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Trading basics

Owning stocks or trading on equity is one of the best ways to invest and grow your money. You can take part in the financial market by investing in stocks through online trading. Your growth of income with stocks is based on your understanding of the stock market, how they work and how to best trade in the stock market.

To yield maximum outcome from your investment in stocks, it is important that you understand the basics of stock trading. In this article, we talk about the essentials one needs to know about stocks.

The stock market, what is it?
Stock market helps investors purchase the shares of publicly-traded companies. As an investor, it is important that you decide on where to invest and how much money to invest. Stock market allows you to trade bonds, mutual funds, derivative and shares of a company.

Stocks can be bought or sold with the help of a trading and demand account and stock exchange like NSE (National Stock Exchange of India Ltd) and BSE (Bombay Stock Exchange)Sensex. This ensures that your money and shares are transferred safely. Stock exchange lists the stocks that are available for buying and selling. Note: Stock trading is not gambling, as some perceive, and it is based on sound trading strategies.For example when you have made a thoughtful investment you are entitled to some returns, unless the company completely fails to deliver. Whereas gambling is all or nothing – If you lose, you lose the entire amount you put.

How to determine the stock price?
The stock market has many investors with varied opinions about stocks. Hence, it is advised that stocks and stock market need to be understood completely by the investor before initiating an investment. Note: The rise and fall of share prices are unpredictable and depends on various factors like risk, supply, and demand, political and social factors. Prices of stocks may fall if there are more buyers than sellers for a particular stock, likewise the prices may rise if the situation is vice-versa.

How to invest in the right stock?
To analyse the rise and fall in the price of the stocks, one has to conclude based on the market activity. As an investor when you decide to buy or sell a stock, the stock’s actual price and its fair price need to be compared. This gives a fair idea about the value of the stock in the near future. You can take advantage of the online trading platforms such as Alice Blue, sans brokerage charges options just for you.

Note: Investing money in the right stocks comes with a thorough understanding the stock market, the nature of the company you are investing in and analysing the progress of the stocks.

Alice blue online trading is the easiest way to buy and sell stocks or shares in the indian stock market.Subscribe to our four revolutionary zero-brokerage models and start increasing your profits today.

What are equities?

When companies need more money than what they already have, they ask for it – usually through a public announcement in newspapers or other media. Interested parties (individuals or even other companies) can provide such financial assistance. Any such investment is in exchange for a portion of ownership in that company.In lie u of money, each such investor is entitled to an amount of company ownership. These portions of ownership are referred to as equities. Shares and stocks refer to the units of ownership that are given out by a company for investors.

Alice Blue helps you trade in the indian equity market unlimited number of times at absolutely no brokerage.Our revolutionary zero-brokerage models help traders of types save their money on brokerage.

Alright, equities benefit a company but what’s in it for me

Since you own a piece of the company through equities, you are entitled to a corresponding portion of its earnings and profits too subjected to certain conditions. If you invest a substantial amount, you would be a valuable partner sharing a significant portion of its earnings. So, equities are one of the types of assets one can hold.Like savings accounts, cash deposits and real estate, equities are a form of investment. Money in the form of equity shares of a company is subject to change of value depending on the company’s performance thus making it an indirect source of income.The stock market keeps a tab on the performance of companies and enables investors to buy or sell their holdings. Since the advent of online trading, managing investments through single accounts has become a norm.

How can I get these equity shares

Equity shares can be “bought” through the stock market when a company makes an offering. You could also purchase them from other investors who are willing to sell their holdings for various reasons through a trading account

I am interested but unsure of how to invest in share market. Who can help me

If you are apprehensive but want to invest in the share market, an experienced guide who can be a stock broker would prove to be invaluable A stock broker specializes in dealing with shares, mutual funds, and other such financial instruments. They could be individuals or companies. They can advise on the best ways and companies to invest your money in and even deal on your behalf. Some do this in exchange for a fee.If you are a newbie and wondering how to invest in share market, a stock broker can prove to be beneficial and help you get the bang for your buck!

Why do I need to invest in equity?

You stand to gain a portion of ownership in a company through equity shares. By buying such ownership of many companies, you can diversify your investments by creating an equity investment portfolio through the online share market.

When compared with other investment types, equities offer a number of benefits ranging from being a regular source of income to ease of convertibility to cash. Here’s a look at some of the main advantages of share trading:

The prospect of higher returns Equity holdings in the share market offer the possibility of higher returns on the principal amount unlike banks and traditional investment options

They can be a regular income source Well-established companies usually pay their equity investors with an amount of money in both good and bad economy and typically every quarter. So if you know the best shares to buy in multiple companies and over different cycles can ensure a steady source of income, even every month

You can gain significantly on initialinvestment As companies grow and profits increase, the initial amount one invested in buying their equity shares holds the prospect to increase their net worth over time

They offer ease of liquidity In case you are cash strapped, they can be sold in the equity market without compromising much on its original value ensuring ease of liquidity unlike selling real estate which is usually a laborious process

Equities come with limited bindings In case a company incurs losses, an equity investor has limited liability. In most scenarios, small investors do stand to lose their capital investment but little or no other legal binding

Well-planned equity investments hold a vast potential to appreciate over a period of time provided one knows about the best stocks to buy. Such information can prove to be vital to tide across tough times in a stock exchange like the India stock market as it comes with its fair share of fluctuations.

As such these investments come with certain risks which need to be studied and understood well. But online share trading of equities offers one the possibility of testing waters by looking at popular stock recommendations from experienced financial experts before investing a large while leaving you with more knowledgeable about how you can make them work to your advantage.

How to Share Trade Online

Are you looking for an investment online? Trading online is a cakewalk for many, but can be hectic if you are investing online for the first time. Individual investors and traders can buy and sell securities online with online share trading. To help you invest in the right securities and stock, we will talk about how stock broking trading works, how to trade in share market by opening an online stock trading account and much more.

Strategy to trade

Initial Investment: The first and most important step is to decide on how much money you would like to invest in the stock market. Make sure that this money is one place, for example, a savings account.Understand the rules: Before you invest, you must know and understand the rules and regulations set by the government, such as the tax repercussions.Do your research: Read up on stocks and understand the how it works, what you are to gain or lose. It is advised that you examine the services provided by the trading firm you are investing in. It is all in the numbers.Tech-savvy: Unlike telephonic interactions with your share broker, online trading requires you to have an understanding of how the software works. Learn the jargon, explore the options on the brokerage web page and make sure you know exactly what to do when you log in.Invest: If you are an apprehensive first timer, invest a small amount of money as a test run. This will give you a more practical understanding of how your money is invested. When you are sure you know how the market works, invest a bit more!

Points to note when you are trading online

Before you invest: Before you begin it is advised that you have enough money apart from your initial investment in case of unexpected expenses. The thumb rule is to have minimum six months’ salary as savings. You could also consider keeping cash or cash equivalents in hand, which would act as an emergency fund.

Demat account: Demat or Dematerialised account is opened when you register with an investment broker. This account helps in making the transactions online for an electronic settlement of trades.

Opening an online stock trading account: To start with a stock trading account you can open new trading and demat account with your preferred bank or link it with your banking account if you already have one. To buy stocks and trade funds, you will require a brokerage account, which acts as an agreement between the investor and the broker.

CDSL: The “Central Depositary Services Limited” secures the securities either in certified or dematerialised form. CDSL helps in recording the transfer of securities between an individual and broker.

Considering these simple steps, your first investment can be made easy. Be sure of the stocks you are investing in, with adequate analysis and seeking assistance you can ensure the best returns.

Purpose of Fundamental Analysis

Fundamental analysis of stocks

The share market is often considered as a good source of return on investment through equities thus enticing one to take a plunge into share trading despite the risks involved.Some amount of ground work and analysis can enable one to make an informed investment in the equity market. A smart and practical approach to arrive at a decision is through fundamental analysis of the intended shares to buy.

What are the factors involved in fundamental analysis

Some factors involved in such an evaluation are quantitative aspects and other qualitative aspects.A company’s assets, its revenue and profits and the market share can be measured. Sources like the company’s financial statements are good quantitative indicators.Details like what a company does to make money and its business model is not quantifiable. A company’s corporate information or its brand value and recognition serve as qualitative indicators.Thus, many people advocate fundamental analysis for online share trading.

How does such information help me

This method of analysis includes examining the factors that can affect a company’s business and its future prospects, as opposed to making an investment decision in the equity market based on merely looking at the variation of its pricing.

An understanding of these factors provides an insight for an investor to:

Arrive at the real value of a company: The idea behind this is to check the difference between a company’s stock market value which is subject to variation and its real value. Examining various aspects of the company helps to determine the value of the company and thus, its stock value.

Maximize profits: Once you have determined the real value of a stock, you will know buying that company’s share at a price lower or higher than this in the share market and hence reduce the losses or enjoy increased profits.

Enable investment decisions: Since this analysis gives a fair idea of a company of the company’s growth prospects and performance, it serves as a tool for online share trading. It is no good to invest in a company blindly, fundamental analysis is intended to give you a fair idea of a company’s real worth before investing for any time period – short term or long term. To sum it up, fundamental analysis aims to answer the one basic but crucial question of whether a company offers the best shares to buy and is worthy of your precious investment.

Importance of Stockbroker in Share Trading

The equity market is a popular means to diversify one’s investments. And some research in this area can convince one to start investing. However, equity shares cannot be bought directly unless a company makes a public offering.Many companies offer their stocks for sale only through a brokerage system. Often, a company’s brokerage sells its stock to other small brokers who in turn sell it to the public through a trading account.This is just one of the many roles of a stock broker who could be an individual or a representative of such a specialist company.More popularly, an individual investor can directly invest in stocks but this is through a brokerage that may not involve a physical person and can be fully automated.

What are some of the important ways a stock broker can help me

Usually, a stock broker manages an online trading account in your name with little or no brokerage and can provide assistance in a number of ways.

(i) They offer the expertise to advice on the stock recommendations for a person, for what term to invest and help plan their portfolio. Especially for someone who is unsure of how to invest in share market but wants to explore, such assistance could be worth every penny.

(ii) They are well informed of the stock prices, changes in the market and generally up to date with all the critical information in the online share market. They are persons to go-to for any unbiased crucial investment decision.

(iii) They have access totechnological advancements to ensure effective returns in the short term throughintraday trading which requires constant watch over the equity market and square off one’s share dealings between the opening and closing of the market in any one day.

(iv) They have the power to represent a client by prior consent. Since many investors are not involved full- time in share market dealings, the stock broker can buy or sell shares on their client’s request even with zero brokerage.

You may have sufficient money but not the expertise in share trading to put it in the right places and for the right time. So, these brokers or “financial advisors” as they are sometimes called no doubt works as facilitators of sorts in such trading. You can find one with the lowest brokerage to take care of your money.

In a volatile stock exchange like the stock market India, such an experienced guide can prove to be invaluable to steer clear of huge losses and maximize returns on investment.

Alice Blue Online’s stock brokerage compares itself against it competition frequently and charges the lowest brokerage in the market.

Why do stock prices change

In the online share market, a stock is said to have a “bullish outlook” if its demand is more typically its price will be more. When the supply of a stock is more, the price will be less making it have a “bearish outlook”.

There are many causes for the fluctuation in stock market price. Some influencers driving a change price of a company stock are:

Positive or negative news about the company News like major acquisitions by the company or its rallying about to pay debts to financial institutions may affect investor sentiments, their attitude towards the company and influence people to reassess their holdings through online trading account

Sudden selling or buying of huge amounts of company stock A large shareholder who holds significant portions of their stock may want to diversify their investment and offer their shares to buy through a trading accountand thus increase the supply without many who would be interested in buying them. He may be forced to sell them at a lower price

Considerable changes in a company’s earnings The profits of a company can have an impact on its stock prices in the equity market. If the earnings are more than what was expected, the value of the stock will increase. When it earns lesser than expected, there will be a dip in the stock price

Change in economy The stock prices tend to change overall, irrespective of the company depending on the state of the economy. For example, inflation will tend to raise the price across the board.

Though there are various theories in share trading to explain the roller-coaster changes in stock prices in exchanges like the stock market India, there are many who believe that it is difficult to pinpoint one that gives a definitive reasoning.

There are a number of people experts like a stock broker who bank on high-end technological advancements to track price movements to enable smarter trading in online share market by zeroing down on long term and short term causes.

The stock price changes are said to indicate what the investors believe the company is worth. However, two major factors affect the price of any product- supply and demand. So also, at the very basic level the stock prices change is due to the change in its demand and supply in the share market.

When to buy in share market and sell share in share market

Buy and sell shares

A share is something that you can buy for a set price which is a small part of a company. The price of shares can vary depending on the performance of the stock market. When you decide to invest in shares, the aim is to invest in shares that increase in value over time. You become a shareholder in a company when you buy shares.Shares to buy or sell in Indian stock market involves many risks- make a list of all the pros and cons and then begin.

General guidelines on when and how to buy and when to sell

Let’s have a look at the most important factors to buy and sell shares in a stock market.

(i) A closer look at the year-by-year performance of the company is a must when you begin, also, look for investment advisors you trust

(ii) When you decide to buy/sell in a share market, a trading account has to be created for online share trade

(iii) There is no rule that you have to sign up with a stock broker for guidance on best stocks to buy. There are advantages and disadvantages and it depends on your requirement. But remember that a stock broker is better equipped to advice you on when to buy and sell. On the other hand, even the best of them are proven wrong in the stock market.

(iv) If you decide to opt for a broker, he will be you go-to person for all the transactions. This is the best option only if you have stock experience; read the terms and conditions carefully to avoid problems with your broker.

(v) A mutual fund is a collection of shares and ‘equity’ is a term for ownership in a company. ‘shares of stock’ and ‘equity shares’ are the same. This is a safer way for you to deal with shares since the risk is mitigated owing to the variance of a mutual fund portfolio. So is the potential for gain as well.

(vi) When you need to sell funds, the best thing to do is to opt for an investment platform that will allow you to buy, sell and manage all the investments

(vii) The more people want a particular share, the higher its price will go. If the demand for a share is less, people may have to offer it at a very low price in order to sell it

(viii) • Most importantly,the best time to sell is when a share is at a good/high price; and,best shares to buy from a company is when the price is at its lowest

Monitoring and handling your shares needs patience which is an important aspect; time plays a major role by giving you a rare edge because longer horizons make losses less likely. It is a good idea to have a financial adviser, but, it is not a must. One of the best options is to get a recommendation from a friend who you trust. Happy trading!

Know how to start withforex Trading in India by Trading Currencies

To start off, one must know whom to trade with. NSE, BSE,MCX-SX are the Indian exchangesthat currently offer 4 pairs (USDINR,JPYINR,GPINR,EURINR) in currency derivatives(futures and options segment). The governing body of trading currenciesin India is SEBI.

The brighter side ofcurrency trading in India

There are no middlemen, no government fees, no exchange fees, no brokerage fees, low cost transactions and no fixed lot sizes. It is safe to do online currency trading because it is quick and hassle–free.

How to trade currencies and various things to keep in mind

Apart from choosing who to trade with, you must open a trading account with a brokerage house. Further, you need to deposit the stipulated cash with the trading member. With low margins, and the access to hedge possible currency risk between 9:00 am to 5:00 pm on all working days, you can trade in currency futures contracts because they are available in minimum contract sizes of 1,000 USD.

You can either trade or invest but while you trade you must

Value your ownership and know when to buy and when to sell.Keep in mind the time frame, and do not go for the ‘buy and hold ‘concept because that raises the risk.Traders look for high probability trade set-ups and they incorporate market sentiments. Traders must be aware of proper risk management.At Alice Blue, we are here to help you choose the right path to a steady growth.

How share trading is more beneficial than other investments?

Share trading

Online trading has made thestock market a lot simpler these days and tradingequity sharescan be done on a daily basis from the comfort of your home by creating a trading account. Thus, investing in an online share market can help you to make money at interest rates higher than most other investment options. With proper knowledge, there are chances of you booking high profits in the share market.

Share trading versus more traditional Investmentss

Life insurance policies, bank fixed deposits, post office schemes, etc are some examples of traditional investment options. While these are safe investment options, the return on your investment is limited. We have also seen that interests from normal savings accounts have also steadily declined over the last couple of years.Comparatively, Investing in the equity market is better in terms of returns.From the approximately single digit returns of traditional investments, equity investments, over a period of time, can result in double digit growth. This is essentially capital growth, and a lot of people opt for capital growth to build wealth and overcome financial instabilities.

Flexibility and ease of Trading

The flexibility that is involved in shares is a key advantage. Buying and selling in relatively small amountsareeasy and low transactional costs are involved in the India stock market.Many investors engage a stock broker for stock recommendations, who gives them expert guidance on stocks to buy. The brokers know about the best shares to buy based on market intelligence and often work for the lowest brokerage since volume is the key for them. It is a good idea and also typical these days for investors to have an online trading account that they can operate themselves (where no broker in person is involved and the trading company does the brokerage online) for participating in the equity market and also engage stock brokers simultaneously for ready intel on shares to buy today.

Once you have an online trading account for the India share market, you need not worry about the conveyancing cost, stamp duty or ongoing expenses. It’s simple because everything is done over the internet, and brokerage fees range from a minimum fee to zero brokerage. You can always start small, do online share trading yourself or with a trader who offers to trade at no brokerage and take the time to learn as you go.

The financial benefits from successful trading can be life changing.The biggest advantage of investing in the share market is that you can always start with a small amount of money and watch it reap benefits.

Conclusion

A combination of the right attitude with good aptitude will literally pay off for a trader. The implementation of solid plans and strategies will maximize profit for you once you learn or engage a broker who knows how to invest in share market. Of course, there might be some risks that are involved when it comes to any investment, make sure to be aware of them. Before you start investing, it’s important to investigatethe company you decide to trade with, like its testimonials, policies, terms and conditions, etc.

Alice Blue trading account helps you take advantage of the zero-brokerage trading model which enables you to net returns more quickly.

Nifty Trends

Nifty Trends: What Should You Watch Out for?

Trading on the Nifty index is characterised by different types of trading patterns that vary with each day. These patterns can be broadly categorized into three categories and understanding these can help you get a better grip on market conditions. This way you can maximize profits while minimizing risk.

The first types are known as trend days wherein the market moves up and down during the trading period. Quite often certain news events can change a bullish market to bearish or vice versa. Normally, trend days do not last for more than two days in a row. Reversal or consolidation usually follows trend days.
The second type is reversal days where stock hits a strong high price during the day and then reverses back. On a daily Nifty chart these points can be seen as shooting stars or hammers. A trend day is likely to follow a reversal day.
Consolidation or range days make up the third category. These usually follow a trend day and during this time there are no significant changes to the market sentiment.

Understanding Nifty Trends

Online calculators are available that can help you figure out the trend in Nifty options or Nifty future trading once you input the required data. The three common market scenarios are a bull market, a bear market, and a ranging market. Bull and Bear markets are known as the primary trend. A ranging market also known as an intermediate trend, is not considered a good one for trading and can be volatile. They can vary from very short periods to extremely long ones.Intraday trading is dependent on the market trends and technical analysis is helpful in understanding these trends.

Various types of charting software are available nowadays for this purpose.Tracking trends on the Nifty can be quite tricky given the number of indices that are available in the Indian stock market. It is also important to remember that the market does not always move in trends. Professional traders are adept at making profits in a trending market.

Options jargon

Basic Options Jargon

Options are contracts in which a buyer and seller set a price and trade an asset that will be delivered in the future. An option has an expiration date and on that date, the seller has to deliver the asset if the investor exercises the option of physical delivery as a settlement. However, the investor is not obligated to buy the asset at the end of the time period. This is where futures and options differ. Futures is a contract which is similar to options but both parties are obligated to carry out the settlement at the expiration date. This future price is called strike price and it is set according to the current or spot price and the trend of the asset.

The ‘Call’ and ‘Put’

A ‘call’ is the option that conveys to the owner the right to buy at the strike price and a ‘put’ is the option that conveys to the owner to sell at a strike price. The owner of the option may sell the option in a secondary market, privately as an over the counter deal or in an options exchange. It is similar to the equity market where the prediction of the rise and fall of the price of an option decides the trading of that option. A long call is a strategy when a trader expects the price of the option to rise; buys the call option at a strike price that is lower than his prediction. Similarly, a long put is the strategy when the price is expected to drop and he buys a put option.

Trading Options

Options are traded mainly in exchanges and these are done online like most other stock trading. It can be traded in any of the popular exchanges like National Stock Exchange, Bombay Stock Exchange, Multi Commodity Exchange, etc. The privately traded stock is unregulated and a customized deal can be brokered between the two private parties to suit the needs of both these parties. Online options trading requires a trading account with an options brokerage. Options are traded on assets that are commodities and not equities due to the deliverance of said asset at the time of expiration.

Nifty Support and Resistance

Nifty Support and Resistance

Two concepts in technical analysis : support and resistance can be difficult to grasp for many especially those who are novices to trading in the Indian stock market. Simply put, these terms are used by traders to talk about price levels on charts which might act as an obstacle to preventing the price of an asset from being pushed in a certain direction. The price a security rarely moves above is known as resistance while the price it seldom goes below is called support.

What is Their Significance?

Support and resistance assume significance when it comes to market psychology as well as supply and demand. These are the levels where quite a few traders might be willing to buy or sell the stock on various platforms including the Nifty index. Some characteristics of support and resistance figures are outlined below:
They are useful in arriving at entry or exit prices.
Round numbers have been seen as important in support and resistance levels. Numbers such as 10, 20, 35, 50, 100 and 1000 are some examples. The increased selling and buying pressure at these numbers lends them psychological importance too.
They are an important component of trends because they help make trading decisions and pinpoint the moment the trend starts reversing.

Identifying Support and Resistance

Many indicators have been developed with the intention of identifying these barriers. But using them effectively takes some practice and experience. These two variables can be identified with the help of some methods used in technical analysis such as these:
Support and resistance can be easily determined with the help of moving averages
The Fibonacci retracement tool is another means of determining these
It doesn’t matter which method is used so long as the interpretation is accurate.By using various methods to arrive at the support and resistance values of stocks, the returns from a short-term investing strategy can be drastically improved. They can be applied when trading in Nifty calls or Nifty options. Even foreign investors who trade on the SGX Nifty keep track of the support and resistance levels of their investments.

Stock Prices

What Events Influence the Stock Price in the Stock Market?

Stock prices are volatile. Their trend is decided by a number of factors like the fundamentals of the company, the economy and internal and external factors. Before investing in the Indian stock market all these factors need to be taken into consideration.The share prices move due to a number of obvious reasons. However, there may be many other factors which though do not directly affect the particular share but has a significant impact on the stock market.

World Economy

Today, no country can operate independently. Every country on the globe is depended on each other. Thus, if there is some event on the international stage, it also has an impact on the Indian stock market. Exchange rates or shifting relations can either cause market panic or boost it.

Economy

The economy is directly proportional to the trend of the stock market. A good economy makes the stock market move higher and vice versa. When the economy is good, there are more jobs and there is also rise in sales and revenue of the company which boosts stock price.

