader, you can also apply various trading strategies, patterns, indicators to know when to trade; it also increases the chances of winning the trades.

By having a mindset of a gambler, trading also becomes gambling. If you trade without understanding the market, without a trading plan, and without doing any research on your part, you are just gambling in the forex market.

Unlike gambling, if you apply your logic in forex, you have better odds of winning. The best way you can do so is by having a forex education. It will make you a trader from a gambler if you are one. This article would help you to learn these concepts better.

When Trading Becomes Gambling?

When you put your money in trading without having a plan, it becomes gambling. It can happen in several ways, as stated below.

1. When You Chase Losses

This is a prevalent and worst type of mistake that forex traders often make. In such cases, a trader keeps on betting money even when he/she is losing money. It is similar to gambling in casinos, where you keep on trying to win your lost bets by making more bets, and in the end, you lose more bets than you initially had in your account.

It is indeed a vicious physiological cycle fuelling the concept of winning in a gambler’s mind. But traders often forget that it is risky to trade so blindly. If a trader has used leverage for the same, it becomes many times more perilous than the initial trade.

Let’s understand this with an example. Susan is a forex trader and buys USD/JPY at 2.3333. At the end of the trade, her position is at 2.3110. She made a loss. But now, instead of accepting the fact she made a loss and moving on, she freaked out and ended up taking a similar new position immediately.

She didn’t see market conditions, opening price, or volatility; she just entered the trade, and in the end, ended up multiplying her loss. Her mindset was to settle her loss, but she gained more enormous losses. Her panic and short-sighted vision led her to take bigger trades.

Often, a trader keeps on trading and repeating this pattern until nothing is left in their account. They might make a little money in this process, but this kind of mindset is hazardous if one wants to be in the trading arena for the long term.

2. When You are High on Winning Trades

Well, everyone’s trading journey is different, and so is how their forex trading turns into gambling. When a novice trader enters a trade and by chance ‘Get Lucky,’ he/she may feel that he/she has got it and can make money very easily.

But often, it is just the beginner’s luck, and it would not back every trade. However, the wins, in the beginning, make them so excited that they end up misunderstanding it for their capabilities.

As a result, such forex traders keep trading the way they are trading without studying the market, but trading in such a foolish way leads to a bubble blast someday. Things get worse when the trades are bigger. Having a gambler mind can lead a person to believe that if he/she gets profit with such a small amount, he/she will do wonders if traded with big trades. That’s how they get into a disastrous loop.

In this case, a trader is not chasing the profit, but he is pursuing the high of gaining the trades. They have the capacity to involve all their money to get the feel of winning by luck as they did for the first time (on a loop.)

How Can One Identify the Signs of Gambling?

Gambling is very similar to addictions and can be identified with a few signs, as stated below.

Isolated Personality:

Under this sign, a person stops interacting with other people such as friends and family because of being so involved in gambling.

Messed Up Financial Condition:

The person ends up gambling the most amount of capital that he/she owns; they may also lose all their savings and borrow money on interest from others to fuel their gambling addiction.

Less Sleep:

The person gets involved in trading so much that he/she hardly sleeps. Their losses or the thought of losing interrupts their sleep making them feel insomniac.

No Self-care:

Their addiction does not stop here, as the person also becomes irresponsible in eating, maintaining hygiene, and taking care of the house.

Emotional Distress:

Their emotional imbalance causes the person to become anxious, hyper-aggressive, or he/she would feel depressed as well.

Challenges in Performing at Work:

The person can find it hard to manage and perform at work. The person may have issues with his/her co-workers, they act absent-minded, and in worst cases, they may gamble at work as well.

Combines Addictions:

These people often combine their addiction to gambling with other addictions such as drinking, smoking, taking drugs, etc.

Oblivion of Other Problems:

The person is so much involved in gambling that he/she can ignore other problems that are in front of him/her.

No Knowledge of Forex Trading:

While the person gambles in the forex market, he/she may not possess any training, education, or knowledge about it.

People struggling with gambling should take help from others without any hesitation. There are many organizations like NHS that help people to come out of their gambling addictions.

How Can You Avoid Gambling Forex?