News Related to the Company

Any formal announcement made by a company can also affect the stock price of the company. Good news can see the stock prices rising. If there are any layoffs then it may negatively impact the company’s share price. An acquisition on the other hand can boost confidence among investors which reflects in the stock price.Any scandals related to the company like insider trading or fraud quickly catches the attention of the investors who then sell their stocks resulting in a fall in the stock price.

Publicity

If a company announces a launch of a new product, like a new gadget, or if a stock market expert who is followed by the whole country promotes a stock, the stock prices tend to rise.

Elections

Elections play a major role in influencing the stock price. If a particle party wins the elections and the investors sense that the party will work towards improving the economy of the country, then the stock market tends to boom.

Natural Calamities

Natural calamities have a positive impact on the stock market. The effort to rebuild the losses due to the calamity boosts the economy and also the investor?s confidence towards the market.

Demand and Expectations

Sometimes the stock prices increase only on the basis of speculation. There are a lot of expectations from a company and thus people tend to rush in to buy the company stocks. These may have no fundamental back up to reason why there is an increase in the stock price of a particular company. It is a simple theory of demand and supply where when the demand of a particular stock is high it tends to rise and when the demand is low it starts to fall. A lot of analysis goes into deciding on which stock to pick and at what price. Not only the internal factors but the external factors also have to be kept in mind before deciding to buy a particular stock.”

War and Terrorism

Terrorism and war tend to have a negative impact on the stock market. Investors fear that the economy of the country will be deeply impacted due to the war and thus they pull out their money from the stock market.

Stop Loss

What is Stop Loss and how to use it

Trading in the stock market can be tricky when you aren’t aware of strategies that can minimize your losses. When you buy shares or sell shares, their prices can often go in a direction that may not be favourable to the investor.

This is where a stop loss order comes in.A stop order is a type of trade order given to a brokerage house. While a traditional market order is one to buy or sell shares at a particular price, a stop loss order indicates that an investor wants to execute a trade order, but only when a certain pre-determined price level is reached during trading. It is hence an automatic order to be executed by a brokerage house on behalf of the investor.

To understand this concept, here is an easy example: If you bought one share of Company ABC at Rs. 10 and it is now trading at Rs. 20 per share, you can continue to hold the share incase the price goes up more and trade in the unrealized profits so far. However, you inform your brokerage house to sell the stock in case the price goes down to Rs.15, as that is the maximum amount of loss you are willing or able to realize.The main advantage of a stop loss order is that you need not watch over a stock on a daily basis to see its performance, in case you are unable to. However, a disadvantage of it is that the order could kick in even when there is a short-term price fluctuation, which could result in an unnecessary selling of stock.

The trick is to allow a stop loss percentage that allows the stock to move up and down in a day without hitting your pre-determined limit.This sort of order comes at no cost to the investor as regular commission is charged by the broker only once the stop loss price has occurred and the stock needs to be sold. Whether you are engaging in online share trading or in any other avenue available, stop-loss is an insurance that every investor should undertake.

Indian Stock Market

An Introduction to the Indian Stock Market

The Indian Stock Market, also known as the Indian Equity Market, is the third biggest in Asia after China and Hong Kong. There are a number of exchanges in India; however the primary two exchanges are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).The BSE was formed in the year 1875 whereas the NSE is relatively new, founded in the year 1992.Trading happens in exactly the same way in both the exchanges and the trading mechanism that is followed is also very similar. The trading house and the settlement process of both the exchanges are the same.Traders are allowed to trade on either of them. The NSE however has an edge over BSE in that it is very dominant in the spot trading and the derivatives market which makes trading on NSE very easy owing to the liquidity that it offers.

Trading in the Indian Stock Market

Trading in equity, in both the exchanges, follow a similar pattern. Both the exchanges allow online share trading. The equity shares are traded by matching the orders placed by investors with the best limit order. There is a lot of transparency and the buyer and the seller details remain anonymous.However, it is important to trade only on liquid stocks so that your orders get executed.Any order placed in the Indian equity market has to be placed through a broker.The Indian equity market is broadly divided into two types- Primary market and Secondary market. In the Primary market, a share is first listed in the form of an Initial Public Offering, also known as an IPO. After this the share can be traded normally i.e. it can be bought and sold on the Secondary market.Traders can trade in the Indian equity market from 0915 to 1530 hrs. The trading floor is open from Monday through Friday. It is closed on Saturdays, Sundays as well as on public holidays. Muhurat trading is followed on some public holidays like Diwali, the timing of which is communicated to the brokers and the traders in advance.

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) is a regulatory body. All the trading activities are regulated by SEBI. They develop, regulate and supervise the stock market. Founded in the year 1992, SEBI has constantly laid down rules to make trading in the Indian Equities Market more transparent. They enjoy enormous powers to impose penalties in case of any breach.

The Average Directional Index – ADX

ADX indicates how strong the forex market is. It lets you know if the current trend of the market is strong or weak. This lets you either stay in your trade or book profit.ADX is a very useful indicator mostly used by advanced and professional chartists.

A Word of Caution!

The process of buying and selling shares in the Indian Equity Market has advanced a lot in the last few years. From paper trading to electronic trading, the Indian Stock Market has come a long way. However, as a word of caution, traders are advised to seek professional guidance and only then put their money into the equity market. The volatility and the uncertainty in the market need to be studied so that the trader does not end up losing all his capital invested in the market.

Equity Indicators

Equity Indicators That You Should Look Out For

Trading on equity is no doubt rewarding. However, you need in depth as well as expert analysis to pick up the overbought and oversold stocks to take the trade. Technical analysis and fundamental analysis are the two major schools of study that gauge equity market and then suggest the buy price of a stock.Technical analysts use candlestick charts to find out high probability buy levels of a stock. They study the past history of the stock and along with the trend identify patterns and the support and resistance zones. Fundamental analysts, on the other hand, read financial reports and judge the prospects of a company. They find out the intrinsic value of the stock.

Indicators That Should Be Used To Trade Equities

When trading the Indian equity market, you can use a few indicators to get high probable trades.

Average Directional Index (ADX)

For equity trading, you first need to know the trend of the market and then take a trade according to the dominant trend. ADX is a tool, which measures the strength and the momentum of the trend. ADX will not tell you what the trend is. However, it tells you if the prevailing trend is strong or about to die. An ADX value above 20 indicates that the strength of the current trend is strong. A value over 40 indicates that the trend is getting weak and may start to reverse.

Moving Averages

Equity shares can also be picked up on the basis of moving averages. Moving averages denote the trend of the market. Two moving averages are usually drawn together on a chart. A cross over towards the upside indicates an up trending market. Similarly, a crossover towards the downside indicates a strong downtrend in the market.

Relative Strength Index (RSI)

RSI indicates the overbought and oversold condition of a stock. If the RSI is indicating an oversold value, then the stock is a good buy.Equity indicators can give confirmation of the trade, but they cannot be used as the sole criteria to choose stocks. Price, volume, trend, support and resistance levels and many other factors decide if the stock is at a good price to buy. Indicators are always lagging and thus, they should be used only as an additional tool.

Stock To Buy

Best Stock To Buy – How To Choose Them

Before investing in the stock market it is important to understand and know what you are doing and what you are getting into. Doing the necessary research will help you to avoid the common mistakes. One should have an exit plan before going ahead with the investment after considering all possible outcomes of that investment opportunity. Managing stocks after picking them is equally important as investing in them. Here are some pointers that will help you in choosing the right stock to buy.

52 is the number

Many stock brokers will suggest their clients to invest in companies where something good is brewing, profit-wise. Both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) publish a 52-week high list which is a list of companies whose stock have been performing well over a period of time. It is recommended that investors refer to this list to pick companies to invest in. The stocks that appear on this list would have shown a positive momentum and there is every chance that the trend will continue.

Choose Diverse Stocks

It is recommended to invest in companies that belong to a diverse group of industries. Having stocks spread over different industries will reduce the risk factor and will even out any ups and downs, if there is anything in one particular industry that you have invested in.

Avoid Defensive Stocks

Defensive stocks, also known as Stodgy Stocks, are those which show very little movement irrespective of whether the market is performing good or bad and it is recommended to avoid investing in such stocks.

Say No to Takeover

It is suggested not to invest in stocks of companies that are possible takeover or merger targets. In such scenarios, the price of the stocks is driven by the possible buyout situation instead of the actual company’s market value.

Analyze the charts

Before investing, one can take a look at the historical data with the help of charts and analyze the performance of the stock for the previous year or two to understand the trend. If the chart suggests high volatility trend, then it is better to keep away from investing in them.

Stock To Sell

Stock To Sell – When Should You Sell Your Stock?

A stock once bought, has to be sold. Whether you will make a profit or incur a loss on all those stocks that you have bought will not be known until you sell it. Many stock brokers suggest that buying a stock at the right price will eventually determine how much profit that the investor is going to make. But the actual profit is made only when these stocks are sold. However, determining when to sell a stock is not an easy task. Some investors get greedy when the stock price is rising and refrain from selling at the appropriate time which may later come back to haunt them. It is very important to find the right balance and not allow emotions such as greed, fear or regret cloud your thinking.

Set a Target

Seasoned investors are known to have a target price or price range in mind for the stocks that they invest in. Once this target is reached, they consider selling it.

Keep an Eye

Investors often tend to follow the company or the industry group in which they have invested in to keep track on how the business is performing. Any drop in the numbers and the alarm would have been raised and they are prepared to sell their share. Both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) publish their 52-week lows list where investors can find below par performing stocks and determine whether they should be sold.

Cost of Opportunity

Investors generally compare existing stocks with better prospects to determine whether investing in them will gain them more profit than what their current shares are returning. If the alternative provides better returns, then it makes sense to sell the existing stocks.

The Takeover Situation

Mergers or takeovers deals may take a long time to be formally completed, and with the idea of Opportunity Cost in mind, it is suggested to look out for alternative options that are performing better and invest in them and sell shares of a company that is going to be taken over.

Equity

A Complete Guide To Everything About Equities

What are Equities?

Equities, also known as stocks, are a part of a company. When you buy the equity shares you are actually a small owner of that company. Investors buy the equities of a company when they expect the company to profit.

What are Common Shares and Preference Shares?

“Both public and private companies issue common shares. The shareholders are the owners of the company. They provide the capital that is required to run the business. Investors benefit from capital appreciation, dividends as well as voting rights. However, the drawback of common shares is that they have a preference on the asset of the company only after the bondholders and the preference shareholders.Preference shareholders, on the other hand, get a fixed dividend from the company. They rank above the common shareholders and are better protected than them. Preference share is somewhere in between debt and equity. The only shortcoming of preference shareholders is that they do not have any voting rights.”

Investing in the Indian equity market

Investing in the Indian equity market has its own share of rewards. It helps you maximise your gains and the return from the equity market is much higher than investing in fixed deposit or bonds. The percentage return in the equity market is higher than most other forms of investments. The equity market also gives you return that helps beat inflation.

Risks involved in trading inequities

On the flip side, trading on equity is risky. Short-term traders may tend to panic by the volatile equity market. It is thus required that you trade in the equity market only after thorough analysis and under the proper guidance of a technical or a fundamental analyst.Fundamental analysts read company reports and actively study various internal and external factors that might affect the equity price. Technical analysts, also known as chartists, read the candlestick charts and find out the support and resistance levels from where there is a likelihood of trend reversal. They also study candlestick patterns and use indicators to find high probability trades.

Purchase Shares

How To Purchase Shares ? Your Guide To Online Trading

From un-regularised paper trading to a completely monitored online trading, the Indian share market has come a long way. Online trading is not only very convenient but also transparent. Whether you are in the share market to trade or for investing purposes, you can open an online account with your broker and trade with ease.The first and foremost requirement to start online equity trading is to select a stockbroker and open an account with them. The stockbroker should be registered. You should check the facilities that they offer. Brokers also guide you on which shares to buy.

Do check their track record and find out how good their equity trading tips are. You should also check the brokerage that the brokers charge. The brokerage rates are very competitive and some even offer a zero brokerage account.You can place a market trade, a stop loss trade and a limit trade order on the online platform. There are other forms of orders like bracket trades, trailing stops etc. Though it may take some time for you to get comfortable with placing these orders online, it is a very simple and easy to use platform.Your brokerage firm will also let you trade on margin. This means that you can borrow money from your stockbroker to trade. However be careful that you manage your risk before trading with the borrowed money.Online platform also lets you short stocks. In the Indian equity market, you need to cover your shorts within the trading day i.e. you are not allowed to carry forward your shorts. If you trade in the futures market you get the privilege to take positions and carry the shorts overnight.The online trading platform also lets you have access to the technical charts.

This can help you take trades if you know how to read the candlestick charts. Most advanced online trading platforms give you access to various technical indicators. Some even give you the flexibility to take trades directly from the charts.Online trading is definitely a big step in the stock market world. Today you can trade on the go, be it from your laptop or your mobile. This gives you the flexibility to trade the stocks yourself without worrying about calling your broker each time you need to place an order.

Stock Market Work

How Does The Stock Market Work?

The stock market is a platform where buyers and sells are bought together to exchange securities. The exchange securities include not only stocks but also bonds and other exchange traded funds. The securities are listed on the stock exchange and can be traded in the secondary market. Retail investors need to open an account with a stockbroker to be able to trade on the exchange.The participants in the stock market are retail investors as well as big institutions like fund managers and banks. There are a number of stock exchanges in India. The Bombay Stock Exchange and the National Stock Exchange are the two major exchanges in India.

Stock Market, How Does It Work?

Like any market, the stock market is a place where one buys and the other sells. The job of a broker is to match the buy and the sell orders and get the best possible price for both the parties.Once a trader places a buy order it gets fed into an electronic system. It then gets you a match of a seller who is ready to sell at the buyer’s price or at a lower price. Once the match happens the seller can now sell to the buyer.The bid price is the price at which a buyer buys and offer price is the price at which the seller is ready to sell.Stock market provides a lot of liquidly to the trader or the investor. There are a lot of market participants trading in the stock market, which makes buying and selling stocks very liquid. This means that as soon as a trader is interested in buying a share at a particular price, he quickly gets a match of a seller who is ready to sell at the specified price or even at a lower price.

Importance Of Stock Market

Government and organisations are able to raise capital for their business from individuals as well as institutions, through the stock market. Once a company decides to raise money and get its shares listed, it sells the company shares to investors as an Initial Public Offering (IPO). This is the primary market. After the shares are sold they are now tradable on the secondary market.

Stocks

Stocks : A Brief History Of Their Origins

Stocks are basically the equity stakes of the owners of a firm. They are issued to raise capital by the government or corporate firms. The stock is first issued as an Initial Public Offering (IPO) and once listed; it can be traded in the secondary market. Stockholders are paid only after clearing all secured and unsecured debts.

History of Stocks

The history of the stock market dates back to the Roman Republic period when the state had leased out its services to the private companies. These companies issued stocks, which also used to fluctuate. The earliest known joint stock company is the East India Company.

Bombay Stock Exchange (BSE)

The Bombay stock exchange is the first stock exchange in Asia. In the year 1855, five stockbrokers used to meet under a banyan tree in front of Mumbai’s town hall. The group kept increasing and finally moved to Dalal Street in the year 1874. It then became official and was known as the Native share and stock brokers association. It was however recognised by the Indian government only in the year 1957 as BSE. After that, there was no stopping. It is now a completely electronic platform and is also regulated by SEBI. Your stock broker will give you the option to trade on the BSE exchange where you can trade on the cash and the derivatives market. The benchmark index of BSE, Sensex, is a group of 30 liquid stocks.

National Stock Exchange (NSE)

The National stock exchange is a relatively new exchange in India and also the most popular one. It is located in Mumbai and was established in the year 1992. NSE was the first electronic exchange and allowed screen based trading. The Nifty is the benchmark index and is a list of 50 liquid stocks. You can also trade in the derivatives market on the NSE exchange.

Securities and Exchange Board of India (SEBI)

Since BSE was run by a group of people, there was no proper system to monitor and check the transactions. In the year 1980, traders felt the need for modernisation of the existing financial system. This gave birth to SEBI, which completely monitors and regulates the Stock exchanges in India and has full power to take action against any fraud. It was created in the year 1988.

Global Stock Market

Global Stock Market: Learn About The Different Markets In The World

Just like a market, as economics defines it, is a phenomenon witnessing the buyers and sellers corroborating their demands, similarly, a stock exchange is nothing but a financial market where buyers and sellers of stocks meet to fulfil their respective needs. Various companies of varying types can list their securities and issue their IPOs on their country’s respective stock exchange, after issuing their IPOs in accordance with the country’s jurisdiction.

SEBI and Indian stock market

In India, SEBI: Securities and Exchange Board of India manages the legal issues in the stock market and also supervises the functioning of the two major exchange boards of our country: Bombay Stock Exchange and National Stock Exchange. New companies, wanting to be listed on NSE / BSE have to conform to the rules listed by SEBI. BSE is the oldest stock exchange in Asia.Both stock exchanges in India are order driven; both sellers and buyers place their orders anonymously thus ensuring transparency in the entire system. This is where a stock broker comes into the picture. All orders need to be placed through stock brokers only. Some also provide an online retail platform for the purpose.

American stock market

The American stock market houses two of the most powerful stock exchange in the world: NASDAQ and New York Stock Exchange (NYSE). The most basic difference between these two is that NYSE is traded in a physical marketplace. NASDAQ trading takes place through a telecommunications network.The American stock market is the only exchange where you need to attach specific meanings to terms: specialist and market maker. Since in NASDAQ, telecommunications network is required for transactions to take place, a market maker is required to create a market so as to initiate successful deals between the buyers and sellers. When it comes to NYSE, a specialist is the required the watchdog. The transactions between the buyers and sellers take place through auctions which are facilitated by the specialist.

London stock exchange (LSE)

LSE’s origin dates back to the 17th century. It is known for housing the maximum number of International companies from over 50 countries around the world. It is the primary and largest stock exchange in Europe. LSE uses various trading systems. For the most actively traded stocks, LSE uses SETS, an electronic order book, which is also considered the most liquid one in Europe. Then there is SETSqx, Stock Exchange Electronic Trading Service quotes and crosses, which is for securities with lesser liquidity as compared to those listed on SETS. SEAQ is for securities not traded in SETS and SETSqx.

Equity Market

Equity Market: How Does It Work?

The origination of the Indian stock exchange dates back to 1875, with the establishment of the Bombay Stock Exchange. BSE is the oldest stock exchange trading in Asia. More than 5500 companies are listed on BSE and around 1700 companies and more are listed on the National Stock Exchange or the NSE.

Registration with SEBI and the stock exchange

The Indian equity market has the following participants: trader, investor, companies and brokers. All market participants need to be listed on the preferred stock exchange and with the stock exchange regulatory board of our country, SEBI. This is to ensure transparency in the system. If a company is going public for the first time, then the process starts with the company issuing its IPOs in the primary market.

Understanding primary and secondary markets:

These stocks, which have been issued first in the primary market, are allotted to the initial bidders. After the stocks have been listed, these stocks are then made available to traders and investors in the secondary market, which is responsible for the maximum portion of trading activity in the economy.

Stock broker:

Your stock broker acts a facilitator between you and the company you are interested in. the broker connects various investors to the companies in the equity market for trading on equity. Nowadays, the stock brokers also provide online retail platforms to investors for faster and easier trading. So after a stock is made available in the secondary market, you can register yourself with the stock broker to start trading. With the advent of technology in equity trading, the process of matching the buyers and sellers is wrapped up within minutes, unlike before, when it took weeks together!

Demat account:

Since today, maximum portion of trading happens online, an investor is required to open a Demat account to trade in equity shares. As investors also have to be listed on the broker, this happens through the Demat account, where the investor files his / her registration with the investment broker. The Demat account saves all transaction details, transaction history, certificates and likewise, pertaining to the investor!

Stock Brokers

Stock Brokers History

The earliest existence of the stock market dates back to 18th century. The Indian Stock Market has been considered as one of the oldest stock markets in India. In the 1840s and 50s the number of stock brokers was around a dozen stock brokers. Shortly after that a group of 22 stock brokers gathered near a banyan tree after investing Rs.1. The group was controlled by the American War as India provided the demand for the cotton. The Native Share and Stockbrokers Association came into existence in 1875 and were restructured into the Bombay Stock Exchange.

The First Indian Stock Exchange

Premchand Roychand was the stock broker in charge at the time, and some of his practices in running the stock exchange are still being applied today. The Indian Government recognized the Bombay Stock Exchange as Indian first Stock Exchange in 1956. Almost 50 years later, the manner in which Harshad Mehta handled the market, shook the Bombay Stock Exchange and led to the need to bring in reforms. The need to reform gave rise to the National Stock Exchange that started trading on 4 November 1994.

The National Stock Exchange

The Bombay Stock Exchange had reformed but after that, could never match the success of the National Stock Exchange. In less than 12 months, the turnover of the National Stock Exchange exceeded the Bombay Stock Exchange. Although the Bombay Stock Exchange improved, the National Stock Exchange was so far ahead in generating turnover; BSE struggled to keep up. With several attempts that followed, the Bombay Stock Exchange tried to get ahead of the National Stock Exchange. The Bombay Stock Exchange tried to stop their progress. Two years after the installation of the Nse, they wanted to install the equity derivatives trading. The BSE counter attacked this endeavour and blocked equity derivatives trading for about 5 years with a derivatives training expert. The BSE pulled another attempt to dissuade the success of the NSE. Nothing worked as eventually NSE won 100% market share of equity derivatives trading. At present, the NSE continues to dominate the play ground and owns more profitable stock and BSE waits in second place.

Nifty Futures: How to trade in them?

Nifty Futures

Futures is a type of financial contract.Most of the Futures volume is traded on the National Stock Exchange and Nifty is the indicator of the National Stock Index. The Nifty index futures trading in the country started in the year 2000 in the NSE.There are three kinds of futures that can be traded. They are Index Futures, Stock Futures, and Currency Futures. Based on the Futures Contract, the two parties involved agree to make transactions on group financial agents for future delivery at a specific cost. The contracts have a specific date and price for delivery. No cash transactions occur when the contract is initiated.

The most common Futures contract traded in India are Nifty Futures.

A better understanding of Futures can be explained through an example.Saurab wants to buy a phone which costs Rs. 35,000, in a month’s time. However, he realizes that in one month, the price of the phone could decrease. He then enters into a contract with the computer manufacturer to buy it in a month.One month from today, another buyer called Raj will buy a computer for Rs. 2000. Raj, however, wants to be cautious and agrees to purchase the computer at the present price, but only 30 days from today.As defined above, this type of contract with a specified date and price for delivery is possible with no cash exchanged between the parties when the contract is initiated. Futures trading, therefore, is the buying and selling of these contracts. More specifically, Nifty Futures are a form of Index Futures. The underlying is the S&P CNX Nifty index.The allowed size of the lots in the Nifty Futures contracts is 50, and can only be done in multiples of 50.Nifty Futures Contracts the ‘near month, mid month, and far month’ dates of expiration. The expiration day for each contract is the last Thursday of every month.

What happens when a Nifty Futures Contract expires?

A new contract for three-months would be initiated on the next trading day. Investors can trade in Nifty futures by having a margin amount in their account. This margin is a percentage of the contract value. It is usually about 10-12 per cent.

Nifty

What is Nifty

Nifty was derived from the words fifty and National. Fifty, because there are 50 actively traded stocks and Nifty indicates the top stocks of the National Stock Exchange. Basically, Nifty is a stock index in India. An index is nothing but an indicator. It tells you on an average about the present condition of the stock, whether most of the stocks have gone up or most of the stocks have gone down.The Nifty is an indicator of of the 50 top major companies the major companies of the National Stock Exchange. Nifty even foretells market movement. If the Nifty index goes up, it shows that a majority of the stocks in India went up during the given period. If the Nifty index goes down, this shows that the stock price of most of the major stocks on the Bombay Stock Exchange have gone down.

The futures instrument is a derivative contract that is attributed its value from a rudimentary selling point. In the context of Nifty futures, the rudimentary selling point is the Index. Hence the Nifty Futures attributes its value from the Nifty Index. Therefore, if the value of Nifty Index goes up, then the value of Nifty futures also goes up. Nifty Futures are the most traded contracts in India.25% of the companies whose stock is sold on Nifty are banks, other players are big names in the country like Cipla, Zee entertainment, Tata Consultancy Services Ltd., Power Grid Corporation of India Ltd., Ultra Tech Cement Ltd., Bosch, and Wipro. Prior to 2011, the Nifty had downward trend but shot up 2011 onwards, with regular fluctuations.

Since then, Nifty hasn’t dropped drastically but keeps dropping and coming back up frequently.In the present financial year, Nifty dropped 490.95 points because of the crash of the Chinese stock market on 24 August, 2015 and 234.45 points due to the depreciation of the rupee on the 16th of the same month and again another time on the 27th. On May 6, 2015 NSE Nifty slipped below the 8,200-level by falling 179.25 points or 2.15 per cent to 8145.55.

Nse Index

NSE index: How is the index defined?

The National Stock Exchange of India Limited (NSE), set up in the year 1992, is India’s largest financial market. In the present time, NSE is a completely electronic, allowing online trading between companies and investors. NSE India also ranks third in the whole world for the volume transacted. The NSE transactions are in forms of debts, derivative markets and equity.NSE India offers capital building abilities for companies and a platform for trading debts, derivatives and equity – which includes both mutual funds and currencies.

NSE index is merely an indicator, which gives a basic idea when the stocks have gone down or the stocks have gone up, depicting the performance of the stock and share market. Financial analysts to facilitate better measures that will increase the market capitalisation and also stabilise the stock market performance use these indices in economic research. Indices majorly help in risk management in the global economy scenario. Nifty is the index associated with National Stock Exchange. Nifty tracks the performance of blue chip companies, the biggest companies in India.

NSE index, Nifty takes are the important sectors of the Indian economy and offers its investors an exposure towards the portfolio of the Indian market. IISL, INDIA Index Service and Products own nifty.NSE index, Nifty is a 50 stock, weighted index, which is used for benchmarking economy portfolios, funds and derivatives. Nifty also represents around 65% of the total float-adjusted market capitalisation of the Indian National Stock Exchange. As it is a diversified index, reflecting precisely the market performance, the reward-risk ratio of Nifty is higher than other indices of measurement.Maintaining the index is extremely crucial to ensure consistency of the Indian equity markets. IISL, which takes care of all aspects of NSE index, Nifty, is the decision maker when it comes to additions and removal of companies in the index. Change is the index directly affects the market capitalisation, which is caused by the fluctuation of stock price. The index is calculated real time on all days National Stock Exchange is open.

Types Of Stocks

What Are The Different Types Of Stocks Available?

Stocks as a part of the stock market are classified based on different parameters – ownership rules, market capitalisation, dividend payments, risk and price trends. The Bombay Stock Exchange and National Stock Exchange are the two leaders in the field.Ownership rules: Preferred stocks ensures its investor a fixed amount of dividend at the end of every year while a common stock is uncertain in this aspect.

Preferred stocks always are a priority over common stocks but in cases of liquidation of a company or voting rights, common stocks win the game. Hybrid stocks are a sort of preferred stock with an open choice of converting it into common stocks at a given time. They are also called as convertible preferred shares.Market capitalisation: Market capitalisation is the determination of the market the value of the total amount of share holding of a given company – Small capitalisation, mid capitalisation and large capitalisation stocks. As the name suggests, the classification is based on the size of capitalisation.

Small capitalisation stocks usually represent small size companies upto a range of Rs. 250 crores. Mid capitalisation stocks fall in the bracket of R. 250 crore to R. 4000 crores and large stocks represents the industry rulers like the Tata, Reliance or ICICI. Investors or stock brokers usually go for small capitalisation stocks considering the gains yielded over a long time and less risk value. Mid stocks represent the well known companies in the market. Growth of large stocks are slower when compared the small stocks but gives way for exploring new business opportunities.Dividend payments: Dividends are the returns one gets until the time the shares are sold for a profit. Income stocks are the ones which pay a dividend higher than the share price.

These are less risky stocks to invest in but lesser growth value. Whereas, growth stocks are the kind that may or may not pay high dividends. The companies usually put back their money into the company operations resulting in higher growth rate.Price trends: Price trends refer to the stocks prices in comparison with the company’s earnings. Cyclical stocks are the kind whose value vary with the economic trends, booms or slows down. Defensive stocks are the ones who are almost unaffected by the economic trends like companies dealing with food, drugs and beverages.Risk: Stocks are also chosen based on the risk value associated with it. Blue chip stocks are the ones associated with stable companies which promise a regular dividend to all its investors and beta stocks are the ones which can have a fluctuating value in comparison with the market but can also yield high profits with smart dealings.

Stock Patterns

Common Stock Patterns

The ability to read charts is critical for stock investors to enjoy profits in the Bombay stock exchange. The chart is the start point for all analysis because they provide comprehensive information in a short time. Investors use several types of charts, however here are 5 chart commonly used patterns in online share trading:

Head and Shoulders

The most reliable and popular chart pattern for technical analysis in the stock market is the Head and Shoulders. Like the name indicates, the pattern appears like a head that has two shoulders. It is a reversal type of pattern and is formed when the stock most likely is moving against the previous trend. There are two versions of the head and shoulders. First, the head & shoulder top indicates that the price of the stock will fall with the completion of the pattern. The second is the head & shoulder bottom indicates that the price of the stock will rise and is formed in a downward trend.
There are four categories of commodities that have been a part of the trading industry – Energy (natural gas, crude oil, gasoline and heating oil), Livestock and Meat (cattle, hogs, feeder cattle and pork belly), Metals (copper, silver, gold and platinum) and Agriculture (rice, coffee, wheat, cocoa. soybeans, corn, sugar and cotton).A few commodity tips to note are:

Cup and Handle

This pattern resembles the shape of a tea cup in a chart. This is a bullish pattern where there is a pause in the upward trend, however it will continue to trend upwards till the pattern is complete. The cup and handle pattern precedes an upward movement, which stalls and heads for a sell-off. The sell off is the initial part, after the sell off the stock trading will be flat for an extended time period without a clear trend. The next stage of the pattern is the upward movement towards the peak which precedes the upward movement. The last stage of this pattern is a smallish downward move before the stock movement is higher in continuum with the previous trend.
A few commodities are sensible to trade and a few are risky in nature. Volatile markets usually come across traders and investor who wish to store their money in precious metals like gold which has been considered reliable over the years and ensured a certain return on investment. Investors incurring losses in stock market can always shift to trading commodities like metals.

Gaps

A gap in charts indicates that there is an empty space between a trading period and the previous one. It is formed because of a vital and material event that has an impact on the stocks. It may be a merger, surprise earnings, economic instability etc. This occurs when there is a large difference in the opening price and the subsequent price movements do not fall in the range of the previous trade period.

Triangles

The chart pattern here clearly forms the shape of the triangle. Here two trend lines converge: ascending, flat or descending where the price of the security moves between two trend lines.

Flags and Pennant

These patterns, flag and pennant are two continuous patterns that closely resemble each other. They differ in their shape only during the consolidation period of the pattern. A flat is rectangular in shape and the pennant appears like a triangle. These two patterns form when there is a sharp movement in price followed by a movement in price sideways, which will be a pennant or a flag.

Stock Research Company Balance Sheet

What to Look For in The Annual Report of a Company

Annual reports are essentially documents on the company’s performance for the year aimed at potential investors. If you are considering investing in a particular company or certain business area then the annual report offers a snapshot of each company and its business performance. This is not to be confused with the 10-K report that is mandatory for any company to file. Most treat the annual report like the 10-K and submitthe more detailed 10-K in place of the annual report. Keep in mind that an annual report is essentially marketing material so make sure to look beyond what you see.

General overview: The first section is usually an excellent introduction to the business and what it does. Here, a company should lay out what they do in the simplest terms. If a customer cannot get any clarity from this section then they should move on to another report.

Finances: Once you get a concise look at the overall profile, delve into the finances. It may seem daunting but this is where the clearest picture lies. Focus on the gross and profit margins, even compare these numbers from previous yearly reports to find changes. Have they increased or decreased? Has top management being handing itself big pay-checks while the company does not break-even? Make sure to check if the policies have changed recently as this will affect how positive the numbers look. It also lets you have an idea of where it stands in the current financial market and if it looks promising enough for you to invest in.

Shares: This section is key to public market investors, you the outside investor. It should ideally give you insight into where the company stands in the share market and how this will affect you if you purchase equity shares. These are the components of a company you will invest in and the report will indicate how the shares have performed and how they have been distributed. You can watch the rise and fall of several of these in the public arena – the national stock exchange.

Legalities: Peruse this section carefully as it will indicate if the company has any legal woes or if there is any potential conflict on the horizon. Does the company on-going cases and if so are they significant enough to affect the desirability of the company?

Read Stock Ticker

How to Read a Stock Ticker

A stock ticker is likely something everyone has seen and associated with the stock market but are unaware of what exactly it is an indication of. It is the band of continuously moving number and stock names you usually see at the bottom of your TV screen and the arrow marks displayed on screen when a newscaster is reading national stock exchange updates.It involves red and green arrows which indicate any upward or downward movement of stock prices. Each arrow is considered a ‘tick’ and is used by traders to stay aware of developments.

You can also find the volume of that particular stock displayed.Not all stocks when updated are displayed on the ticker, but only those that have had a massive change overnight since the stock market trading hours closure. A ticker comprises of the stock code or name, the quantity traded, current trading price, the net price change from the previous day in dollars or a percentage and an arrow indicating if there has been a drop or rise. A green arrow is an indication of upward movement and a red arrow of downward.

Live Updates

The stock ticker is an excellent way of keeping tuned into the live stock market. The colour coded updates are updated with very little delay and there are several websites which let you install tickers at the base of your computer screen or in your browser so you can keep an eye on your stocks movements. They vary based on various trading platforms but all are indicative of the same information.Particular companies like the Bombay stock exchange, have entire websites dedicated to this data and value investors use these to keep informed about their stocks on a detailed basis.

Here you can find which stocks are climbing and which dropping by how much. There are also displays for what is trending and the top turnover for the most significant stock options on the home page. A news channel or app may not show your stock on its ticker but a website with a thorough list will ensure any information gaps you have are taken care of.

Bonus Shares

What Are Bonus Shares? How Are They Allotted?

Bonus shares refer to shares that are provided to the current shareholders of the company who are investing in it, based on the number of shares of that company currently being held by the shareholder. These shares are given to the shareholders without any cost, and thus are free (or bonus) shares.Basically, these are a part of the earnings of the company only but are not distributed in the form of dividends. Instead, companies convert them into bonus shares and distribute them to certain shareholders. The major reason for the issuance of bonus shares is to increase the equity base of a company and also to boost retail participation.

Declaration of bonus shares increases the number of shares which results in bringing down the price of each individual share (price per share), but the total amount of capital remains largely unchanged. Reduction in the price per share in the financial market attracts new investors to invest in the company by buying shares.

Allotment of Bonus Shares

The most common way of issuing bonus shares is following the principle that the number of shares must increase with a ratio of the number of shares held by the shareholder to the number of outstanding shares, and this ratio remains constant. For example: If a shareholder holds 300 shares of a particular firm and the firm decides to give out a 3:1 bonus; that means that the shareholder is awarded 3 free shares for every single share held by him. Thus, the investor gets 900 bonus shares and this increases his total number of shares to 1200.

Companies plan to give out bonus shares beforehand and accordingly, start accumulating a reserve by saving a part of their earnings which is not distributed in the form of a dividend. Once these reserves reach a specific level, the amount is moved to the capital account and from here, the bonus shares are subsequently issued.Shareholders holding both equity shares and preference shares are entitled to bonus shares. Also, almost all companies listed on the National Stock Exchange prefer issuing bonus shares from time to time.

Bank Nifty

What is Bank Nifty?

In the Indian stock exchange market, you have two types: Bombay and National. The two of these stock exchanges have their own indices: Sensex for BSE and Nifty for NSE. In Nifty the “N” stands for National Stock Exchange while “ifty” stands for the top fifty companies present in the stock market. Nifty is an index that measures the movement and prices of stocks that keep changing every day. When talking about bank nifty we confine the definition of nifty just to banks.

The banking stocks are considered here and an index is generated. This takes into consideration just 12 top banks in the national stock exchange.

How does it work?

The bank nifty is facilitated by a futures contract that can be accessed from an online trading account. The terms of this contract can differ and the trading cycles span over three months: near month, next month, and far month, that can be renewed after these three months.So how exactly does this work? Bank nifty trading has to be done quickly and sharply as fluctuations can occur immediately. Let’s look at this illustration to understand bank nifty better. First you need to make sure that you have margin money of 1 lakh that is if you decide to trade 4 lots bank nifty. Then, subsequently, the profits or losses accumulate. If you manage a profit of 400 points for each month then you earn a 40% profit. Subsequently, for 600, 800, and 1000 points you receive 60%, 80%, and 100% profit respectively.

Is bank nifty a safe option?

As much as bank nifty poses as a better option, economists beg to differ. Some believe that the overall nifty index is safer than bank nifty as it covers all the possible companies in the market. In the case of bank nifty charts, it only covers bank stocks. When speaking in terms of volatility, due to the limited number of stocks, high volatility will be witnessed while applying for a bank nifty. This can cause some unnecessary worry as to the buying and selling of stocks. To eliminate mishaps, economists suggest that during dull market rates you can buy a nifty option and sell it as a bank nifty future.

On the other hand, if it’s a field day, then you can buy bank nifty future and sell it as a plain nifty future.

Option Buying & Writing

What is Option buying & Option writing?

Ever had trouble keeping up with conversations about options and shares? Don’t fret. You can simplify these terms and think like a professional in no time. A basic concept is that of options. An option is the right to buy or sell a particular trading instrument a specified price. There is no obligation, but there are defined terms. When you sell an option within the expiration rate, you are said to be “writing” the option.There are generally two types of writing: covered and naked. In a covered call, the writer owns the property in question and sells the option on the expectation that the price will move in a certain direction. The buyer has to pay a premium in exchange for the writing. If the option writer does not own the trading instrument, this is called “naked writing”. This follows the same principle but is risky because then the writer has to produce the number of shares without already owning them.

Why buy options?

Many people, while investing, use options to buy/sell stocks, hedge positions, or act as speculators. The last group, spectators, do not hope to buy/sell but hope to make gains by capturing any movements in the stock, although options trading is a far more efficient way to make profits. While purchasing an option, the movement of the stocks price is important. If you are a call buyer, you will need the stock to rise, while a put buyer would want the opposite.This can be explained with an example. When you buy an option, you aren’t buying the property itself, just the contract rights for a certain price.

If, at a certain point, the value of the property is much more than what you negotiated to pay, you make a profit, because the writer has to give it to you at the negotiated price. If the stock price of the property in the share market goes down, you don’t have to buy it, and you only stand to lose the price of the option. You can look at various online trading options and information about nifty options from brokerage firms.

Read Stock Quotes

Stock quotes: How to read them?

When you look at an exchange like the Bombay stock exchange, the price of stocks quoted on it is the stock quote. This gives you information like the asking price, bid, volume traded, and previously traded price. With mobile apps and websites, you can follow live stock market movements. Reading the stock quotes may seem like a task at first, but it can be easily broken down to be understood.

Columns and what they mean:

The first two columns show you the highest and lowest trade prices of a stock over the year.The next column will list the company’s name and type of stock

Column 4 has the ticker tape, quoting the latest prices.
Column 5 indicates the annual dividends per share.
Column 6 shows you the dividend yield
Column 7 has the P/E or price by earnings ratio.
Column 8 show you the trading volume for the day
Column 9 & 10 shows you the day’s highest and lowest trading prices for the stock.
Column 11 has the closing price of a stock, or the last recorded trading price.
Column 12 shows you the net change in the stock price from the previous closing price.

You can get a lot more from the quotes and charts than just the prices. Charts show you a summary of the trade volumes and stock performances over various time spans. Option charts show all the contracts that a specific stock has.

You can also look up a stock’s past information using the ‘historical” option, as well as the executives and earnings of a company. Other financial parameters can be seen through the different ratios and financial statements.There are no fool proof rules when it comes to analysing quotes on the stock market. Brokerage firms will offer detailed quotes and other information regarding from an exchange like the national stock exchange. At the end of the day, you need to make a logical investment decision you are comfortable with.

Ncdex

Ncdex : A Brief Introduction

Nowadays, the Indian stock market is filled with opportunities, that you might not even be aware of. Those who have gained sufficient knowledge or expertise about the same will definitely utilise these opportunities to get an advantage. However, one has to keep a track of whether the stocks are secure or not.

Staying updated with minute to minute market trends would definitely help in keeping a track of the performance as well as of the rise and fall in value. Also, information about potential companies that are listed in the BSE and NSE of India must be considered. Once, investment in Indian stock market starts, keeping records of buying, selling, gains and losses is important. They must be reviewed periodically so that the risk can be assessed and investments can be reallocated in sync with the current risk capacity.Investors who are beginners never follow any stock market tips that are published on the internet.

Some tips definitely prove quite useful, but distinguishing between various tips is a skill. One more thing that must be kept in mind while investing is that the emotions must not overcome the judgement. Gaining and losing are part of this game.You must not be surprised to see that every investment is associated with some kind of peril. Thus, seek professional assistance from people who are having an experience and offer good suggestions.

Experienced people would help you with precise and crucial nifty options as well stock tips. Since the Indian stock market is quite impulsive and unpredictable, seeking help from stock tip provider firms and companies is essential.These firms do analysis and research various trends of the Indian stock market, view the profile of the companies, their past histories and future drifts. They calculate the risk accordingly and tell you.

Equity Basics

Equity Trading Basics For Beginners

A stock is a share in a company’s ownership, on its assets and profits earned. It signifies a small stake on everything under its name; licenses, trademarks, personal assets. It enables a company to find multiple owners through its monetary purchase, who will be gaining a right to make decisions in its functioning, including a right to vote. The extent to which one owns a percentage of profit and has a say in the functioning of the company is proportional to the money they have invested.

It’s hard for a common man to have any material influence as the amount being shared is less and voting rights are restricted to selecting the board of directors, annually.

Why does a company offer shares?

It requires money to make business, for its daily functioning. It can either raise money by taking a loan from a bank or by issuing a public offering of shares. The former is an example of debt financing, issued through a bond where the company is liable to pay the amount with an interest promised, while the latter is an example of an equity share, an investment which carries a risk of loss if a company results unsuccessful.

Open equity trading account

In a share market, different companies offer trades which could be concluded online. If you are an account holder with a bank, your online equity trading account would correlate with your Demat account, facilitating a transaction electronically. To use it as a channel, the bank or a third party (usually a broker) will negate a specific charge.”

Zero brokerage and Equity brokerage

Let us understand these through examples;A broker charges you 1 paise on an intraday transaction. You buy a share of a company for Rs. 70 a piece, a total of 1000 shares and sell it on the same day for Rs. 80 a piece.The brokerage would then amount to (1000*70*.01% + 1000*80*.01%) = 70 + 80 = 150 Rupees.You could leverage this as an example of equity brokerage.Otherwise if your broker charged you a flat Rs 15 for a trade, your transaction would work out to be Rs 40, an example of zero brokerage.

Equity Market In India

An Introduction to the Indian Equity Market

The Indian Stock Market, also known as the Indian Equity Market, is the third biggest in Asia after China and Hong Kong. There are a number of exchanges in India; however the primary two exchanges are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).The BSE was formed in the year 1875 whereas the NSE is relatively new, founded in the year 1992.Trading happens in exactly the same way in both the exchanges and the trading mechanism that is followed is also very similar. The trading house and the settlement process of both the exchanges are the same.Traders are allowed to trade on either of them. The NSE however has an edge over BSE in that it is very dominant in the spot trading and the derivatives market which makes trading on NSE very easy owing to the liquidity that it offers.

Trading in the Indian Stock Market

Trading in equity, in both the exchanges, follow a similar pattern. Both the exchanges allow online share trading. The equity shares are traded by matching the orders placed by investors with the best limit order. There is a lot of transparency and the buyer and the seller details remain anonymous.However, it is important to trade only on liquid stocks so that your orders get executed.Any order placed in the Indian equity market has to be placed through a broker.The Indian equity market is broadly divided into two types- Primary market and Secondary market. In the Primary market, a share is first listed in the form of an Initial Public Offering, also known as an IPO. After this the share can be traded normally i.e. it can be bought and sold on the Secondary market.

Traders can trade in the Indian equity market from 0915 to 1530 hrs. The trading floor is open from Monday through Friday. It is closed on Saturdays, Sundays as well as on public holidays. Muhurat trading is followed on some public holidays like Diwali, the timing of which is communicated to the brokers and the traders in advance.

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) is a regulatory body. All the trading activities are regulated by SEBI. They develop, regulate and supervise the stock market. Founded in the year 1992, SEBI has constantly laid down rules to make trading in the Indian Equities Market more transparent. They enjoy enormous powers to impose penalties in case of any breach.

A Word of Caution!

The process of buying and selling shares in the Indian Equity Market has advanced a lot in the last few years. From paper trading to electronic trading, the Indian Stock Market has come a long way. However, as a word of caution, traders are advised to seek professional guidance and only then put their money into the equity market. The volatility and the uncertainty in the market need to be studied so that the trader does not end up losing all his capital invested in the market.

Why should you invest in the Equity Market?

Why should you invest in the Equity Market ?

In the current scenario, investing in both equity and forex can be quite profitable. But before you can reap huge financial gains you need to understand the basics of both equity and forex trading. If you can play your cards properly in the equity market, or invest cleverly in companies, which can give high returns, then the equity market will generate sustainable profit against your investment.