If you already have a tendency or addiction to gambling, you should avoid getting into forex in the first place, along with any other form of trading. Forex trading seems easy, but it is not for everyone.

If you have just entered the forex trading, you can stop it at any time you feel. You need to have a firm mindset to enter the forex market. You have to learn how to trade in the forex market to avoid forex trading best. Forex education is a must, whether you are a beginner trader or an experienced trader.

Another important thing that one should consider is that forex trading is not a pass time; it requires as much focus as a full-time job or academics. It needs the preciseness to identify the patterns and indicators with the skills that you have gained.

The Bottom Line

No professional traders gamble all their deposits, lose it and try to win it back by trading impulsively. By that, it does not mean that professional traders don’t lose money, but they don’t make the same kind of mistakes repeatedly. They have skills to identify when they can enter the market and exit to earns them a profit. They keep themselves updated with all the news around the glove and apply their own reasoning and logic to practice while trading. 

In addition to that, they have their own trading strategy and risk management in place. Traders are likely to lose money at some point in time, but they must control how much they are willing to lose and their risk to reward ratio. Having stop loss is equally important as the market doesn’t go by what you predict, and it becomes essential to have your own safety.

It is also important to know as a trader when you have to give up and continue. Taking slow and steady steps always win. So, the bottom line here is – if you want to avoid forex gambling, the solution is to educate yourself and trade forex just like a professional.

Top Points to Remember

The following points would give you the crux of this article.

1. Remember that forex trading is not gambling; if you do not know, it becomes gambling.
2. There are signs that a person having addictions to gambling shows like insomnia, lack of self-care, absent-mindedness, etc.
3. Those involved in gambling do not have any trading strategy; they trade totally naked without considering anything.
4. Trading in forex needs one to have education regarding the same as that is the best way to avoid gambling.
5. You can also trade forex on a demo account to learn trading first and avoid losing money.

We are living in a world that is rapidly changing. Being conscious of how we interact with the environment is not a choice but a necessity now. People are becoming increasingly aware of the implication of their actions on nature and looking for ways to protect it. This has led to a huge shift in our habits, for example – the use of eco-friendly goods, looking for environment-friendly alternatives, and more. People realize that to promote mindfulness, they need to support companies that do not harm the environment. Therefore, more and more investors are deciding to support environmentally aware companies. They wish to further their cause, which will ultimately benefit everyone, by investing in their stocks,  

Companies across the board have understood that tomorrow will be too late as we are already facing the flashes of climate change. Progress cannot be at the planet’s cost, which is why companies throughout the globe are turning a greener leaf. If you wish to support their efforts and build a livable future for your loved ones and yourself, keep reading.

What Are Green Stocks and Why You Should Invest in Them?

Green stocks belong to the companies whose policies and activities are targeted towards benefiting the environment. These stocks are likely to focus on activities concentrated in pollution control, recycling, alternative energy, carbon abatement, and more. 

These stocks are also called eco-friendly stocks, and they align with the interest of investors who believe in sustainable development. While there is a raising need for environment-friendly companies, their growth often does not spurt as they rely primarily on government subsidies and incentives. As the government’s support depends mostly on the country’s economic condition, there is no surety of stability. 

There is a greater need for investment in greener stocks. This will allow these companies to expand. We have shortlisted the top eco-friendly stocks that you can invest in.

1. Enphase Energy Inc. (ENPH)

ENPH is a California-based company that produces solar micro-inverters. This green energy company produces energy-efficient inverters for both commercial and residential properties. The company has installed over 940,000 micro inverters worldwide, curbing billions of pounds of carbon dioxide. Its product has generated over four billion KW of energy without adding to the carbon level in the environment.

ENPH has been presented with several awards and accolades for its contribution towards promoting clean sources of energy. It includes the prestigious Solar Innovation Award that was presented to them in 2018 by Solar Solutions. The company has had the honor of being mentioned in many lists for its innovation. Enphase is a rapidly growing company that has shown only upward revisions. 

It was named one of the Grids Edge Top 20 Most Innovative Companies in 2015 and made the Green Builder Hot 50 Products list in 2018. The company is growing, and earnings estimates have only received upward revisions, with expected earnings growth of 420% for the fiscal year of 2019. Investing in this company will be a smart move for your financial targets and the planet as well.