Difference between the Equity and Forex

When planning to invest in the forex market, the trader must know or understand the basics of intraday or day trading. Because currency exchange rates can vary throughout the day, and a clear understanding of the exchange rates of different currencies against the Euro or Dollar is essential. Currency trading is dependent on volatility; a fast price change can make or break your investment. Only high-risk traders rely on forex trading and small investors rely on long-term and less risky investments. Such investors tend to invest in the equity market or stocks. If an investor wants to invest a part of his income by buying stocks of different companies, he or she needs to study the company’s financial history, its current status and how it is expected to perform with its future investments. Keeping these in mind, an investor a can make highly profitable long-term investments.

Equity pays long-term dividends

Investing in big blue chip companies or well-heeled companies can bring you year-end dividends. When the company makes a profit, the company may reinvest some amount of the profit in the business itself and some part of the profit is distributed amongst its investors or shareholders. This way the company retain its long-time shareholders. The dividends for large shareholders can be quite profitable as they are distributed by the proportion of equity an investor is holding in the company. Dividends or over-night dividends are also applicable for forex trading, where an overnight interest rate is applied, for holding a few specific currencies. The rates vary according to different currencies, but for a long time investor, this option is not that viable. The trader needs to fathom the high volatility of the forex & the dynamics of the money market.

Equity market for long-term investors

For long-term investors and day-to-day traders, both the equity market and online forex market can bring in profits, if investments are made judiciously, but for low-risk individuals who prefer to invest occasionally, investing in company stocks or equity would be a better choice as forex trading can change due to multiple reasons, including socio-political reasons.

What is Forex Trading

For extrading is trading currenciesfrom different countries against each other. Forex is the abbreviation for Foreign Exchange.For example, the currency in circulation for Europe and United States is EUR and USD respectively, and the example of a Forex trade is to simultaneously buy EUR while selling USD.

Where does India stand in the Forex market

Presently, the Indian Forex market is the 16th largest Forex market in the world in terms of daily turnover, as per the BIS Triennial Survey report. This is owing to the Indian economy which has seen a steady growth because of the emerging industrial sectors over the past few years.

Know how to start withforex Trading in India by Trading Currencies

To start off, one must know whom to trade with. NSE, BSE,MCX-SX are the Indian exchangesthat currently offer 4 pairs (USDINR,JPYINR,GPINR,EURINR) in currency derivatives(futures and options segment). The governing body of trading currenciesin India is SEBI.

The brighter side ofcurrency trading in India

There are no middlemen, no government fees, no exchange fees, no brokerage fees, low cost transactions and no fixed lot sizes. It is safe to do online currency trading because it is quick and hassle–free.

How to trade currencies and various things to keep in mind

Apart from choosing who to trade with, you must open a trading account with a brokerage house. Further, you need to deposit the stipulated cash with the trading member. With low margins, and the access to hedge possible currency risk between 9:00 am to 5:00 pm on all working days, you can trade in currency futures contracts because they are available in minimum contract sizes of 1,000 USD.

You can either trade or invest but while you trade you must

Value your ownership and know when to buy and when to sell.Keep in mind the timeframe, and do not go for the ‘buy and hold ‘concept because that raises the risk.

Traders look for high probability trade set-ups and they incorporate market sentiments. Traders must be aware of proper risk management.

At Alice Blue, we are here to help you choose the right path to a steady growth.

Alice Blue trading account helps you take advantage of the zero-brokerage trading model which enables you to net returns more quickly.

What are currency derivatives

Currency derivatives offer investors the option to trade in major foreign currencies attached with the Indian rupee. Leading stock exchanges of India offer futures trading contracts in different foreign currencies. The two ways movement of the rupee attached with a foreign currency helps investors to put up a wall against the foreign exchange risk and gain.

The silver lining of trading in currency derivatives

You can protect your Forex exposure in business and hedge potential losses by taking appropriate positions. For example, if you are an importer and have USD payments to make on a future date, you can hedge your foreign exchangeexposure by buying USD and by fixing your payout rate today. You can hedge if you feel that USD-INR is going to depreciate. Alternatively, you can go in for short term movements by using Currency Futures, i.e., for example, when you feel that the oil prices will rise, you would buy USD-INR and sell it when exports from the IT Sector will translate.

You can take advantages of different exchanges in different markets barring Forex market, and you can pay the margin amount and trade in currency derivativesinstead of the full traded value.

Currency futures trading and its importance

You basically trade contracts on the exchange much like you do with equity and commodity contracts. These contracts are based on the margins. Globally, currency futures are more speculative and they don’t hedge tools.

Currency future contractsare future contracts to exchange one currency for another at a specified date at a price that is fixed on the purchase date.You don’t require any underlying charges to trade in currency futures.Therefore,currency futures trading is a wise choice.

Currently, the currency derivativesavailable are GBP, USD, EUR and JPY paired with the Indian currency INR.

Key difference between futuresand options

Futures: The buyer and the seller both are obligated to complete the transaction on the specified date at the price set in the contract.

Options: The buyer has the option but not the obligation to complete the transaction. The seller is obliged to transact if the buyer of the options chooses to carry out the currency trade.

Why do people trade in Forex Trading

For one’s own profit, thought that would have been the obvious answer. However, there are other reasons too that makes currency trading a sought after option – are you tired of working for someone else? Or are you looking for an additional / alternative source of income.Online forex trading offers several advantages to traders because it is spread across a vast geographical area and operational for 24 hours every day. You can, therefore, trade major currencies at any time.

Why Trade

(i) Forex tradinghas an international platform, which gives investors the opportunity to hunt anywhere they can. If you want to take a broad number of opinions and invest in another country, Forex is an easy way of gaining exposure.

(ii) Due to the available leverage, you can track the slightest movements happening in the market. You can trade Forex with considerable leverage, 50:1 and sometimes higher.

(iii) The forex market is one such market where there are no limitations on shorting currencies. If you think it will go up, purchase it or else sell it.

(iv) The spread between the buying price and selling price is your cost of trading and it displays on the trading screen. Most trading accounts have no pricey exchange fees or data licenses.Thus, lower transaction costs for forex currency trading.

(v) As it is a massive market (around $4 trillion) there are little chances you may be disappointed because someone always will be willing to trade, so the market is high on liquidity.

(vi) Easy to enter and trade, you can even start with smaller amounts to see how your investments cope. So, easy entry and exit makes this an attractive market to try.

(vii) Lesser regulations compared to a financial marketYour chances of a steady growth increaseover a period of careful observation and clear understanding of theforeign exchange market. Whether you risk your chances of losing finances or not, you have the ability to close your position in the market at any time even if you think that you simply want to close your position. The market maker does what you say and what you think is the need of the moment.

Online forex trading in Indiais safe and Alice Blue provides quick solutions for all your trading related needs.

How could I trade in Forex

Trade in Forex

Forex tradingorcurrency tradingis typically done through a broker or market maker. The broker helps you(the buyer) to choose the right currency pair and place your order with him.

For example, if you had purchased 1,000 Euros in January 2005, it would cost you around 1,200 in US Dollars. At the end of the year 1,000 Euros were worth 1,300 US Dollars. If you had chosen to end the tradeatthat point in time you would have a $100 gain. The broker then fills your (the buyer’s) position in the interbank market used for Forex trading in India and elsewhere, and credits or debits your account with the gain. A loss would occur in the reverse scenario.

Steps for forex currency trading

(i) Understand the basics of forex trading and the terminologies used.

(ii) You need to open a Forex Brokerage Account for foreign currency trading, and do so by understanding the services your chosen broker provides because they differ between different companies involved in Forex trading in India.

(iii) Decide on your strategy or mix to trade in forex. The two main currency trading strategiesin the Forex currency market is the simple buying or selling of currency pairs, and the second is to purchase derivatives that track the movements of a specific currency pair in the currency trade.Currency futures tradingenables the investor to take a position on forex exchange for a time in the future, based on which an action can be predetermined.

(iv) Establish some ground rules. You can decide here on your risk appetite, which currencies you want to trade in, what margins you will go after what thresholds that will determine what actions you will take, etc. For example, you can decide to sell when your position changes beyond a ten percent positive or negative.

Types of order

There are three types of online currency trading orders for a trader looking to open a new position in the Forex market.

Market Order: This is when you tell your broker to obtain the currency at whatever exchange rate it is currently trading at in the market.

Limit Order: your trader specifies a certain entry price and a transaction is carried out at that price.

Stop Order: When research or speculation points to an increase in price, a stop order can ask the broker to purchase at a rate higher than current market rate. This is in anticipation of a high profit. This can also be an order to see at a price lesser than market rate to reduce further losses.

The above points should set you off with the basics of how to trade in currency.

How is the price of currency Determined

Trading in currencies

Before getting into the currency trade,you must know about the factors that determine the price of a currency.

The Forex marketis a massive market and the free flow of finances contributes to the appreciation and the depreciation in the foreign exchange market. There are many online trading courses that help to understand the basics and advanced level currency trading equipping you with some pointers to start-off.Currency trading strategies can also be planned while keeping in mind what affects the price of the currency:

The price of currency is determined on various factors

Demand and supply: If the demand for the currency were to increase the exchange rate will go higher as well. For example, in the 2012 London Olympics when tourism to the UK increased their currency appreciated by over 20% in a short period of time. The behavior here is just like any other good, dictated by supply and demand

Market and situational sentiments: During cyclonic situations in the market, investors usually keep their money safe by keeping them in US treasuries, Swiss Franc, gold and so on to avoid losses to their portfolios. This would lead to foreign investors redeeming their investments from India. This in further could increase the demand for dollar vis-à-vis Indian rupees.

Speculation: When speculators sense improvements or downfall they too want to benefit from such rising or falling dollar and that’s when they start selling or buying dollar which further changes the demand of the dollar.

RBI intervention: The RBI buys dollars when rupee appreciates over acceptable limits and sells dollars when rupee depreciates. The RBI does so to avoid the volatility in the rupee –dollar rates.

Imports and exports: Importers are burdened with taxes and other situations for which the government incentivizes exports. Importing items would make us pay in dollars which in turn strengthens dollar’s demand. Export does the exact opposite.

Interest rates: The only way in which money would pour into India and provide us with the supply of dollars is when government interest rates attract foreign capital to India and encourages foreign exchange trading.

Public debt/fiscal policy: Currency fluctuates due to the government’s failed attempts at matching expenses with equivalent revenues which cause a shortage of funds in the currency trade. Then the government opts to borrow money from the World Bank and the IMF which in turn accrues interests, leading to currency fluctuations again.

Forex charts: What are they and how to use them?

Forex (Foreign Exchange – FX) is a currency trading market. Here traders participate in buying, selling, exchanging and speculating of foreign currencies. Central banks, investment firms, brokers, investors from all over the globe take part in trading in the forex market where transactions worth more than a trillion dollars are processed every day making it the largest market in the world with regard to the total amount of cash traded.

One useful way of tracking the prices of currencies is Forex Charts. Currencies in the forex market are valued by comparing it with another currency, called the Currency Pair. The first currency of which is called Base Currency and the second one is referred to as Quote Currency. Traders involved in forex market perform in-depth analysis of forex charts and decide when is the right time to buy a currency and when is the good time to sell a currency so as to make a profit in the money market. Candlestick, Bar, and Line are the different types of charts that traders use to analyze their next move in forex trading.

Line

These are simple charts that consist of a line representing one closing price to the next closing price of a currency. It depicts a currency’s movement over a certain period of time.

Bar

These charts are a little complex compared to line charts. Along with showing the opening and closing price of a currency it also shows the highest and lowest price for which the currency was traded. The entire bar depicts the range of price for which the currency pair was traded over a time period (an hour, a day etc.). Projection on the left side of the bar indicates the currency’s opening price and that on the right indicates its closing price. They are also called as OHLC (Open, High, Low, Close) charts.

Candlestick

A better version of a bar chart, candlestick chart has a large block in the middle which specifies the opening and closing currency price range. If this block is filled, then it indicates that the currency pair closed at a price much lower than the price at which it opened. If it is hollow, then it is the other way round.

Forex indicators that you should look out for

“Trading the forex market with technical charts is not only exciting but also lets you make some huge profits from the moves in the money market. Traders are always looking out for the forex signals, which will give them a buy or a sell opportunity. There are a variety of forex indicators, which have been tried and tested over the years. The only problem with these indicators is that they are lagging and cannot be the sole criterion to trade in the forex market. The indicators which are used for currency trading help to determine the best time to buy or sell the cross rates. It is over time that one gets comfortable to trade with a few of them.”

Indicators That Most Traders Use To Trade The Forex Market

Brokers give you forex tips on the basis of these indicators. Each indicator has a different use. A few are used to identify the trend while others are used to find out the strength of the prevailing trend. There are also indicators to help in booking profit.

Moving Averages

Moving averages are used to gauge the trend of the market. Two moving averages are used simultaneously and when there is a crossover, it indicates a confirmation of a trend.Different traders use different pairs of moving averages for trade confirmation. It is a tried and tested formula which will take some time to master.

Moving Average Directional Index (MACD)

MACD is a very popular trend-supporting tool. This indicator does not tell you what the trend it. Instead, it tells you how strong the current trend is. So whether the trend is up or down, you can gauge the strength of the prevailing trend with this indicator.

Bollinger Bands

Bollinger Band is another popular forex indicator, which is used by traders to time the entry and the exit in the market. When the price reaches the lower line of the Bollinger Band, then there is a high probability that the price will rise. Similarly, when price touches the upper line of the Bollinger Band, prices are likely to fall.

Forex market offers a lot of volatility and using these indicators on the technical charts can let you make some highly profitable and rewarding trades.

Forex market: How does it work?

Forex market or a Foreign Exchange Market is one of the largest financial markets in the world. As the name suggests, all the currencies in the world are traded in the largest intangible financial market in the world. The magnitude of transactions can only be imagined, considering the number of currencies and relevant traders around the world.

Why trade currencies?

Even before we understand the functioning of the forex exchange market, we should understand the significance of trading currencies. Since every region has their own particular currency in which transactions take place, a forex market is required to trade in regions other than their own reign. ?Region? can be dubbed as your respective country like the US dollar or the Indian Rupee or it can be dubbed as the entire continent like the European Euros. Any businessman wanting to trade his / her goods in a foreign country, a tourist wanting to visit another nation or an investor trading in currencies for sole purposes of gaining profits can be found as active participants in the forex market. Although tourists are not essentially traders but rare purchasers of the respective currency.

How do we trade?

Forex market is an intangible market. Here again, forex trading can take place through brokers. Online brokers provide you a retail space where investors need to open a forex trading account to carry out the transactions. Investors open a forex trading account to indulge in regular trading of currencies.Alice Blue is one of the leading firms that provides the facility of zero brokerage forex trading.

Fixed and floating exchange rate:

MACD is a very popular trend-supporting tool. This indicator does not tell you what the trend it. Instead, it tells you how strong the current trend is. So whether the trend is up or down, you can gauge the strength of the prevailing trend with this indicator.Anything that is traded in any market happens at a price. In the forex market, different currencies have different systems of trading at an exchange rate. Some government use the fixed exchange rate systems, where the government or the central bank of the country peg the currency with a particular exchange rate before opening it up to the market.Some countries follow the floating exchange rate system, where the exchange rate is decided by the market forces of demand and supply. India uses the floating exchange rate system at large although intervention by the government is legally allowed, if and when required.

Forex Prices: What factors affect them?

The forex market is just a fancy term for the foreign exchange market. In the forex market, there is an official trading of currencies that take place and this is where the buying and selling of shares happen at an international level. The foreign exchange market affects the economy of every single country and contributes to them majorly thus making it the largest market in the world.There are many factors that affect the forex trading in India and they affect it significantly.
The economic health of the country

It is highly essential that a country has a healthy economic condition to determine a good currency value. A country must generate a good GDP, employment results, and so on to help the currency stand in a strong place in the world.

Government policies

Fiscal and monetary policies play a role in affecting the currency as it concentrates on the spending of money for government purposes that can ultimately change the value of the currency itself.

Inflation:

If a country is undergoing rising levels of inflation, then the currency is bound to drop out in terms of its value. Forex tips will have to be followed while considering investing in the international market as inflation can have a huge impact.

Efficient trade systems:

Trading that occurs between two countries must happen in a clean an efficient way so as to promote forex prices. If surpluses or deficits occur, there can be a negative impact on the currency thus producing undesirable results.

Politics:

Politics is something that influences anything and everything in a country. So it is only natural that the country?s currency depends on it as well. The dirty game of politics can affect not just one but two countries at the same time. If there is a political upheaving in one country then apart from affecting just the respective country, it also has the ability to affect the neighbouring country as well. International, external, and internal political events can all have influences (both negative and positive) on the forex exchange.

Why should I invest in Forex?

Currency trading ? buying and selling currency ? in the foreign exchange market is a 5 trillion trading volume market which is sixty times larger than the New York Stock Exchange.If that?s not reason enough, investing in forex investment ensures high liquidity and returns. It also can be extensively leveraged with only a small initial investment. Unlike the stock market, it is open 24 hours a day and can be traded at the convenience of your home without disrupting your day job.While stock traders and investors make double digit annualized returns, forex traders make double of that on a monthly basis which makes it high yielding.

Narrow Focus

The stock market has a thousand different stocks to trade on while the forex revolves around eight major currencies. It makes the currency market a less complex place to trade in.

Liquidity And Size

Daily trades account for enormous volumes making it the most liquid market in the world and therefore is large in size too. This ensures that no one can corner the market, even banks. Banks find it hard to have enough pull to control the market which makes it easy for traders to make large moves.

Simplicity

Using technical analysis like charts and trends are more than enough to trade, thereby making it a zero brokerage trading. There are options of using broker services but to a large extent it can be carried out individually.

Leverage Margin

All trades are carried out using borrowed money which allows the traders to take advantage of this leverage margin. Hence, if a trade of $1000 is being carried out, an amount as small as 2-5 dollars needs to be set aside as security deposit. This guarantees that all traders leverage even the smallest movements in currencies by being in control of more money than they have in their account.

How does Forex trading work?

Forex trading is the buying and selling of two currencies. The two currencies that are traded are what make up a ?currency pair? and re always traded in pairs. Currencies in the forex market are represented by three letters, first two letters denoting the country and the last letter identifying the currency.The currency pair reads in opposite direction of mathematical ratios, example: EUR/USD = 1.23700 .Wherein, the currency to the left of the slash is the base currency and the right of the slash is the quote currency meaning 1 unit of Euro is equal to 1.23700 of U.S. Dollars.A trader in the money market therefore has to pay 1.23700 Dollars to buy 1 Euro. Similarly, if he is selling, the foreign currency exchange will specify the units of the quote currency the trader will receive for selling a unit of base currency.Taking the above example into consideration the trader would receive 1.23700 Dollars if he sells 1 Euro.

The Right Time To Buy And Sell

The right time to open a buy position is when the trader speculates the value of a specific base currency to increase. To open a sell position, the trader would look for a value of a specific base currency to decrease.

Earning Profits

Quote currency is the profit or loss earned or incurred in a trade, as the currency pair price is given in it. For example, if a trader buys euro-dollar at 1.3000, and sells it at 1.3010, his profit is $0.0010 or 10 pips for each euro. A pip is the smallest measure of price move on a forex exchange.Spread: Each trade has two prices: bid price and ask price. The bid price is the rate at which the broker buys and trader gets on selling. The ask price is the proposed price at which the broker sells and the trader pays to buy. The difference between bid and ask price is the spread or the broker’s profit.In a Euro-Dollar trade at 1.4000/1.4003, the spread accounts to 3 pips. On trading 100,000 euro-dollar, the broker earns a total of $30, irrespective of the trader?s profit or loss. If the currency pair rises to 10 pips (that is, from 1.4000/1.4003 to 1.4010/1.4013), the trader will earn only 7 pips because it was bought at 1.4003 and sold at 1.4010.Hence, while trading, a lower spread is better for traders, as it gives higher profit.

New Trader

For a newbie, there are many demo and micro accounts to practice on and several brokerage and zero brokerage forex trading offices that office expert services.

Forex Jargon

Basic Forex Jargon

Are you planning to start online forex trading? If yes, then you would definitely need to know these basic forex jargons to be able to trade in the currency market.

Cross Rate-Currencies are always quoted in pairs. However, if the currency pair is quoted in a country where none of the two currencies traded is the country’s own currency, then your broker would mention the term Cross Rate. Do ask your broker for a zero brokerage account when you open an account with him to start trading in the forex market in India.

Exchange Rate – Exchange Rate is the value of one currency which is expressed in the value of another currency.

Pip- Pip – It is the smallest increment in the price movement which a currency pair can make.

Leverage– When you trade forex, you get a lot of leverage. This means that your broker lets you trade for a higher amount keeping the capital invested by you only as a margin. You can use the forex brokerage calculator to calculate the brokerage that your broker is charging you for the trade. Leverage is good since your profit percentage increase. However on the flip side it also increases your loss, should the trade not move in your direction.

Margin – Margin is the amount of money that you need to deposit with the brokerage firm to be able to start trading the forex market. Since the broker gives you leverage, you can trade for an amount over and above the margin. However, in case you are in a trade and start making huge loss, then you will receive a “margin call” from the broker asking you to deposit more margin.

Spread – Spread is the difference between the sell price and the buy price.

Bid and Ask price Bid – The price at which the broker will buy the currency from you. Ask – The price at which the broker will sell a specific currency to you. . When you trade the forex market, you always trade a currency pair. The stronger currency is written to the left of the weaker currency. You are thus buying one currency and selling the other, each time you make a trade.

Forex Signals

How to Spot Common Forex Signals

Trading the forex market in India is definitely rewarding. However, in order to be able to understand how to spot the forex signals you need to know how to read the technical charts. There are a number of ways in which traders analyse and then buy or sell in the currency market. There are a few popular trading strategies which are followed by the majority.”

Support and Resistance

Support and Resistance is the crux of Technical Analysis. They are the likely turning points and show the zones where the demand and supply is the maximum. Whether you are an equity trader, a commodity trader or a forex trader, knowing how to identify Support and Resistance levels is a must. They let you decide on the best forex rates in which to enter the market.

Multiple Time Frame

You cannot trade the forex market by just observing a single time frame. There are different combinations of time frames that you need to analyse in order to take a high probability trade. So when a particular time frame will give you an indication of the trend, the other will let you draw the high probability supply and demand levels.

The Average Directional Index – ADX

ADX indicates how strong the forex market is. It lets you know if the current trend of the market is strong or weak. This lets you either stay in your trade or book profit.ADX is a very useful indicator mostly used by advanced and professional chartists.

Head and Shoulders

Head and Shoulders is a very well known formation that traders look for in the technical charts. This indicates a peak in the market and signals possible reversal. The pattern looks like a head between two shoulders and thus the name. This is a common forex signal that is traded.

Moving Averages

Moving Average is a very popular tool used by traders to spot common signals in the forex market. The moving average shows the trend of the market .Most traders use two moving averages on their chart simultaneously where a cross over signals that the trend is still strong.Your broker may offer you a zero brokerage account to trade the forex market. The forex market gives you a lot of leverage. It is important that you know how to read the technical charts or get help from a professional chartist to be able to make consistent profits in the forex market.

Forex Trading Basics

Forex Trading for Beginners

Trading of currency in foreign exchange is called Forex trading. With a trading of $5 trillion per day, it provides an exciting way to make money by predicting the direction of the market with a small original investment.

How to do Forex trading?

Online forex trading is a simple and best way to do forex trading. There are numerous players in the market that provide the service of doing forex trading. Most of the major players have dedicated customer support team to ensure hassle-free trading along with professional guidance and training if required. While choosing the broker it is best to look out for the established and reputed names in the market which signifies that they know how to manage their clientele.

How to open a forex trading account?

Like equity market, for forex trading also, a trading account is required. Each provider will have a different services and account type, so it is better to go with the one that suits your need. There are two things that should be kept in mind before selecting a broker. Leverage and commission/ fees. Leverage is the power to control a large capital with small initial investment. For Eg: 50:1 leverage gives one the control over Rs. 50 with investment of Re. 1. Leverage helps in making big gains but also might lead to large losses if the market does not go your way.Commission/fees is the amount charged by the brokerage for every trade done through them.

What is Forex brokerage?

The entity that connects the trader to the forex market is the Forex brokerage. Forex, unlike equity which is traded on a single platform like BSE, NSE; is traded electronically between banks with varying prices from bank to bank. Forex brokers provide traders consolidated data of the rates by giving an approximate average of the currency rate at which trading can be done. Brokerages make money on every transaction done through them by charging a commission.

What is Zero brokerage?

Some brokers have plans of zero brokerage. This is basically broker charging for a subscription of services for a specific period of time without charging brokerage or fees for every transaction. The structure and plan for zero brokerage plan differs from broker to broker and it is advised to understand the plan completely before buying it.

How is the Forex market in India?

Forex trading is operated by Central government of India under FEMA 1999 (Foreign exchange management act). Trading on Foreign exchange or forex is not allowed but trading on Indian exchanges like BSE, NSE, MCX-SX which trade in USDINR, JPYINR, GBPINR, EURINR derivatives along with future and options is allowed.

Currency F&O brokerage calculator| AliceBlueOnline.com ™

Currency F&O Brokerage Calculator An Introduction

One of the largest markets in the world is the global forex market. However, that isn’t the only way to take part in foreign exchange. The currency market is not as large as the forex on, but it has a fairly high daily average. Currency futures give you access to the foreign exchange market which feels like the share trading market. In this market, currency futures, also called forex futures, are contracts which are used to buy or sell an amount of a particular currency at a price and date in the future which is set.

Alice blue brokerage calculators help you understand how much you stand to save in the indian stock market.Our web calculators are better than share calculators in excel.You can use it find out how much you will save if you subscribe to our zero-brokerage forex plan.

Online currency trading first introduced at the Chicago Mercantile Exchange, after the gold standard system was removed. This market works just like a regular futures market, where the currency is traded in terms of contract months at standard maturity rates.

The currency brokerage calculator The currency brokerage calculator is a simple online tool available. It can be used to calculate the net profit or loss after or before taxes. The calculator requires a number of input values. The brokers charge a small amount (variable) as stamp duty. Just like all other online calculators, you will need to input known values like selling and buying price. If the contracts are being traded at multiple prices, then you need to take the average. Another factor to look at is the lot size. The number of lots indicates the number of lots traded for which the net profit or loss is to be calculated using the online currency brokerage calculator.

The Process This process takes place through stock brokers, and brokerage is payable in mere amounts of paisa, determined by the turnover, which is influenced by lot size. Brokerage charges are made on both sides of transactions separately. The other charges, in the form of taxes, are calculated automatically. You can see two results on your calculator. One with and without the extra charges.

The net profit or loss is given only after taking into consideration the brokerage and taxes, as these are what most traders look for. You can buy and sell prices, and can be entered upto 4 decimal values. For trading in National Stock Exchange of India, the tick size is 0.0025. The way these values are determined to vary according to the exchange you are on. In India, the currency trading is offered in NSE-SX, MCX-SX, and USE. There are popular currency pairs like USD-INR, EUR-INR, GBR-INR.

Requirements to open a Forex trading account

Requirements to open a Forex trading account

Many forex broker firms will offer you a zero brokerage forex trading account to trade in the Indian forex market. Currency trading can be done online and you can trade in the currency futures that are traded in the exchange. Forex trading in India can be done in USD/INR, EURO/INR, GBP/INR and JPY/INR as permitted by SEBI and RBI. The trading account is linked to the clients bank account .The trader can place trades from anywhere by transferring the required margin amount in to his trading account.

What should you look for in a broker?

Before selecting a broker, you should check if the brokerage firm is ready to offer you these few basic services ·
Brokerage rates should be competitive ·
There should be an integrated platform for your bank as well as your trading account. This will make deposits and withdrawals very easy ·
Line marking is also very popular where the client can leave money in his trading account until the trade is done and earn interest on the amount when it is sitting idle. · A secure and a robust platform to trade online

Advantages of trading in currency futures

There are a number of benefits of trading in currency futures ·
The price discovery is transparent and very efficient ·
Trading in the currency market is very easy

Opening a forex account·

In order to trade in the forex market a forex trading account is a must. The account will be linked to the bank account of the customer. ·

The necessary KYC documents need to be completed and submitted. The KYC form is used to collect all the details of the client which is kept confidential. ·
The obligations as well as their rights is in a document that specifies the rights and duties of the client. ·
There is also a risk closure document which specifies the risk associated with trading the currency market. ·
The client will need to sign all the forms to show his acceptance and that he has read all the clauses and terms and conditions.

There is a member client agreement that also needs to be signed. The agreement is stamped and it lets the client receive the contract notes electronically. ·
The trading account will be opened after all verifications and the client will receive a unique username and password to start trading the forex market.

Currency trading: What should you know about it?

Currency trading: What should you know about it?

The Indian forex market is a vast market with various diverse features, pitfalls and advantages. Trading in currency futures and engaging in the spot forex market are features of forex investors. There is a very subtle difference between these two investment options. It is worthwhile to find out the difference.

“A currency futures contract is a legally binding contract that obligates the two parties involved to trade a particular amount of a currency pair at a predetermined price (the stated exchange rate) at some point in the future” – according to Investopedia. On the predetermined date, the buyer can own the currency at the rate decided in the contract unless the seller prematurely closes the position. The buyer may resort to “gamble” before the settlement date to check the price of the currency in order to get it at a cheaper rate.

With the spot Forex transaction, there is a physical exchange of the underlying currencies on the settlement date. The most common in commodities markets is that it involves the actual exchange of the underlying asset. An example of forex spot market participation is the case when an individual walks into a bank to exchange currencies. Currency futures in the currency market is involved in determining a trading price for a specific date and spot FX is to do with the physical exchange of the currency pair.

Forex brokers actively help all customers to deal with currency trading which is a huge market where all currencies of the world are exchanged with each other on a daily basis. Customers can take help of online forex trading for currency trading. Some offer zero brokerage forex trading account that is beneficial to the customers. Related to other markets, currencies have a tendency to be very volatile. So currency trading is a risky business. Using conservative risk management is the key to success in currency trading. The bottom line for success is to use a trading plan and be very cautious.

Financial institutions, individual retail investors and corporations are active participants in currency trading. While the banks and retail investors engage in currency trading for profit, the corporations carry on currency trading as a part of their day to day operations for an international business.

Indian forex market: A brief history

Indian Forex Market: A Brief History

To understand the history of the forex market in India, we have to trace its origin to the year 1978, when the RBI permitted banks to participate in intra-day trading in foreign currency exchange. This was a landmark move to give birth to a dynamic foreign exchange in India.

This initiative fuelled several opportunities to make profit for buyers and sellers. Consequently, banks began quoting two-way prices against the Rupee and the volume of trade began to grow. The value of Rupee was defined by the RBI in terms of a weighted pool of currencies of India’s trading partners. Since the RBI was buying and selling an extensive volume of Pound Sterling, its quotes became critical.

The 90s

During the nineties, economic reforms enabled the change in the exchange rate of the Indian Rupee. Such reforms invited a new age of the Indian forex market. A notable milestone in the Indian forex history was the appointment of an Expert Group committee on forex currency in the year 1994. As a result, banks received the freedom to carry out forex market development initiatives such as fixing trade limits, the ability borrow and invest funds in the international stock markets etc. Corporate organisations were enabled to take advantage of financial instruments such as interest rates and currency swaps in the currency exchange market.

The NSE

The first stock exchange that was formed in India was the National Stock Exchange (NSE) that issued forex currency futures and forex trading in India. To support close alignment between exports and imports, the government established the EXIM scrip scheme. This provides support to exports. Under the Liberalised Exchange Rate Management System (LERMS) RBI instituted a system of dual exchange rates. As per this system, 60% of earnings could be collected and the balance returned.

The foreign exchange currency trading in India is growing at a good pace although it is known that the forex market is still in the nascent phase in the currency exchange market. A significant point to note is that a considerable amount of the foreign exchange was contributed by NRIs and the Indian population living abroad. The way ahead to amplify the volume and success of forex trade is to take cognizance of the forex signals and build sustainable development plans.

The foreign exchange currency trading in India is growing at a good pace although it is known that the forex market is still in the nascent phase in the currency exchange market. A significant point to note is that a considerable amount of the foreign exchange was contributed by NRIs and the Indian population living abroad. The way ahead to amplify the volume and success of forex trade is to take cognizance of the forex signals and build sustainable development plans.

Requirements to trade in the indian forex market

Requirements to trade in the Indian forex market

The (Foreign Exchange) Forex Market is the largest financial market in the world. Currencies of different countries are traded in this market. The estimated daily currency exchange in this market is 4 trillion dollars.

Unlike other markets, the forex trading is carried out 24 hours a day as the market is always open. Whenever you hear of any financial scoop, you can immediately transact in the Forex market. Some of the steps are listed out that can be considered before starting to trade in the Indian forex market: Define your risk taking level The first step to start currency trading is to analyze and recognize that your risk tolerance and capital allocation to forex trading is appropriate. Plan carefully and stick to the planned goals.

Get aforex trading account

Various types of online forex trading accounts are available. Select one that best suits your needs. You can start with a mini account where you study the market well to get used to it. Then you can switch to a standard account when you have a fairly good knowledge of leverage and trading.

Choose your broker

While choosing a broker you need to find out whether the broker will be able to satisfy the financial goal that you are looking for. Their client profile should be similar to what you are looking for.

Begin with small sums

Begin with small investments and low leverage. You can concentrate on your trading choices to increase your account size by generating profit.

Focus on a single currency

To start with, trade with a single currency on which you have done your analysis and is familiar with its trend. Once you are comfortable with one currency, then you can move to multiple currencies.

Do what you understand

Trading should not be done on the basis of rumours and word of mouth. Do your own bit of research and invest when you are sure of backing up your investment.

Restrain your emotions Do not get carried away with the initial success or failure. Both are a part of the game. Take calculated and logical decisions.

Automate your trading to the extent possible Your trading choices can be automated to minimize the impact on emotions.

Things to consider before investing in the Forex market

Things to consider before investing in the Forex market

The (Foreign Exchange) Forex Market is the largest financial market in the world. Currencies of different countries are traded in this market. The estimated daily currency exchange is this market is 4 trillion dollars.

What is forex?

Forex is nothing but foreign exchange. The exchanging of various currencies in the world is carried out by currency trading in the money market. This is a comparatively unfamiliar ground for retail traders. Originally only the multinational corporations and big financial institutions used to trade in this market. Now, with the advent and popularity of online trading, individual investors are also venturing into this market and find it fascinating and lucrative.

How does the forex market differ from other markets?

Firstly, the forex market consists of approximately eight important currencies of the world. This is unlike the stock market where innumerable shares are traded daily. This ensures a narrow focus and easy understanding of what is happening in the forex market. However, the flip side is that there is no central regulatory body overseeing the currency trading and most of the trading is carried on based on credit agreements. Business here is the largest and in liquid form.

Forex Market cannot be cornered

It is difficult to corner the market due to its colossal size. Even large financial institutions are also unable to control this market over a long time period. This makes it an ideal place for the small investors to invest.

Some of the terms used in Forex trading: PIP

A PIP is the “Percentage In Point” (PIP). It is also called as “Point”. It is calculated as the minimum price increase of a Forex trading rate. 0.0001 is the most common PIP.

Ask price The price that you buy a currency at is the ask price. The market is agreeable to sell the currency at this price.

Bid price The price that you sell a currency at is the bid price. It is the price which the market is agreeable to pay you for this specific currency.

Spreads Spread is the difference between ask price and bid price.

Currency rate The rate of the currency against another currency. Define your risk capacity, plan your goals, get a forex trading account, select a broker carefully and start investing in the Forex Market.

Investing in the forex market: Things to know

Investing in a FOREX Market:

Things to Know

The currency market or Forex (FX), is among the largest markets in the world and accounts for more than $4 trillion average traded value each day. It comprises of commercial companies, banks, central banks, hedge funds, investment firms, and retail investors. Buying, selling, exchanging and speculating on currencies constitutes the activities of the Forex Market. There are some things that an investor must know before investing in a Forex market. Here are a few things that you should know about the market.

1. The Forex trading is a 24-hour cash market where trading occurs in currency pairs. It is also a speculative market that relies on investors and traders betting on a particular currency to go up and vice versa. The currencies are bought and sold according to the current price or exchange rate. It is a place where currencies are traded.

2. It is a future market and involves institutions, corporations and individual trade, where stocks are bought and sold based on a standard size and settlement date. In simple terms, contracts are bought and sold between two parties, with predetermined clauses stated in the agreement between the parties.

3. The option-holder has the choice to buy or sell at a future date without any obligation at a specified price in the future. He may thus handle money for a long time without having to worry about any other form of expense at his end.

4. Since this is a speculative market, no physical exchange of currencies takes place. All the transactions happen as digital entries in the name of the holder and this helps the holder exchange one currency into another for multinational corporations that need to trade currencies continually.

5. The forex market comes with huge returns as well as huge risks attached to it. However, many foreign currency exchange products which provide exposure to Forex markets are available, making it possible for the holder to associate himself with the market. It is a different form of an equities market and focuses on seven major pairs of currencies namely EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD & NZD/USD

6. Foreign currency Certificates of Deposits are available on individual currencies or and allow investors to earn interest at international rates. The trading also allows investing in the bonds of foreign governments that are denominated in the currency of the country of sale.

This fact proves valuable if the value of the foreign currency rises relative to the local currency of the investor, as the interest earned will also increase when the currency is converted. These are only a few of the major details of this huge market, and in the digital age, every investor around the world can invest and make a fortune in Forex Markets by timely actions and proper market advice.

What is commodity trading

Learn what is commodity trading and how it works

The commodity marketdeals in primary products rather than manufactured products. Commodities can be of two types –soft commodities like tea, sugar etc. and hard commodities like gold and oil, and further broken down into 4 other categories namely Energy, Agriculture, Steel and Livestock. Hence, individual investors and traders have an area where they can participateto extend their portfolios further than just shares, bonds, and real estate. Commodity tradingis the apt choice.

Commodities offer opportunities to be a separate alternative asset class for investors. If you know the demand and supply fundamentals of the market, then the commodity market is easy to understand.

Retail investors need to understand the risks involved with trading commodities before taking a leap. The commodity market has been pretty consistent historically, compared to equity and bonds which provide diversified options to the retailors. The size of the commodity market in India has been significant. Commodities constitute to about 58 percent of the country’s GDP of INR 13, 20,730 crores.

How does it all work

With the onset of the three multi-commodity exchanges in the country, retail investors can now trade in commodity futures without having physical stocks.Unlike before, retails investors can trade in the commodity marketwith very little investments as well.

You can take advantages of different exchanges in different markets barring Forex market, and you can pay the margin amount and trade in currency derivativesinstead of the full traded value.

How to start

To start trading online, retail investors need to open an online trading accountand choose their broker.

Several established brokers have memberships with NCDEX and MCX. MCX provides trading online. Therefore,trading mcx online becomes easy once the respective online trading account is opened with the chosen broker. You can get a list of members from the exchanges and decide upon the broker you want to choose.

As a standard practice, you will be introduced to the terms with the broker,the Know Your Client format that exist in equity trading, and the terms and conditions of the exchanges and brokerages respectively.

The minimum required investment ranges between 5 to 10 percent of the value of the commodity contract. It varies from exchange to exchange, but the minimum investment required should be INR 5,000 approximately.

Alice Blue commodity trading account helps you trade in the indian mcx at zero-brokerage on all your trades.

Alice blue commodities helps traders of all needs trade in the indian commodity market.Our zero-brokerage commodity trading account lets you make unlimited transactions at zero brokerage.

How can I trade in Commodity

Commodities are products of daily use that can be bought or sold. While there are products that we can buy or sell as individuals, we normally cannot invest in them today and sell them later at a profit or loss without physically holding them. Further, products that are not available in retail are out of reach of individuals. With commodity trading exchanges that have been set up, individual investors can now trade in commodities which were previously not feasible. Commodities that can be traded in can be broadly categorized into four categories

Energy (gas, oil, heating oil, etc.)
Agriculture (wheat, sugar, rice, etc.)
Livestock and Meat (pork, cattle, etc.)
Metals (gold, silver, etc.)
To start off with commodity trading, once the initial online trading account is open and the stock exchange is chosen along with the broker, you need to look for information on commodities in daily financial newspapers that carry spot prices and relevant news and articles on most commodities. Brokers provide support with research and analysis, besides there are specialized magazines for subscriptions.

The are three approaches to commodity market trading and one can adopt a style based on their interests and objectives. They are:

Hedgers: They primarily guide themselves from price movements in the future by taking a position on a commodity today. Producer-hedgersreduce the risk of declining prices in the future when they actually produce the commodities. Consumer hedgers do just the opposite.

Speculators: They study the market and take a position to make a gain in the commodities market.Arbitrageurs: They take advantage of a price difference for the same commodity in different exchanges by buying commodities from one and selling in the other, or vice versa.

Example of commodity trading exchange

MCX is one of the three commodity exchange based in Mumbai that is independent and regulated by SEBI, and allows you to deal in the MCX commodity market.

You can trade in this exchange through a broker. You can get updates of live commodityprices using commodity live functionality of MCX, and also through your commodity broker.

Importance of Gold as a Commodity

One of the reasons for investing in gold (gold MCX in case MCX online is the exchange of choice)is because of its importance as the oldest precious metal and its value as a global currency. Gold has huge demand and supply and is spread across the globe. India amongst them is the largest market for gold jewelry and a key driver of the global gold demand. Two third of the Indian demand for gold comes from the rural parts of the country. Indian households have the largest stock of gold in the world and this is a consideration to be noted for the commodity market in India.

Alice Blue can be your broker of choice with excellent market intelligence on commodities and competitive prices. Alice blue brokerage charges help you trade in the indian commodity market without you having to pay any brokerage charge at all.

How does a Commodities Exchange Function

Commodities Exchange

While choosing to trade with the commodity market in India,you must know about how this market functions and its major exchanges.

The basic Functioning of Commodity Exchanges

There are three national commodity exchanges in India and one of them have to be chosen. A commodity exchange has a list of brokers as their members, for commodity live trading, who offer services for zero brokerage or for a fee to you.

It functions pretty much the same way like a stock market does. Consider the commodity exchange as a common place where traders can buy and sell commodities. Exchanges ensure flawless trading, which eliminates the need for middlemen and in return this helps the market to fix a price that is driven purely by demand and supply of the product.

How trading is Done

(i) Cash/spot commodity trading happens when the buyer and seller agree upon a price of the commodity and actual delivery of commodities take place.

(ii) Futures trading happen when the buyer and the seller happen to agree on a price of the commodity, but the delivery happens at a future date. Commodity manufacturers /producers look out for the fall of prices in the future and they hedge their produces while commercial consumers lock in a maximum number of goods in order to avoid paying higher prices later.This entire process is done electronically. The producer submits an offer price and the future delivery date of a certain commodity on this exchange. The seller, who agrees to pay that price, enters into a contract with a buyer. Almost all transactions happen the similar way, allowing the actual flow of demand and supply to determine the price.

Commodity Exchanges of India

There are twenty-four commodity exchanges in India for commodity trading, and three national level exchanges through which all permitted commodities can be dealt in

.• National Commodity and Derivative Exchange (NCDEX)

• Multi Commodity Exchange of India Ltd (MCX) – MCX online

• National Multi-Exchange of India Ltd.

All the three have online trading and settlement systems and hence, you can trade in them using an online trading account.

What are the major factors that impact commodity prices?

Commodity Prices

The three major factors that impact commodity prices are weather conditions, economic and political conditions, and government policies.

Weather conditions: Agricultural commodities are traded in majority in the global markets, and the weather affects production of these goods. Sudden changes in weather can impact production. Inadequate or excess rainfall, droughts impact the availability of the produce which shorten the supply and increase the demand.

Economic and political conditions: Price of commodities is also dependent on the economic conditions of a geographic area along with the political conditions. The producers and the consumers of that region work their supply and demand knowing the conditions. A weak economic condition reduces the spending power of consumers, leading to a fall in demand, which results in movement of prices.

Government policies: Changes, whether minor or major, in the government policies, reflect on the price of a commodity at large. The change in import/export government policies. For example, increase in import duty on edible oil results in a hike in its price. The buyer and seller work their supply and demand respectively with respect to the policies.

Other factors like currency movements, inflation, seasonal variations,are also importance factors that contribute to fluctuations in commodity prices

(i) Price movements of other commodities in combination with global demand for commodities such as gold or silver in the commodity livemarket

(ii) Global, and in particular US, inflation impacts the prices driven by rising money supply.

(iii) The trade and growth imbalances against the US and the resulting twin deficits that turn into a fear factor.

(iv) The activities by the central bank like money printing and sales also reflect on prices of commodities.

(v) Private and physical demand and supply also affect the price of a commodity.

Given the above factors, you can now decide which exchange to choose and work with the brokers with lowest brokerage charges. There are also companies that provide commodity advisory online to its traders which allow them to freely sync with the exchange and keep themselves updated. Your broker can also be a source of commodity advisory. You can now begin to trade safely after researching well and understanding the global commodity market with the commodity market in India and how it works.

How can I get these equity shares

Equity shares can be “bought” through the stock market when a company makes an offering. You could also purchase them from other investors who are willing to sell their holdings for various reasons through a trading account

I am interested but unsure of how to invest in share market. Who can help me

If you are apprehensive but want to invest in the share market, an experienced guide who can be a stock broker would prove to be invaluable

A stock broker specializes in dealing with shares, mutual funds, and other such financial instruments. They could be individuals or companies. They can advise on the best ways and companies to invest your money in and even deal on your behalf. Some do this in exchange for a fee.

If you are a newbie and wondering how to invest in share market, a stock broker can prove to be beneficial and help you get the bang for your buck!