2. Weyerhaeuser (WY)

Weyerhaeuser is a trust for timber real estate investment. It is almost unacceptable to see a company on this list whose primary activity is to chop trees to procure construction lumber. What we need to understand here is that sustainable development does not mean abstinence from using natural resources. It means doing it judicially. This company believes in sustainable forestry. Weyerhaeuser has planted over a billion trees within a tenure of 10 years. It is committed to clean energy and responsible development.

It is also known to be transparent towards its stakeholders and promotes inclusion in the workforce. Weyerhaeuser was featured on the Ethisphere list as one of the most ethical companies globally and on other lists. The price to earnings ratio offered by the company is 28.28, and its dividend yields  4.57%.

3. Clean Harbors (CLH)

Clean Harbors is one company that takes social responsibilities very seriously. In addition to being ethical while performing its core operations, CLH is also known to clean up the mess created by other organizations. Complete hazardous waste management and emergency spill response are two of its main services. 

CLH took the responsibility of heading the clean-up effort to deal with the oil spill in 2010 in the Gulf of Mexico and the mess created after the Deepwater Horizon explosion. 

CLH was founded in 10980. It is a Massachusetts-based organization that operates throughout the states, Canada, Puerto Rico, and Mexico. Safety-Kleen is its subsidiary that is deemed as the largest recycler and re-refiner of used oil. It aims towards sustainable growth, and its programs revolve around health and safety, energy usage, and customer solutions. The revenue of this company has only tripled in the last.

4. Brookfield Renewable Partners (BEP)

BEP focuses on renewable, green, and clean energy resources. Every ounce of energy produced by this company comes from a clean source. 75% of the energy is generated using hydroelectric dams, 20% energy comes from wind power, and the remaining 5% is generated using solar power.

BEP invests in renewable energy across the globe. It owns 940 facilities for power generation, including hydroelectric facilities, worldwide. Brookfield goes the extra mile when it comes to taking social responsibility. It has many philanthropy projects running under its name. The company focuses on its employees’ well-being, ethical governance, and maintaining transparency across the board. BEP{ has a long-term growth plan. The plan is to build and buy more wind and solar farms to produce cleaner energy. Its growth has been consistent.

5. Bloom Energy (BE)

Bloom Energy is a San Jose-based firm that focuses on renewable energy. They offer sustainable and clean electricity to commercial organizations across the globe. Its product is Bloom Energy Servers, which are power generators. These generators run on fuel derived from biological sources like methane. Methane gas is a by-product of decomposed biowaste like vegetables. BE recycles this gas and converts it into an energy source that can be used in the industries. By using this energy, industries worldwide can reduce the overall carbon footprint.

Along with reducing carbon emission, there is less consumption of water as well. BE’s technology has considerably brought down air and water pollution.

The company was expected to have an earnings growth of 250% in the year 20202.

Advantages of Investing in Green Stocks

Investing in eco-friendly stocks is ideal in many ways. If you are not convinced yet, the following advantages will make you consider it:

1. Contribution to Eco-friendly Projects

Green stocks belong to the companies that aim towards directing a part of their capital towards renewable and clean energy, natural habitat restoration, and more. If you are an investor who is aware of the ongoing climate change and interacts with the environment that it doesn’t cause any harm, you should invest in green stocks.

2. Tax Exemption

In addition to the fact that your investment will create a positive impact, you will be happy to know that any income derived from green stocks is exempted from taxes. The government wants more people to invest in green stocks.

3. Low Borrowing Cost

The higher the demand, the lower the borrowing costs. When the borrowing cost is low, the company incurs less expenditure, and it can maximize profits. This increased income is ultimately shared with the investors as dividends, bonds, or ETFs exchange-traded funds.

Trading Sustainable Stocks

Most green stocks, including the ones we have mentioned above, are available online. You can trade them by opening an account with a broker. Look for a broker that offers individual stocks. You can even look for eco-friendly ETFs.

Frequently Asked Questions

Q1. Which stocks can be called green stocks?

Green chip stocks are the ones that belong to companies that work towards the betterment of the environment. Mostly stocks that belong to companies focusing on alternative energy sources, carbon abatement, recycling, and pollution control.

Q2. Are green chip stocks legal?

Yes, green chip stocks are legal.

Q3. Are green chip stocks profitable?

Green stocks are not like your conventional stocks. It can be difficult to make a profit, but with the right stocks, it is possible. Do your research before investing money. In addition to financial gains, the real gain is the sense of fulfilling your ethical duty towards the environment.

Q4. What are some of the top eco-friendly stocks available in the market?

There are many, and we have explained the most popular and profitable ones above.

What are Indicators?

Market indicators or indicators are tools that follow the quantitive nature of data derived from forex, stocks, and other financial assets. This information collected by these indicators is presented in the form of charts, graphs, and tables. Market indicators and trends aim to help traders in making speculations regarding future market movements. 

Trend Indicators

Many traders rely on bar chart signals for technical analysis. This is not always reliable as bar charts cannot successfully filter trends from the noise surrounding them. Trend indicators are built to provide objective measures to the traders that allow them to speculate trends and their directions successfully. It is easy to follow a trend using these indicators as it is represented with a single line’s help. Price data is smoothed, and you can easily concentrate on the trend line. 

Trending and Ranging Markets

Most indicators are better suited for trending markets than ranging markets, except for the complex ones like the Directional Movement System. They lose money when they are used in a ranging markets. This happens because of the fluctuations taking place in a narrow price band. This can whipsaw traders in or out before they are even ready. Therefore, it is better to use momentum indicators in this type of market.

There are dedicated indicators for both types of markets. You need to confirm the market type before employing an indicator.

Different Types of Trend Indicators

Trend Indicators can be classified as oscillators, indicators based on moving average, band indicators, directional movement, stop and reverse systems, price averages, and combinations of these approaches.

1.  Oscillators

• MACD: MACD or the Moving Average Convergence/Divergence is a technical indicator that helps check the changes in the direction, duration, strength, and momentum of a trend.
• MACD Histogram: This one is an upgrade of the original MACD. The MACD is not equipped to trace price movements, but the MACD Histogram can take care of this problem.
• TRIX Indicator: This is an oscillator that will help you in capitalizing the trends that are short or as long as the window period.
• Smoothed RoC: Fred G Schutzman introduced this oscillator in 1991. It is similar to the Rate of Change and Momentum indicator but competent enough to avoid their weaknesses.
• Relative Strenght index, RSI

2. Moving Average indicators based on Closing Price

• Moving Averages (MA): It is one of the simplest tools used for technical analysis. It constantly updates the average price by smoothing the price data. The trader can set the time period, which can be for days or even weeks. 
• 2 Moving Averages: It is a fast-moving average that represents the price line. The difference between this indicator and the MA is that it is used for a short period of time, usually 5 days, while the MA is used for a prolonged period.
• 3 Moving Averages: This indicator helps traders in identifying ranging markets. Traders can stop their trade and direct their resources towards trending markets.

3. Band indicators

• Price Envelope: These are also known as percentage bands. These are used to define oversold or overbought levels. They can be used on their own as well.
• Bollinger Bands: These bands are also used to indicate oversold and overbought levels but by the moving averages.

4. Directional Movement

• The Directional Movement System: This is a complex indicator used in both trending and ranging markets. It identifies the current market first before giving trading signals.

5. Stop and Reverse System

• Parabolic SAR: This indicator follows the trending market and highlights profitable entry and exit points for the traders.

6. Closing Price and Moving Averages

• Detrended Price Oscillator: This oscillator is used in short-term cycles. It compares the current closing price to the previous MAs.
• Commodity Channel Index: This index measures the price position of the MAs. You can check when the market is overbought or oversold.

7. Price Averages

• Typical Price: It is the average of the prices during a trading period. 
• Median Price: As the name suggests, the median price is the midpoint of each period’s trading range.
• Weighted Close: It is very similar to the typical price. The main difference is that it lays more stress on the closing price.

8. Price Comparison 

• Price Ratio: It is similar to Price Comparison (explained below) as it also compares prices of different stocks and indexes. Some traders use it as a general filter to check which stock has outperformed the other.
• Price Comparison: This is a straightforward tool that allows traders to compare different stocks and securities prices.
• Price Differential: This tool also compares interest rates or bonds instead of comparing stock prices.