Commodity Trading: Different types of derivatives

Commodity Trading: Different Types of Derivatives

Trading in the commodity market involves buying or selling commodities on exchanges such as the MCX and derivative trading is a part of this market. Here, derivatives are products, which get their value from an underlying asset or other variables. Trading in derivatives can be of two types – exchange trading or over the counter. The latter is applicable to most complex types of derivatives and transactions are conducted directly between large financial institutions.

The commodity derivatives market covers various segments such as agriculture, metals, coal, crude oil, and gas to name a few. Benefits of derivatives are that they boost entrepreneurial activity, increase long-term returns and savings, and help transfer risk from conservative traders to risk takers. The different types of derivative instruments in commodity trading are:

  • Forwards
    These are contracts between a buyer and a seller to purchase or sell something on a later date at a price agreed upon the current date. Also known as forward commitments, they do not come with a cancellation clause
  • Futures
    A futures contract is defined as a financial agreement between two parties (buyer and seller)to buy or sell an asset at a future date. Futures contracts are subject to daily settlements. They have quite a few things in common with forwards contracts from which they have evolved.
  • Options
    Options can be categorized into two categories – call and put. In a call, the buyer has the right to buy a certain quantity of the underlying asset at a determined price on or before a particular date. Similarly, put gives the buyer the right to sell a certain quantity of the underlying asset at a determined price on or before a particular date. There is no obligation involved in either.
  • Swaps
    This refers to an exchange of financial instruments between two parties as per an agreed upon formula. They help to hedge risks of different kinds. Currency and interest rate swaps are commonly traded in the market

The Securities and Exchanges Board of India (SEBI), has quite a few measures in place to safeguard the rights of investors in the derivatives market as well as online commodity trading.

Commodity Market: What are the different commodities being traded?

The commodity market has many similarities with the stock market. The main difference being that it involves trading in raw or primary products rather than manufactured goods. The two different segments in commodity trading are the over-the-counter trades and the exchange-based trading. Again, these can be further classified as spots and derivatives trading.

There are three national level commodities exchanges in India—the Multi Commodity Exchange of India (MCX), the National Commodity and Derivative Exchange (NCDEX), and the National Multi Commodity Exchange of India Ltd. (NCMEX). Commodities that are traded can be broadly classified into two categories—hard and soft

  • Hard commodities refer to naturally occurring resources that have to be mined or extracted. Examples include gold, rubber and oil
  • Soft commodities are agricultural products or those that are grown. Examples include corn, wheat, soybean, and sugar.

Industrial Metals :Copper, aluminium, lead, steel, nickel and zinc fall under this category since they are widely used in various industrial applications. There is a global market for all of these.

Precious Metals:These are metals of high economic value such as gold and silver. Metals from the platinum group such as ruthenium, rhodium, palladium, osmium, iridium, and platinum also come under this segment. It is not just practical to use, but their investment potential is huge, which makes them lucrative for business. Gold and silver are known as highly liquid commodities both in the Indian market as well as the global.

Energy :Crude oil, natural gas, and coal fall under this category. Crude oil is the most significant of these on the national and international scene. Developments in the oil market have an impact on the economy of nations and crude oil is considered one of the most liquid commodities on all exchanges

The daily fluctuations in the gold market, MCX crude, copper MCX, and MCX silver are all followed with great interest by a good deal of investors and traders within the country and outside.

Commodities: Why should you trade in them?

Commodity trading is a good option for those who can afford to hold positions for a longer period of time. It is also recommended for diversification and balancing of portfolios. Trading in commodities is considered a risky venture. But at the same time, they offer quite a few benefits when compared to stocks. Let us take a look at some of these benefits offered by trading in commodities.

  • Better returns
    There are huge swings of prices in the commodity segment and making the right investments can help you convert these into spectacular profits. Understandably, the risks are also higher, but will not be a hindrance to a knowledgeable trader.
  • Security against inflation
    When there is inflation, the value of the rupee falls. This leads to an increase in the prices of commodity goods, which can translate into profits for you. Commodity prices also increase during such times because many traders liquidate their equity positions to purchase commodities.
  • Lower margin thresholds
    The fact that commodity trading has lower margin thresholds makes it more lucrative to many. Margin refers to the money that has to be deposited with the broker before you can carry out trades. This is usually somewhere between 5 to 10 percent, which is much lower than that of other asset classes. This means that you can trade in larger volumes while putting up very little money.
  • Greater liquidity
    Poor liquidity in the equity market costs many traders when attempting to enter or exit positions. There are more options available when trading in the major contracts like sugar, gold, oil, and natural gas. The availability of online commodity tradinghas added to its sheen.
    Ensure that your trading in the commodity market does not turn into mere speculation or gambling. There is a danger of this happening when the trader does not have adequate information or knowledge about what they are doing. Just remember that a good mix of stocks and commodities is considered a good portfolio by analysts especially when it comes to turning a profit. Facilities like MCX live make it easy to track commodity prices.
Indian Commodity Market: A brief introduction

The history of commodity trading in India dates back centuries and has evolved a great deal from its early beginnings. Trading in commodity futures is similar to trading on the stock exchange. Price fluctuations can be quite volatile depending on the type of commodity you are dealing with, but no more than they are in the stock market. The fluctuations in prices are more than adequately made up for when it reaps returns. Many opt for commodity trading as a means of diversifying their portfolio.

What is Commodity trading?

Commodities here refer to the items defined as per the Foreign Currency Regulation Act (FCRA). You can buy and sell the products available in the commodity market just as you would trade in stocks or equity. You can pick long or short positions while trading commodity derivatives on the National Commodity and Derivative Exchange (NCDEX) and the Multi-Commodity Exchange (MCX).

List of Commodities

The commonly traded commodities include agricultural products such as cereals, pulses, cotton, sugar, jute and jute products, spices, coffee, tea, and grains, fuels like crude oil and natural gas along

Influencing factors

Supply and demand are the deciding factors when it comes to prices in commodity trading. Inventory figures come into play when it is perishable commodities or high demand items like crude oil. Global prices and political instability are crucial in determining whether prices will spike or slump. Climatic conditions can have an impact too.

Some facts Trading in commodities requires a smaller investment because you need to just put up the specified margin amount. The brokerage also can be on par with those in the stock market and forex trading. These factors make it appealing to speculators. Understanding the functioning of the commodities market is quite simple and contrary to popular belief.

One significant benefit of the commodity market is that it encourages price transparency and helps control cartelization while aiding fair price discovery. Commodity trading is for big and small investors alike and once you get the hang of it, reaping profits might become a habit.

Commodity trading for beginners

Investing in commodities is advised as a good move when diversifying your portfolio. The advantages of investing in the commodity market include helping in ideal asset allocation, hedging against inflation, and involvement in global demand growth. There is a substantial risk associated when investing in this segment, which is offset by the significant returns that can be accrued.

  • Types of Commodities The commodities traded on the various exchanges are broadly divided into three categories—metals, agricultural products, and energy. Gold, copper, and silver are some examples of metal commodities. Sugar, grains, and spices come under agricultural products while crude oil and natural gas are categorized as energy.
  • Starting off You will have to open an account with a brokerage firm or broker before you can start placing your trades. Photo identification, PAN card, and other such documents will have to be produced for the process to be completed.
  • Factors influencing commodity markets Demand and supply are the two factors that drive the commodity market. Inventory assumes importance in deciding prices when the commodities in question are perishable products or high demand products like crude oil. The government policies, political climate in the country and the world, and social changes all have an impact on commodity prices.
  • Track performance It is essential to stay updated on the fluctuations and live commodity prices when placing trades. Making an informed decision can reduce the risk factors associated with the commodity market. Though you will come across numerous commodity tips, it is important to distinguish between the good and the bad ones. Not every tip will be from a reliable source, so be sure to conduct your own research and follow the findings.

Subscribing to a commodity advisory issued by your broker or some other expert might be a good move that can help you sift through the riff-raff. Irrespective of whether you have taken up online commodity trading, or are doing it the old-fashioned way, it is important to remember that information about demand and supply in the commodity market is not as accurate and controlled as in the equity market.Investing in commodities is advised as a good move when diversifying your portfolio. The advantages of investing in the commodity market include helping in ideal asset allocation, hedging against inflation, and involvement in global demand growth. There is a substantial risk associated when investing in this segment, which is offset by the significant returns that can be accrued.

  • Types of CommoditiesThe commodities traded on the various exchanges are broadly divided into three categories—metals, agricultural products, and energy. Gold, copper, and silver are some examples of metal commodities. Sugar, grains, and spices come under agricultural products while crude oil and natural gas are categorized as energy.
  • Starting offYou will have to open an account with a brokerage firm or broker before you can start placing your trades. Photo identification, PAN card, and other such documents will have to be produced for the process to be completed.
  • Factors influencing commodity marketsDemand and supply are the two factors that drive the commodity market. Inventory assumes importance in deciding prices when the commodities in question are perishable products or high demand products like crude oil. The government policies, political climate in the country and the world, and social changes all have an impact on commodity prices.
  • Track performanceIt is essential to stay updated on the fluctuations and live commodity prices when placing trades. Making an informed decision can reduce the risk factors associated with the commodity market. Though you will come across numerous commodity tips, it is important to distinguish between the good and the bad ones. Not every tip will be from a reliable source, so be sure to conduct your own research and follow the findings.

Subscribing to a commodity advisory issued by your broker or some other expert might be a good move that can help you sift through the riff-raff. Irrespective of whether you have taken up online commodity trading, or are doing it the old-fashioned way, it is important to remember that information about demand and supply in the commodity market is not as accurate and controlled as in the equity market.

Differences between trading in stock and commodities

The process of trading in the commodity market is similar to that of trading in stocks. The main difference is that instead of buying or selling equity or stocks of various companies, commodities such as energy, agricultural products, and metals are traded on a commodity exchange. Besides these, there are differences in the instruments of trade and the units. Let’s take a look at some of the significant differences as well as pros and cons of both.

Associated risks

The risks associated with commodities are in fact less than that in stocks, contrary to popular belief. Commodities are not as volatile as they appear to be. Metal and energy contracts have a cutoff barrier of 6 percent either way but stocks can fluctuate up to 20 percent in a single day. For agricultural commodities, this cut off is at 4 percent.

Trade timings

The trade timings of the stock exchange and the commodity markets vary. The stock market functions from 9.15 am to 3.30 pm while the commodity markets stay open from around 10 am to midnight. This gives commodity traders a greater window of opportunity to carry out trades and maximize their profits.

Ease of trade

Trading in commodities is pretty simple because it is just a matter of supply and demand. But, trading in stocks and equity is slightly more complicated. Without researching about the company you are investing in and making any kind of monetary commitments is not advisable.

Returns and benefits

Here, stocks stand at a slightly better advantage because quite a few of them pay out regular dividends to investors based on their performance. This does not happen in commodity trading online or otherwise. The value of commodities, however, is dependent on a physical asset, which makes them a lucrative investment during periods of economic uncertainty.

In spite of the various differences, both stocks and commodity markets have one thing in common — the advances in technology have made it easy to acquaint oneself with the different aspects of the process through facilities such as online stock trading and regular updates on NCDEX rates.

How Does Commodity Trading Work
Commodity trading : How does commodity trading work ?

Trading in the commodity market is similar to trading in the stock market. The main difference is that commodities take the place of stocks. There are three national commodity exchanges in India—the Multi Commodity Exchange (MCX), National Commodities and Derivatives Exchange (NCDEX), and the National Multi Commodity Exchange (NMCE). Buyers and sellers can connect on these exchanges to make their deals.Metals like gold, silver and copper, agricultural products like sugar and grains, as well as crude oil and natural gas are the commonly traded commodities. Here’s what you need to do in order to start commodity trading.Choosing a brokerThere are quite a few commodity brokers out there. Do some research and ask around for references of experienced brokers. Independent individuals, brokerage firms, and financial institutions can all be considered for the purpose.

The broker has to be registered with the commodity exchanges before he can place trades for you. Check the kind of brokerage rates that are charged.Minimum investmentYour minimum investment can be as low as Rs 5,000 because margins are all that you will need to pay. The margin will be around 5 to 10 percent of the commodity contract. Brokerage transaction charges can be anywhere between 0.10 to 0.25 percent of the contract value.Miscellaneous chargesStamp duty is payable in case of delivery. Instances of delivery will incur extra charges imposed by the broker.

Squared off trades will not incur any sales tax but sales turning into delivery will have to pay up. This will be applicable as per the location of delivery.Study the marketsGet to know as much as possible on all aspects of commodity trading. The financial dailies and magazines are a great source of the newest information. Surfing the web and analysing available data is another option. This will help you to understand trends and make the right decisions when required.All the three national exchanges offer electronic trading and settlement systems. You might also need to open a demat account before you start trading.

Doing this will also make it easier for you to carry out online commodity trading.Alice Blue commodities trading account helps you trade in the indian mcx at zero-brokerage on all your trades.

Commodity Options Trading
How to Trade in Commodity Options ?

Options are defined as a contract between two parties wherein the two parties (buyer and seller) enter into an agreement, which gives the option buyer, the right but not the obligation to buy or sell an underlying asset at a specific price on or before a certain date. The asset can be stocks, indexes, commodities, futures, or interest rate.The two types of options are call and put. When the buyer has the right to buy a certain quantity of the underlying asset at a determined price on or before a particular date it is known as a call. In put, the buyer gets the right to sell a certain quantity of the underlying asset at a determined price on or before a particular date.The concept of options is not currently available in the Indian commodity market, not even online commodity trading though there are indications that the Securities and Exchanges Board of India (SEBI) is considering introducing it in the MCX and other exchanges. Introduction of options trading is expected to throw up benefits like –

  • Increase in liquidity
  • Bring in more depth to the market
  • Open up participation to new players

Commodity options as a risk management tool:Commodity options are considered a good choice for risk-averse groups like farmers and small to medium enterprises. This will also prompt banks and financial institutions to come up with new offerings for the farming sector. Such schemes are expected to benefit agriculturists in terms of higher incomes and employment generation.

Options complementing futures trading:Combinations of futures and options can prove more effective. It can lead to a reduction of variability in the distribution of returns.Increased liquidity benefits:In addition to increasing liquidity, commodity options can lead to lower impact cost, better market stability, reduced volatility, and better price discovery to name a few.Seeing as how the benefits far outweigh the disadvantages, the introduction of commodity options in India seems a desirable move. If SEBI goes ahead with the move, it is sure to garner the support of commodity stakeholders, particularly the smaller players.

Copper Mcx
Copper MCX: How to Trade in it?

A compound metal thought to be the oldest known commodity, copper has played a significant role in the global economy. The price of copper commodity is closely influenced by factors such as the state of the economy and supply. In the Indian stock market, copper is traded on the Multi-Commodity Exchange (MCX). There are two options in copper MCX trading standard and mini contract.

  • Standard contracts: Available in the months of February, April, June, August, and November. Contracts represent 1 MT.
  • Mini contracts: Available as launched and are usually of 250 kg of the metal.
What You Need to Do

The first thing you need is an account with a stock broker registered with the MCX. Once this is set up do find out what the brokerage terms and rates are. Some offer zero brokerage trades to qualified customers. After your account is activated, you can start placing trade orders to buy or sell as per the minimum trading quantity. Futures trading is margin based and so you will need to pay only around 5 to 20 percent of the value. This percentage is fixed by the exchange.

Copper Trading Strategies

Trading in copper requires a good deal of attention and the price needs to be monitored closely. The fate of the construction industry and the movement of emerging markets is what determines the price of copper. Watching for news in these sectors can help you plan your trades better and make profits. Other factors that can influence the price of copper include the emerging trends in the market as well as the behavior of other traders. Advisories and tips are offered by numerous brokerage institutions and analysts. But it is important to filter out the reliable ones from the rest.

Only good knowledge of the commodity market can prove helpful here.The availability of online commodity trading has further simplified the process and it is now possible to place trades at the click of a button. Just remember to square off positions before the contract expires failing which you will have to take physical delivery.

Commodity Jargon
Basic Commodity Jargons That You Should Know Before Trading the Commodity Market

The commodity market in India can only be traded in futures. It is a much more liquid market than the equity market and tends to follow the technical charts better. This is because commodity is internationally traded .MCX and NCDEX are the two commodity exchange in India.

When you do an online commodity trading, you get to trade the agricultural as well as the non agricultural commodities. Agricultural commodities include cotton, cardamom etc and non agricultural commodities include gold, silver, crude, copper, natural gas etc.There are a few basic commodity jargons that you need to know in order to trade the commodity market.

Arbitrage : This is the term used for simultaneously purchasing and selling the same commodity in different exchanges or in different contracts in order to take advantage of any price difference.

Carry forward position: If a trader does not square of his position on the same day buy carries the position to the next day then it is called a carry forward position.Cash settlement .This is a method where the futures contract is sold and the seller pays the buyer the cash value of the commodity traded. This is as per some pre defined contract.

Hedging : Hedging is the term used to protect an open position by taking a counter position. Like buying one month’s contract ad simultaneously selling another month’s contract. This limits the profit but also limits the loss. Hedging is especially useful in the case of an adverse price movement.

Mark to Market : This figure is calculated at the close of the trading session each day. Your margin account is debited or credited as per your holding and the profit /loss made by the futures contract on that particular day.Before you open a commodity trading account, check with the brokerage firm about any zero brokerage option that they may have. If not, you can use the commodity brokerage calculator to know the amount of brokerage that is being charged as well as your break-even price on each trade. Most brokerage firms offer you an online brokerage calculator which lets you check the brokerage charged by just keying the buy and the sell price of the futures contract.

Commodity Indicators
Commodity Indicators That You Should Look Out For

The commodity market gives you many opportunities to trade and be profitable. Whether you are a day trader or a positional trader, you can trade in commodities using indicators, which help you spot high probability trading zones.Online commodity trading can be done on the MCX as well as on the NCDEX exchange. In order to be consistently profitable in the commodity market, you should know how to read the charts and look for the support and resistance levels on them.When you trade commodities, you can look for a few indicators to increase the probability of your trades.

Moving Averages

Moving average is one of the most popular tools that are used to gauge the trend in the commodity market. Your broker gives you the commodity tips using the moving average. Moving average not only lets you take a trade with the trending market buy also lets you figure out any reversal in trend. This lets you book your profits early and thus maximises your gains.

Moving Average Convergence Divergence (MACD)

MACD is a popular indicator when trading the commodity market. Like the moving average, it also lets you analyse the trend of the commodity. When the MACD shows a positive value it reflects a bullish trend. But as the value starts to decrease it signals a possible trend reversal.

Bollinger Bands

The Bollinger Band measures the overbought and the oversold condition in the commodity market. It has three lines, the upper line, which is the resistance, the lower line which is the support and the middle line which is the trend line. Price tends to move within the upper and the lower band. However in case the price moves further away from the bands, it tends to come towards the middle line.

Relative Strength Index (RSI)

RSI indicates the overbought and the oversold condition of the commodity market. It is read on a scale of 0 to 100. If the RSI reads a value of 70 or above 70 the market is overbought. Similarly, if the RSI value is less than 30 then the market is oversold. Most chartists use the 14-day RSI.RSI also lets you look at any divergence in the market. A divergence occurs when the price makes a higher high but the RSI makes a lower high. Similarly, there is a divergence when the price makes a lower low and the RSI makes a higher low.All of these commodity indicators can be used along with the support and resistance levels. These indicators are lagging indicators and the signals that they give cannot be the only criteria to trade in the commodity market.

Commodity Prices
Commodity Prices: What Factors Affect Them?

Commodities are basically items that are exchanged between countries and ultimately contribute to the economic growth of that country. Every day, an exchange of commodities occurs under different prices and hence there is a fluctuation in commodity price. The commodity market is the second largest market and, hence, careful governance must be done to ensure a good GDP for the country.

Product related:

The first factor is the product and its production conditions itself. Many commodities are influenced by a number of natural factors such as the weather, temperature, land size, crop conditions, etc. that can affect the growth of the commodity. Other factors such as labour, cultivation period, use of tools and technology, and so on also affect the overall commodity prices in India. Apart from these, the political and economic factors such as taxes, subsidies, and rules can affect the production of a product and hence controls the amount of money spent in producing a commodity.

Transportation and storage:

Any commodity of any quantity needs to be transported and stored. The maintenance of an inventory and storage is not time-consuming and does not involve any money transaction either. The only aspect that has to be kept in mind is the nature of the commodity. If the product is easily perishable then storage and transportation must be efficient enough to prevent loss in supply.

Demand and economic related patterns:

In modern times, the many commodities such as gold and silver have now reached a better status in terms of investment than currency. With exposure to better infrastructure, better policies, and better production methods, the MCX prices of these commodities are often high and hence make it a better option and zero brokerage options are also available for your disposal.

Storage costs:

Apart from production cost, storage costs also need to be considered as a factor while evaluating the price. The storage conditions of each commodity need to be customized according to the nature of the product and if not done properly, it can affect the product itself.

Silver Mcx
Silver MCX: How to trade in them?

When it comes to investing in heavy metals, silver will certainly be among the top few on your list. This is because, in addition to it endless uses in various industries, it cannot easily be replaced by any other metal. There are several investment and industrial uses for silver. According to The Silver Institute, the world’s industrial use has been significantly increasing from 2001 to 2015. This has been the trend since 2007 and is thought to be likely to persist.

Trading and its uses

Trading silver becomes important in a country like India, where industrial expansion and development, particularly in the automotive and solar machines field is in focus. India and China have actually played a major role in driving silver prices and demand. Here is where MCX India comes into the picture, because this is where silver commodity trading takes place. On the MCX, silver trading facilities are at your disposal.

You can avail of information regarding the many factors affecting the market, like economic parameters for India, silver specific events like industrial changes, and previous data.There are various options for investments to be made in silver. Bullions or bars are available, as are coins. However, both these options do not yield no interest. Certificates allow one to buy/sell silver without actually owning it physically. Popular options are, of course, futures contracts and options contracts, which can be traded on the commodity market. The other alternatives are Exchange Traded Funds, mutual funds, and silver miner stocks.

The gold/silver ratio

The gold/silver ratio is extremely important. The best place to see this correlation is a commodities exchange. Silver being more volatile than gold due to industrial fluctuations, changes the ratio. In general, price charts seem to show that when gold rises and falls, so does silver.Silver is an extremely versatile metal, making it very valuable. Doubling up as both raw material and a solid investing asset, it is pretty dynamic on the commodities market. With sound knowledge and practice, you will be able to make smart decisions and enjoy the various facilities MCX offers.

Mcx
MCX (Multi commodity exchange): A brief introduction

If you commonly move in business circles, you have probably heard people talking about the MCX and zero brokerage situations. Some of them speak from real knowledge and experience, but many people just talk like they work at the BSE. You can brush up your knowledge in no time at all. The Multi- commodities exchange, or the MCX is an exchange exclusively for the trade of commodities, just like how the NSE is a trading exchange for company stocks and securities.

On this commodity market, you can buy, sell, or trade primary products and raw material. There are more than fifty major markets like these worldwide, but while in trading in India, use the mcx. Through brokerage firms and technology, today you can easily engage in online commodity trading as well.The exchange has operations through most trading terminals across the country, and almost all raw materials are covered here. Most commodities can be classified into two types: hard and soft commodities. The former comprises of products that are generally extracted or mined, like metals and petroleum. The latter will then include livestock and agriculture-based products like wheat, tea, meat, etc.The MCX is a de-mutualised exchange which is promoted by Financial Technologies, NSE, NABARD, SBI, HDFC, Bank of India and a few other banks. It provides a platform for risk management and offers varied futures contracts across various segments of manufactured goods. The primary purpose of the exchange is to provide the value chain participants with secure, transparent trade mechanisms, and to formulate quality and trade regulations.

What happens once you register

Once you are a registered member of the MCX, you can get detailed information about the documents, operations, rates and everything you would get at the NSE for your commodity. You also get access to an application called the Trader Work Station (TWS), from where you can actually trade and place orders.

There are several user-friendly trade features like the market watch screen, ticker, information about the last trading price etc.Knowledge about the MCX is always useful, as it operates like the stock market for securities. It is easily understood and has many practical applications. Once you get the hang of it, you will certainly be able to capitalize on your resources.Alice blue’s mcx trading account enables you to seamlessly execute trades in the Indian Commodity market.

Silver Mcx Rate
Silver MCX: How to trade in them?

When it comes to investing in heavy metals, silver will certainly be among the top few on your list. This is because, in addition to it endless uses in various industries, it cannot easily be replaced by any other metal. There are several investment and industrial uses for silver. According to The Silver Institute, the world’s industrial use has been significantly increasing from 2001 to 2015. This has been the trend since 2007 and is thought to be likely to persist.

Trading and its uses

Trading silver becomes important in a country like India, where industrial expansion and development, particularly in the automotive and solar machines field is in focus. India and China have actually played a major role in driving silver prices and demand. Here is where MCX India comes into the picture, because this is where silver commodity trading takes place.

On the MCX, silver trading facilities are at your disposal. You can avail of information regarding the many factors affecting the market, like economic parameters for India, silver specific events like industrial changes, and previous data.There are various options for investments to be made in silver. Bullions or bars are available, as are coins. However, both these options do not yield no interest. Certificates allow one to buy/sell silver without actually owning it physically. Popular options are, of course, futures contracts and options contracts, which can be traded on the commodity market. The other alternatives are Exchange Traded Funds, mutual funds, and silver miner stocks.

The gold/silver ratio

The gold/silver ratio is extremely important. The best place to see this correlation is a commodities exchange. Silver being more volatile than gold due to industrial fluctuations, changes the ratio. In general, price charts seem to show that when gold rises and falls, so does silver.Silver is an extremely versatile metal, making it very valuable. Doubling up as both raw material and a solid investing asset, it is pretty dynamic on the commodities market. With sound knowledge and practice, you will be able to make smart decisions and enjoy the various facilities MCX offers.

Mcx Margins
What are MCX margins?

Once you are somewhat familiar with the atmosphere of a commodities market like the MCX India, you can get to the details involved in commodities trading.In the stock market, there is a term called a margin. It refers to the use of borrowed money to buy securities. You can apply the same definition to the term in the commodity market. When dealing with futures contracts, the word refers to an initial deposit made into an account to actually enter into a futures contract. This is sometimes called
“good faith” because it is used to make up any small day losses. Once your contract gets liquidated, you will be refunded this initial margin. The requirements regarding this margin vary according to market fluctuations.

While in the exchange market, the margin can be said to be a partial payment, in the futures market, it can be said to be a performance bond.
Why is futures the better market?

The futures market is more attractive to small investors because its borrowing requirements, as well as its margin requirements, are not as high as those in the stock market. Generally, a futures initial margin is about 10-20% of the contract value, while for stocks, it is up to 50%. Each exchange, the MCX included has the authority to revise margin

requirements and documents.

On the MCX, the different margins for commodities are:Initial margin: the minimum amount to enter into a contractAdditional margin: these are margins which are imposed on both sides, over and above any other margin.Special margin: when margins are imposed only on either the long or short side.Tender period margin: this margin is imposed at percentages which are specified in the product or contract. These get incremented and continue up to expiry.Delivery period margin: when a contract reaches the end of its life cycle, this margin is imposed as per contract. This continues up to the delivery obligation is settled.Maintenance margin: the lowest amount which an account can be allowed to reach before replenishing is needed.

If the amount falls below this, the person receives a margin call.These understandings between the client and the brokerage are put down as “Margin agreements”. This has all the specifications about when they are to be met, and varies from broker to broker. While calculating the margins in real time, one has to take into account that they might fluctuate along with the values of the contracts.

Mcx Gold vs Mcx Silver
MCX Gold vs. MCX Silver

Commodities go through the ups and downs in prices just as all shares of companies (equities) do. The commodity market are invested in when equities aren’t doing so well. However, gold and silver are always priced high as while their demand only varies, it doesn’t ever diminish completely. Commodities include natural resources like gold and lead, called hard commodities and agricultural like corn and wheat, called soft commodities. Like equities, commodities also depend on various factors such as currency and oil.In India, gold and silver along with all commodities are traded in Multi Commodity Exchange of India, ltd or MCX. It comes under SEBI, Securities and Exchange Board of India.

MCX Gold depends on

Currency:Gold is traded in US dollars per 10 grams worldwide. That’s why the rupee on the dollar is a very important factor in the current price of gold and to consider while buying gold. It should be noted that silver is traded per kilogram and gold per 10 grams or ounce.Oil:Extraction of gold requires oil.

Thus, when the oil prices go up, gold becomes expensive.State of Emergency, like War:These times always see a hike in gold price as there is no trust in the currency during and after the war. This loss of confidence sees more investment in gold.Central Bank Policy:The banks often try and control the currency using gold. By guiding the investment into gold they guide the stock market of the nation. It provides as a hedge against inflation.

MCX Silver depends on

Demand:It has multiple industrial and medical applications that are on the rise such as electronics and even clothing.Gold:When mcx gold rises, mcx silver goes up too. While silver has its own independent demand, it still follows gold. Gold is rarer and priced higher than silver by nearly 12 times.State of Emergency and Central Bank Policy:These factors affect commodities in general but more so with to mcx gold.To differentiate the two and choose one investment is a personal and subjective decision. All factors have to be regarded carefully as both, gold and silver force you to deal with large amounts of money.

Bullion Market
Bullion Market : How To Trade In It

The Bullion market is essentially a forum through which buyers and sellers can trade pure gold and silver. Open 24 hours a day, it is primarily an over-the-counter market, unlike the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), forex and money markets.The bullion market has a high turnover rate and because of the industrial and commercial value that gold and silver holds.

It even acts as a hedge against inflation.Just like the share markets, trading gold for profit means buying gold less and selling it high.In the Indian Stock Market, gold bullion is exchanged as Gold 995 and Gold 999, the purer type of gold being Gold 995. The changes in the costs are set apart at the end of every exchanging day. In any case, the spot gold climbs consistently, change for the duration of the day and will be shown in the Bid and the Ask rates.The profit is earned on the difference between the Bid and the Ask rate.

How It Works

Unlike the equity markets, whether bull or bear, the bullion market offers high liquidity rates resulting in many to speculate through the futures rather than opt for options or equity markets.

1. Learn what moves gold

Gold is deeply rooted in the psyche of the financial markets and rarely reacts to price catalysts. Inflation, deflations and consumer psychology are some of the few actions that trigger the gold markets.

2. Understand the players

Gold bugs individuals who are bullish on gold and believe it is a stable source of wealth add large amounts of liquidity to bullion markets, providing a continuous supply of buying interest at lower prices. They provide easy entry to traders in the market.

3. Following Trends

It is imperative to understand the history of bullion trends as far as 100 years to pin down an upwards or downward movement of the market. A stark example is during the 1970s oil crisis are marked a historic uptrend of gold prices.

4. Choosing the venue

Liquidity follows gold trends, increasing and decreasing with the trends respectively. This oscillation impacts the futures markets more than equity markets. Choosing the right venue is crucial to leveraging the most out of gold trading and accounting for the risk.

Mcx Charts: What to look for?
MCX Charts: What to look for in them?

MCX charts are similar to charts used in equity markets. While the commodity market is different from the share market, commodities have the fundamental principle of rising and falling prices.Commodity trading is done after much technical analysis. This technical analysis is done with the help of charts. They are mainly Prices vs. Periods charts. These charts are:

1. Bar charts : High/Low/Close charts

These plot price movements over a specific period of time. They consist of vertical lines showing the price range for the period. Some charts indicate the opening price of the commodity on these charts as well.Prediction of trend can be done with moving averages. They give an approximate tendency of the general trend. The longer the period, the more reliable it is.

2. Candlesticks

These charts provide the high, low, open and close values over the specified time period. They are popular as traders can interpret the data faster and easier than bar charts. Relationships between high-low and open-close are seen in an instant. They also indicate the buying or selling pressure by being hollow or filled respectively.

3. Trend lines : shows the upward or downward movement and likely movement of the value of the commodity

4. Channels : These channels are formed between two trend lines. They indicate the trading range of prices

5. Resistance and Support plane : When the price of the commodity tends to remain within a certain range, two lines can be drawn above and below it. The line above is called resistance plane and the line below is called the support plane.

6. Corrections : It is wise to consider a rise as a correction when it is trending upwards as this is the market correcting itself when the value of the commodity has changed too much because of emotion.5. Double tops or head and shoulder formations :These indicate a downward trend of prices

7. Trading Volume : is often included in many charts. It is the number of trades of futures contracts during the previous trading period. It is indicative of the price for the future.Patterns are the key to understanding the commodity market and these are what are observed in MCX charts. These patterns in MCX India charts will all directly or indirectly indicate the rise or fall of the price of the commodity.

Mcx India: Factors affecting it
MCX India: What factors affect it?

MCX India is the Multi Commodities Exchange of India. It deals with the bulk of the commodity trading in India. Commodities traded in the commodity market include the followingMetals : Aluminium, copper, nickel, zinc, and so onBullions : Gold and silver.Agriculture : Cotton, cardamom, palm oil, etc.Energy : Crude oil, natural gasCommodity prices go up and down just like the equities in the stock market. And these two markets are linked to the investments they receive.There are various factors that affect the commodity market:

Demand

Commodities have an industrial demand that factors into the setting of the price. As demand increases but supply is not enough, the price of the commodity goes up. Similarly, it goes down when there is excess supply.

Weather

As most commodities are agriculture based, weather conditions will affect the supply of these commodities. The climate is one the most variable factors as prediction are difficult and dependence on climate is so high.

Economic and Political conditions

This a complex factor as it includes the dependence of productivity on the political conditions and the economic policies set by the government. Political conditions can cause an upheaval in the equities market and as the two markets are linked, the commodities market either sees a surge of investment or a drying out of investors when there is a loss of confidence in the equities market.Political conditions would also include state of war or emergency. While gold and silver see a lot of investment during an emergency, the whole commodity market sees investment as it is considered true money and the conversion of paper money to true money is favoured. This is because of the uncertainty of the state of currency after the emergency is over.

Mcx Gold: How to trade?
MCX Gold: How to Trade in Bullion?

Since time immemorial, gold or bullion has been a highly valued commodity. Today, it is regarded as a good investment and is traded on commodity exchanges across the world including MCX. The manner in which the gold rate has spiked is making it a lucrative investment for many. The global demand for gold is dependent on categories such as jewellery, investment, central bank reserves, and technology.

First Things First

Opening a Demat account, selecting a broker registered with the MCX, completing the registration process, finding out about the minimum amount to be traded, and enabling the method of money transfer are necessary before you start transacting. Documents of identity proof such as PAN details, address proof, bank details, and photographs may have to be furnished before you can start trading.

Gold and MCX

In MCX, bullion trades can be carried out in one of the five contracts : Gold (1 kilogram), Gold Global (200 gms) Gold Guinea (8 gram), Gold HNI (10 gram), Gold M (100 gram), and the newly introduced : Gold Petal (1 gram). For example:

  • Gold Global : This gold will be of .995 LBMA approved purity and will be settled against international prices converted into rupee based upon the RBI Reference Rate on the date of expiry. It will have both option and delivery logic and is aimed at Indian refiners, exporters, and jewellers who can hedge against any adverse indications in the international gold market.
  • Gold Petal – investment is in multiples of 1 gram while delivery is in multiples of 8 grams and in Demat form. Only about 5 percent of the actual value has to be paid in bullion trading.

MCX gold future contracts are settled on the expiry date. The trader must either square his position by selling it before this or pay the full value to take delivery. In our country, the price of gold is also influenced by certain additional factors like the wedding season and movement of the dollar. History shows that gold will be in demand for quite some time to come. Trading in gold commodity involves a certain amount of risk and you should be aware of this before you start off.

5 Commodity trading tips

Until now, not many investors have the seen the benefits that commodity trading can reap. Commodities like silver and gold can give investor good returns over time. It also has a great impact on the economy of the country as a whole and people as individuals.There are four categories of commodities that have been a part of the trading industry – Energy (natural gas, crude oil, gasoline and heating oil), Livestock and Meat (cattle, hogs, feeder cattle and pork belly), Metals (copper, silver, gold and platinum) and Agriculture (rice, coffee, wheat, cocoa. soybeans, corn, sugar and cotton).A few commodity tips to note are:

1. Commodity trading can be a risky business and follows a few commodity strategies. There are certain factors that not in the control of the investors like natural weather changes affecting the growth of crops, natural disasters or any kind of epidemic. Hence, it would be smart to keep aside more than 10% of your investment for commodities.

2. A few commodities are sensible to trade and a few are risky in nature. Volatile markets usually come across traders and investor who wish to store their money in precious metals like gold which has been considered reliable over the years and ensured a certain return on investment. Investors incurring losses in stock market can always shift to trading commodities like metals.

3. Practices like forward contracts, futures and hedging are common with commodity trading. For example, the airline industry utilises fuel in large amounts on an everyday basis. It is very necessary for them to get their fuel inflow at fixed and stable prices without letting any market performance affect their inventory. Hence, airlines practice hedging, to not incur any risk for the company or the investors of the company. Without hedging, fluctuations in commodities can lead to the bankruptcy of companies that require accurate predictions to manage their expenses.

4. One important tip to keep in mind while dealing with commodity trading tip is to put across quality control standards and relative measure to make sure the commodities delivered to the investors/ traders meet the standards. When commodities are delivered in the final validity period, they are said to meet the quality standards.

5. Constantly keeping track of the market performance, helps one decide which commodity to invest in, when to enter and when to exit the trade, as there are multiple multi commodity exchange processes happening all over the world, and at all times.

Commodities brokerage calculator

Nowadays, where everything is online and easy to access, you can do a lot of your market related work from the comfort of your own home. One of the reasons that this is possible is because of the development of various types of brokerage calculators which are available online. It is important to know the total cost of any commodity trading operation. In addition to the market determined costs like taxes and other charges, trading brokerage charges also feature in commodity brokerage calculations.

Commodity Brokerage Calculations

The calculations are fairly simple. If you need to borrow money to buy commodities you need to multiply it by rate to find out the amount owed, then divide it by the number of days in the brokerage year. Multiply this amount by the number of days you have borrowed the money on margin.

What does the Calculator Do?

Just like share brokerages, commodity brokerages costs form the biggest costs of trade. A commodity brokerage calculator will help you calculate all of your transaction costs, including the brokerage cost, commodities transaction tax, stamp duty and exchange transaction charges for your trading plan. There are ways for you to use this tool to see intraday trading costs and carry forward commodity trading tides. Taxes like SEBI tax on commodities and service tax need to constantly updated while using a calculator to see the performance of your commodities. Depending on what type of commodity you are trading, you should use a particular calculator. Some are suited for a certain class of commodity, so make sure you check before you use one.

General Commodity Brokerage Calculator

Here is what you should do on a general commodity brokerage calculator. Once you enter all the input values that they ask for (general information that you will have at hand), all of the other calculations are done automatically using predetermined mathematical formulae. Here, the lot size displayed on the trading terminal and the actual multiplier values for calculating the exact turnover is different from stock and futures trading.

Alice blue brokerage calculators help you understand how much you stand to save in the indian stock market.Our web calculators are better than share calculators in excel.You can use it find out how much you will save if you subscribe to our zero-brokerage commodity plan.

Commodity index: An introduction
Commodity Index : An Introduction What is a Commodity Index?

To put it simply, a commodity index is an index that measures the performance of a set of commodities. There emerged a need for such an index over the years when it became too difficult to keep track of how different products moved, as each commodity has a different market dynamic. These indices are generally traded on exchanges like the MCX, where online commodity trading happens.

This allows an investor to access these commodities without having to go through the futures market. Based on the commodities, the index values keep fluctuating. These indices are used to trade almost just like the regular stock indexes are used in futures trading.

Differences in Indices There are many of these indices available on the commodity market. They differ according to their constituents. There are indexes which cover a wide spectrum of commodity markets, from steel and copper to wheat and other agricultural produce. These indices also vary in how they are weighted, whether they have a predetermined, fixed weighting scheme or not. The tracking of a commodity’s performance is based on a set of predetermined rules. The performances of these indices are used to compare commodity performance with that of bonds and stocks. Commodity trading comes with a lot of diversity and dynamics, which appeals to many large investors. Having a set index will help these investors get an idea about their returns.

The 2 Major Types of Indices While studying how these indices came into being, you will find two major types. The S&P GSCI and DJ-UBSCI, which have become the industry standard benchmarks. Over the years, a lot of money has been invested into the funds, which can track their performance. The first one, the S&P GSCI, is mainly calculated based on a production weighted basis. It comprises of some important commodities which are often subject to use in futures markets. Depending on the average quantity of production and its significance in relation to the other, the weight of the commodities is determined. This index caters to the energy sector, that it, products like crude oils and natural gas. This is from a general, or international perspective.

The CRB, GSCI, Dow Jones AIG Commodity Index and Rogers Index One of the oldest such indices was the CRB (“Commodity Research Bureau”) Index, in 1958. However, the first index which whose construction was practical enough to use in commodity trading was the Goldman Sachs Commodity Index (GSCI). This was followed by the Dow Jones AIG Commodity Index, which differed in how it weighed the commodities. The Rogers Index rounds up the only other significant one.

Commodity market in india

For investors and traders who would like to diversify their portfolio and start trading in commodities, the Indian commodity market offers them a great opportunity. Commodity trading is done in futures, which makes it easy for retail investors to participate in the commodities market.

How do you trade commodities?

Commodities are comparatively easy to trade and understand if you are trading with charts on the basis of supply and demand. This is because commodities are comparatively less volatile than equities and hence the probability of profiting with commodities is higher. The Multi Commodity Exchange and the National Commodity and Derivative Exchange are the two primary commodity exchanges in India.

Both these exchanges let you trade electronically. In order to start trading in commodities, you will first need to open an account with a broker. You can trade the Indian MCX market through them. Once you open a commodity account you can start trading a number of commodities like precious metals (gold, silver),energy (crude oil, natural gas) and base metals(copper and zinc).You can also trade agricultural commodities like sugar, cardamom etc., through your commodity account.

How does delivery work?

Both the exchanges give you the option of delivery as well as settlement in cash. In case you would like to take delivery you should have the warehouse receipts. Since it is a futures contract you need to specify your option before its expiry. Trading in commodities can be done fundamentally by reading financial newspapers and other relevant articles to get an overview of what is happening in the commodity market. Your broker will also provide you with trading tips based on thorough research and analysis.

The Forward Market Commission

The Forward Market Commission regulates both the commodities exchange. They administer as well as look into any foul practices. The commodity market is also well regulated as the equity market and offers a lot of transparency for retail traders and investors. The margin required to trade commodities is comparatively higher than that required to trade stocks. This is because you can only trade in futures in the commodity exchange. You need to deposit a percentage of the purchased value as futures trading offers you leverage. It is important that you understand the market and take the help of an experienced analyst before you start trading the commodity market.

Requirements to open a Commodity trading account
Requirements to open a Commodity trading account

To start commodity trading, you will first need to open a commodity trading account. Investing in commodity is a lucrative option and gives you a lot of leverage to trade in the MCX commodity market. Commodity trading can only be done in futures. In order to trade in the commodity exchanges in India, you will first need to open an account with a brokerage firm. The broker should be registered with the MCX exchange and should also have a member ID from the exchange. Most brokerage firms offer zero brokerage commodity trading account which saves on your brokerage charges and hence lets you make bigger profits.

Documents required to open a commodity trading account

 

You will need the following documents in order to open a commodity trading account.

  • Bank account proof ·
  • Pan card ·
  • Photograph ·
  • Cancelled cheque ·
  • Address proof ·
  • KYC form
Open an account only with a registered brokerage firm

Every registered broker gets a member id from the exchange. It is important that you check if the brokerage that you choose to open a commodity trading account with has a proper and an active membership ID. This will avoid any chances of frauds. The benefit of registering with a member is that in case there are any disputes it can be redressed. The exchange laws and regulations will be applicable and your money will be safe.

Commodity trading

Like trading in any security, commodity trading also does not promise you assured returns. It does have its own share of risks. Even though the commodity market is less volatile and more liquid than the equity market, you should invest carefully and under expert guidance only. Sales and promotional techniques are done by brokerage firms through their advertisements that offer guaranteed high returns in the commodity market. There is no such guarantee and you cannot avoid the risk that is involved when trading the commodity market. Keeping oneself updated on the physical markets of the commodity is important as it lets you take more informed decisions when trading Rumours and tips from unknown sources are absolutely baseless. One should rely only on self study and expert guidance to make money from the commodity market.

Top commodities to invest in

The commodity futures market in India opens up a lot of opportunities for traders as well as investors. Commodity trading offers a lot of leverage and thus increases your return on investment. You can trade electronically in the commodity market when you open a commodity trading account with a brokerage firm.

Non agricultural commodities like oil futures as well as agricultural commodities like cotton futures can be traded on MCX and NCDEX. The Indian commodity market is very transparent and thus attracts a lot of retail traders and investors.

Gold Precious metals are a hot favourite to trade in the commodity market. Gold is not only a safe investment option but also gives decent returns. Gold is in huge demand from the government and the central banks since it acts as insurance in the event of a war or can be used to hedge against inflation. You can trade in gold futures in the Indian commodity market. They come in various weights starting from gold petal which is 1gm of gold.

Copper Another very popular commodity that is traded in is copper. Copper is a base metal and is very important because of its use in various industries. Its flexibility and corrosion resistant feature as well as it being a good electrical conductor makes it of great use in the motors, computers, wiring and many such industries. With the growth in the economy of India and China, there is a rise in the demand of copper. Both the countries are spending to build their infrastructure which needs an abundant resource of copper. Copper can be traded in copper mini futures as well as in copper futures.

Crude oil A very important commodity in the energy space, crude oil, has a huge demand. There is always a great requirement for crude oil since it is important to run an economy. Crude oil is an essential component. Though developed countries are on the lookout for alternate sources, crude oil still has a lot of importance. Agricultural commodities Wheat, soybean, sugar and coffee are the top agricultural commodities to invest in. You need to keep a track of their harvesting period and study the market movement of these commodities in order to invest in them.

Trading in commodities is more rewarding since your broker will offer you a lot of leverage. Another reason is that since commodities are internationally traded, they are more liquid and hence follow technical charts better.

What are commodity calls?

The commodity market is a marketplace where you can buy, sell or trade in raw material or ‘commodities’. Commodity trading has gained much popularity over the years. There are many major commodities markets and exchanges around the world. In India, the major commodity market is the Mcx. There are two major parties involved in any trade – the owner and the seller. The relationship between the two is asymmetrical, because the seller has an obligation to deliver, while the owner has the right of exercise. This is the basic concept you need to remember while investing in commodity trading.

In the stock market, the seller of an option has the power to write it, or sell it. This can also be said to be ‘calling it’. Commodity calls are not much different. Think of this exercise in a commodities market scenario. The owner is said to be ‘long on the call’, while the seller is ‘short on the call’. A call enables the owner to buy any underlying commodity at a specific ‘strike’ price within a specific period. When the call holder exercises this ‘call’, the seller has to deliver the commodity. Call vs. Put A call is different from the other option, which is a ‘put’. In this case, the owner of the commodity can sell the underlying commodity at a certain price within a specific period. In turn, the seller needs to buy the said commodity when the owner exercises this selling right.

Long Call and Short Call

Further, a call can be short or long. In a long call, the holder exercises rights on a long futures or commodities position. In a short call, the long call owner exercises on a short commodities position. Depending on the situation, a trader can either take the call option, put option, allow it to expire, or simply sell it.

Here is how to tell when to use the call option for your commodities. If the exercise (strike) price is lower than the market price of the commodities, then the owner can buy at the strike price which is less than its underlying price and later sell it at a profit. If they are comparable, then you can use your own judgement. If the strike price is higher than the underlying price, it would not be very wise to exercise.

Online commodity trading: How to go about it?

Commodity trading is an age-old practice, and accounts for a significant percentage of financial trade. Similar to stocks, commodities are bought and sold. In India, there are several commodity exchanges. However, the most premium one is the Multi Commodity Exchange of India Ltd (MCX), which is governed by Forward Markets Commission. The MCX operates from 10 am till 11:30 pm on week days; on Saturday, it operates till 2 pm. Known for more than 85% of commodity trading and receiving an average turnover of nearly Rs. 50,000 crores daily, the MCX is one of the foremost trade hubs for investors in India. The National Multi Commodity Exchange of India Ltd (NMCE) and the National Commodity and Derivative Exchange (NCDEX) also are of good repute and operate at a national level.

How to Trade in a Commodity Market

Typically, a commodity market supports spot or derivatives trading. You could begin trading with a capital amount of Rs 5,000. In the case of a spot market, commodities are traded on an immediate basis. However, in a derivative market, a range of financial instruments are bought and sold such as futures. For example, a seller sells a future–it could be anything, let’s say millet, for a specified time period, and a buyer agrees to buy it at a specified amount in future. The pricing is determined based on various factors, and is believed to be fair. A futures contract – not the millet per se is bought and sold in the futures market.

Online Trading

Online commodity trading is designed for today’s tech-savvy audience. Highly advanced and user-friendly trading platforms offer an easier and convenient way to financial trading. You no longer need to depend on brokers for such transactions; although, many consumers may still use the help of brokers for trading. You could open a zero brokerage commodity trading account to begin trading independently. The rules for trading are simple: the buyer is obligated to pay and take delivery of the commodity for the price ascertained in the contract.

Among several commodity tips offered by a host of advisory services, you can choose the best approach that suits your specific needs and financial goals. A good understanding of the market, and a comprehensive technical analysis will help you make the most of your commodity investments.

Silver in mcx: Is it a good investment?
Silver in MCX

Silver, one of the most malleable metals, is featured extensively in the commodities market, and enjoys a favorable position. For decades, silver has commanded significant value as an investment option. Although lesser in value compared to gold, silver still is a hot favorite for investors, and serves as a protection during an economic crisis. Moreover, silver promises greater potential for industrial use.

The MCX

The MCX, India’s premier commodity derivatives exchange, banks on a range of best-buy options including ferrous and non-ferrous metals, energy and agricultural commodities. Silver in MCX has achieved a noteworthy rank–and statistics suggest that its price is bound to rise in the next month. Over the course of last few months, Silver has touched notable price-point peaks and is currently stationed at Rs. 38,515 per kg, an increase of 209 points from the previous close. Analysts report that the month of July 2016 also seems encouraging for Silver in the Indian MCX. Estimated at reaching Rs. 39087 per kg, you can rest assured about positive returns for silver in the commodity market.

The Demand for Silver

The industrial demand for silver shows a steady growth. In 2015, India imported 228 Moz of silver bullion, which is at an all-time high record. The industrial need for silver mainly for electrical and solar projects, and other fabrication requirements is expected to increase this year as well. With the inclusion of excise duty of 1% in this year’s Union Budget, gold and diamond prices are set to increase; as a result, being dependent on these metals, silver prices are also expected to rise. With a favorable economic condition, Silver promises significant investment value. In addition, the Gold/Silver Ratio is in 70s that implies that Silver is undervalued although not extensively. This proves to be a good reason to bolster your decision to put your money in silver.

Silver jewellery is also gaining traction as new jewellery brands are growing in importance. To further enhance the appeal of Silver, the World Silver Council will be launched soon. This will help boost the value of silver MCX to a great extent. Many buyers also take note of the resale value of silver. These reasons make silver, a highly sought-after metal, and it is indeed a wise choice to invest in this commodity.

Things to consider before investing in commodities
  • Commodity trading is a form of investing in the commodities market. You can invest in commodities by actually buying or selling the particular commodity or make a profit from the applicable variable prices.
  • You are required to open a commodity trading account in MCX, the Indian commodity exchange to start trading in commodities. Some of the things to keep in mind before investing in commodities are listed below:
  • You need to be confident of all the well-informed trade options that you make. This market is not for half-hearted or over confident efforts.
  • Patience is the key to this game of commodity investments. You can never be always right or always wrong. The gains and losses need to balance each other.
  • Do not discuss your investment options with all. People will give you contradicting inputs that will confuse you more rather than helping. Take tips from reliable sources and once you have made a decision, stick to that.
  • There is no point being a Bear or a Bull in this market. This market goes according to trends so keep your trades according to the trend.
  • When you find yourself in a bad position, find out ways to exit at the earliest.
  • At any point in time, follow only one Analyst’s guidelines. Following multiple guidelines will confuse you and not yield the desired result.
  • This trade is very volatile and risky. Do not panic and exit the trade at the slightest indication of a loss. Similarly,do not be overjoyed with the slight profit that you make.
  • The stock trading ideas do not work in the commodity trading area. The two are very different ball games and appropriate ground work has to be done before entering the market and also while playing in it.
  • Please use the stop-loss option with almost all transactions as this is for your own benefit. This option is of utmost importance as the global commodities market might turn in a totally unprecedented way anytime.
  • For a day trader, it is not advisable to put all your eggs in one basket. This leads to more risk. Rather having a variety of commodities ensure a wider spectrum of trading leading to effectiveness.
  • Be ready to change and embrace new ideas in this exciting and challenging field of commodity trading.
Equities Commodities and Forex: Which is better?

The stock market is an addictive hobby. Enormous amounts of money for the least amount of labor attract the investors to stock markets, commodities market or foreign exchange market. Besides, nowadays an investor can also reap the benefits of online trading, which helps the investor to trade or invest from anywhere in the world all in real time. The investor can observe the stocks and forex rates online, and invest accordingly.

What is equity, commodity, and forex market?

Also known as the stock market it is a conglomeration of buyers and sellers of stocks. These may include a rather loose network of transactions of the economic interest or money trading. One should note that this is not a corporeal operation or that of an isolated individual. An equity market transaction may include the securities listed on a stock exchange and also those listed for trading privately. On the other hand, the commodity market trades in the primary economic sector rather than the sector dealing with finished or manufactured goods. On the other hand, the foreign exchange market deals in trading of currencies on a global scale. This includes exchange, buying or selling of currencies at the present exchange rate.

Between the three: In the case of commodity exchange, the transaction takes place in future contracts whereas the transactions in case of forex trading are more immediate. In a way, it happens then and there. There are spot transactions for the commodity market as well. The trouble seeps in when the goods in question are not manufactured finished products but raw materials, which are perishable, and if the transaction does not take place immediately, it goes into a total loss. Commodity and stock market are almost similar, where contacts are made over selling commodities at a specific time.

The benefit that the share market has over the commodity market is that the stock remains in the game for several years, commodities have a rather shorter time span. Then again, some investors consider the commodity market over stock market under certain economic conditions. Investing in the forex market comes with its own bundle of pros and cons. Alternatives available for equity market are more than in the forex market which is much limited. People choose currency trading in pairs for a safe game. Then again, ready money trades at higher exchange rates and the absence of fear of losing perishable goods along with a spot on exchange, makes forex trading the preferred choice for the investor.

Oil options trading tips

Crude oil has been at the top of the trading game and will remain so for long. Therefore, when you want to invest, oil options would be a great choice. But, how to make the best of profits out of these things? The given trading tips are here only to maximize your profits of online trading in oil options. Following are the options tips you really need to follow:

1. Sell-to-Close Call Option

Most of the times, to realise the profit, the call option does not need to be exercised. Closing out the position with a call option selling in options trading is a choice with you. The proceeds from that sale would also include the value of the remaining time depending on what amount of time remains from expiry.

2. Profit from Oil Volatility

The volatility in the oil prices provides an excellent opportunity to make as much of profits as possible with the oil options if you are able to predict correctly. It is measured as the expected change in the price of the option. You can use derivative strategies to benefit from these. One of the strategies, known as long straddle consists of buying a call and a put option at the same strike price. This strategy is profitable only if there is a sizeable move in the upward or downward direction. Another strategy called the short straddle involves selling a call and a put option at the same strike price and is profitable only if the price is range bound.

3. Bull call spread

This is an options trading method that buys an out of money call and sells an out of money call on a further point of reference. The premium difference between the two debit amount of net value is the loss of this method. The maximum profit is the difference between strike prices and net debit amount.

4. Risk Profile Using your options in combination with futures can render great sum of profits and the risk profile on the same is really good as well. Though, they are subjected to time decay, if you place your investments at the right time, the profits would come for sure.

All in all, options trading is a great bet with its additional leverage of having lower premium payable, limited potential losses, and flexibility in terms of risk and combining it with oil futures. Oil options trading renders great profits when a detailed study of the charts is conducted before placing anything. So, be careful.

Why should you invest in the Commodity Market?
Commodity Market: the What and the How

What is a Commodity?

A commodity is a principle produce that is utilized in commerce and is substitutable with other goods of the same kind. More often than not, a commodity is used as an input in the production processes of other goods. While there may be certain differences as to the quality of a certain commodity, it is fundamentally unvarying across different producers. Essentially,commodities being traded on an exchange must possess stipulated standards known as the basis grade.

Types of commodities being traded

Traditionally commodities include produce like grains, gold, silver, meat, fossil fuels, etc. With the changing scenarios of the world, the borders of what constitutes a commodity has expanded to include technological goods like bandwidth. Broadly speaking, commodities are of two kinds: Hard commodities and Soft commodities. The former includes natural resources like gold, rubber, petroleum, and natural gas while the latter signifies agricultural produce or livestock like wheat, paddy, coffee, sugar, meat and others.

Understanding the Commodity Market

A real or virtual marketplace is dedicated to the buying, selling and all-around trading of primary products. In other words, a commodity market is a place where trading that deals in the primary economic sector or raw products is carried out. Currently, there are about 50 significant markets of this type. These markets enable the trading in more than 100 such commodities.

Investing in an online commodity market

There are several ways to invest in the commodity market. One of the most popular ways is utilising what is known as the Futures Market. This is a market wherein each participant trades in commodities as well as futures contracts, with a stipulation for delivery on a specified date in the future. Some of the popular futures markets are the Minneapolis Grain Exchange, the Chicago Board of Options Exchange and the New York Mercantile Exchange. Formerly, trading used to be carried out in physical spaces. However, with leaps and bounds in technology, most markets, including the futures market have resorted to online commodity trading.

How to trade wisely?

It is more advisable to rely on online trading for a number of reasons: it is more cost-effective, & the risks are quite less. Also, trading online saves time. It allows the trader to exert control as well as work punctually and most importantly, MCX commodity online offers valuable guidance. For Indian traders, utilizing the Indian MCX is a prudent choice. It is India’s largest commodity futures exchange with huge turnovers. Thus, utilizing these tips, one can trade wisely, and be relatively risk-free.

Investing in the commodity market: Things to know

Investing in the Commodity Market: Things to know

Commodities like agricultural products or raw materials have become an important way for investors to diversify their portfolio beyond traditional stocks and bonds. Earlier it was difficult for the average trader to participate in this area of trading as it required significant amounts of time, money and expertise. Today, times have changed and this area has become more accessible with changing technology that has made it easy for the average investor to participate. Before investing in the commodity market, there are some basic things that an investor must know:


Future Markets

Future markets rely on calculated speculations. So one must be very careful in investing in this sector; one must devote a considerable amount of time to monitor and study the rise of the market and its sway so that your investment stays intact for the future and you get benefits in return for your desired value. Investing in futures will require you to open an online trading account through which you can carry transactions and also buying and selling of stocks. Stocks Keep track of your stock purchases and monitor them daily with the help of your stock broker or any market advisories. It is easy to lose sight of trading when the market is moving in the expected direction. Stick to your original plan and take advantage of changing conditions by tweaking your original plan to suit your needs and maximise profit.

Mutual Funds and Index Funds

One way to get a high return is through mutual funds, but they cannot invest directly in commodities. Rather they invest in stocks of companies involved in commodity-related industries and thus create an avenue for trading in commodities over a period and help you get a significant return on your investment.

Managed Futures

Gathering expertise and engaging experts like a commodity pool operator (CPO) to maintain your portfolio can help manage strict records of all your trading and earnings. It is a preferred way of staying active in the commodity trading market through such a medium and yet take the advantage of the commodity market to the maximum.

Do not IGNORE the RISK

Trading in commodities always promises huge returns and many traders have earned a fortune with such a venture. But it always has a huge risk factor that any seasoned trader would know and it helps to stick to the optimum risk vs. reward ratio and play according to changing conditions. Diversification always helps and protects against inflation and depreciation when there are variations in the market conditions. Do not bluntly bank on hard commodities and having a patient approach with a regular financial return plan always helps in this sector.

5 forex trading tips
5 Forex Trading Tips

Jumping into the Forex market brings a lot of profit options. The world’s largest financial market, as it is known, can generate great returns if you know how to be a good player while trading. Though the market, as well as the strategies used, are different from normal day trading, the basic rules remain the same such as, being consistent, vigilant about market changes and currency values, money management, putting a stop loss value, setting a realistic outcome, market know-how, expert advice and a calm mind. Apart from these, a few ways to make money have been shown below.

Use these trading tips to gain the maximum from your investment in this avenue of trading:

1.    Forex market depends on a country’s economy and its changes and hence a major shift in the economy is rare. Thus currency value escalates gradually at a very slow pace. Usually stock brokers apply a strategy known as scalping to generate substantial output. In this process they lock in money from many traders and invest heavily in the currencies even with small changes in price and earning substantially from a small deviation in the currency value. Look for such brokers and invest through online trading to make profits by scalping.

2.    As a part of management, never invest heavily in Forex trading as it is a market of high volatility. Central banks and other financial institutions influence the foreign exchange market which may result in a sudden shift in currency value changes. Limit your investment to 5-10% of the total value in your portfolio, and never ever use your savings for this particular trading avenue.

3.    Scalping, though you may have a strategy, is not recommended for a long term basis as it has its flaws while dealing with such a volatile market. Investing in a scalper with good resources and trading platform can help in the execution of an order immediately. Every player in the Forex must remember that the window of opportunity for profit making is extremely small and can disappear within seconds in the real trading world; so precise execution with a quick response is always a game changer.

4.    Scalpers usually borrow money from others, and that amounts to a loan figure for the scalpers. This is because the percentage earned is small and hence a good investment will churn out big profits. This makes the scalpers/players dependent on money lenders or loan sharks who eventually expect a huge margin back from the invested amount.

5.    Due to the loan, commissions become expensive and therefore the player or the general investors like a common man interested in Forex will face a smaller return value. So play wisely and exercise the right to information while entering into a contract with your stock broker. Following the above tips will ensure that you will receive a fair return in the Forex market.

3 agricultural stocks that must be traded in immediately

3 Agricultural Stocks That Must Be Traded In Immediately

Agriculture plays a major role in the world economy. The Indian mcx market allows traders to trade on agricultural stocks. Agricultural stocks are not only reliable but also stable and provide a consistent growth income. The agricultural commodity market is regularized and offers traders an option to trade in commodities.   If you are considering about which stocks to buy, then you can consider looking at the agricultural commodities that can be traded on the ncdex. The government is spending a lot on technology and is introducing more refined methods to help the agricultural industry. Crop cycling and other government initiatives as well as the increase in demand of organic crops has put the agricultural industry in a very important position in the world economy and is also one sector that is picking up at a very great speed. The agricultural commodities are finite and thus, there is a lot of demand for these products. Feeding the population of a country is completely dependent on agriculture and thus, the government is spending in technology to cater to the demands. Corn, wheat and potatoes are few of the agricultural commodities that are traded in the exchange. Being the main source of economy, the Indian government has estimated the demand for agricultural crops to almost double in the next 10 years. The government is taking steps to keep the supply stable even during years that experience below normal rainfall and hence affect the production of agricultural crops.

Bayer CropScience LTD.
This company takes high-quality seeds and offers an integrated portfolio. The seed varieties are cotton, millet, mustard etc. It is a zero debt company and has huge cash in hand. The steps taken by the government to spend on the agricultural sector makes Bayer CropScience LTD. a good stock to include in your portfolio.

UPL LTD.
UPL LTD. has a variety of seeds portfolio. Rice, cotton and oil seeds are a few among them. The strong balance sheet of the company and its dynamic business model makes UPL LTD. a must buy agricultural stock.

PI Industries LTD.
As one of the leading manufacturers of fertilizers and hybrid seeds, PI Industries LTD. sees a high growth potential. The visibility of the company’s performance makes it an agricultural stock that should be traded in immediately. The agricultural sector is sure to boom and traders should not miss this opportunity to trade in agricultural stocks immediately.

3 non agricultural stocks that must be traded in immediately

3 Non-Agricultural Stocks That Must Be Traded In Immediately

If you are a commodities trader, then the Indian commodity market is one of the best platforms to trade in. The Indian mcx and the ncdex exchange lets you trade in a number of agricultural and non-agricultural commodities. They are regularized and you can trade online through a broker on the exchanges. The Union Budget 2016 was very positive for the equity market. The psychological levels were broken as there was a lot of optimism in the market. Traders saw the Nifty and the Sensex soaring greater heights and the only mood among traders was to consider which non-agricultural stocks to buy. The announcement by the finance minister to reduce borrowing and stick to the fiscal consolidation plan that was projected was enough to give the market the boost that it was waiting for. A proposal for an interest rate cut was a cherry on the cake. Though the agricultural stocks are set to boom to new heights, considering the steps taken by the government to boost this sector, the non-agricultural stocks are also no way behind. The government has promised to increase spending on infrastructure and roads.

Opto Circuit
The duty relief that was proposed in the budget for dialysis equipment was in favour of Opto Circuit. This definitely saw a big surge in its share prices and is one stock that can be traded in immediately. Opto Circuit is into the business of developing and manufacturing advanced devices and equipment for the modern healthcare industry.

HIL
The focus on low-cost housing, as well as the initiative to increase rural expenditure, makes HIL a must buy.

HUL
The increase in spending on rural household was announced in the Union Budget and will see a rise in the share prices of HUL. Most analysts will bet on the non-agricultural stocks in the coming year and would advise you to trade in them immediately. The government initiatives in these sectors make them a must buy.

A watchful eye on the market with constantly fluctuating bond equity and commodity prices

A watchful eye on the market with constantly fluctuating bond, equity and commodity prices

The modern risk taking investor likes to diversify his portfolio and invest in the bond market, equity market and commodity. All these three are different ball games and investors need to keep a watchful eye in all the three markets separately as they operate differently. Let us find out what to look out for in the three markets.

Bonds
Changing economic environments and market sentiments are the main causes for fluctuation of bond prices. Factors like economic stimulus and mounting interest rates affect stocks and bonds, but both react in a different way. Higher interest rates are the effect of inflation, which in turn raises the discount rate, thereby bond’s prices decrease. In such cases, the price of bonds with a longer maturity drops more. Meanwhile, bond yields fall with falling interest rates, thereby  the bond’s price increases.

Equity
In share trading, stock prices change due to supply and demand. What investors feel a company is worth determines the price movement of a stock. Theoretically, investors’ valuation of a company is affected by earnings, but investors use other indicators to predict stock price. It is good to remember that it is investors’ expectations, attitudes, and sentiments that ultimately affect stock prices.

Commodity
Trading in commodities is a risky business as the prices regularly fluctuate. Since 2007, commodity prices rose persistently thus creating a belief in people’s mind that long-term demand for raw materials will always rise. However, the market saw a sharp fall in the prices in late 2008 and the price in commodity market remains volatile after that. Price fluctuations are actually aggravated by the speed of communication and the availability of information. With the global market permanently opening up, it has become very difficult to predict patterns leading to tremendous volatility.

One of the options was to create many new derivative products in this market that could provide commodity consumers with the capacity to hedge their commodity risk.   However, commodity price fluctuations are going to stay for some time to come. We cannot passively accept or ignore this issue. Managing inventory and commodity price risk is going to be an imperative part of continuing a healthy business in the near future.

Adx: a popular technical indicator

ADX – a popular technical indicator

The Average Directional Movement Index (ADX) is one of the technical indicators that help in taking a decision in share trading.   This measures the strength of a trend and is used to find out if a trend is weak or strong. It indicates only the trend strength, not the trend momentum or direction. The moving average of the expansion of price range over a particular period of time is used to calculate ADX.   ADX values are used in the share market by traders to detect the most profitable and strongest trends to trade. The values are also significant for differentiating between non-trending and trending conditions.   In the stock market, a strong trend is indicated by a high reading of ADX and a weak trend by a low reading. When a low reading is given by the ADX, then it indicates that a trading range is expected to develop. The normal suggestion is to invest in stocks with a high reading.  

Normal range of ADX
  The normal range of ADX is between 0 and 100. Any reading below 20 is considered to indicate a weak trend. Similarly, any reading above 40 is considered to indicate a strong trend. Any reading above 50 is considered to be a very strong trend. Among the technical analysts, some alternate interpretation of this trading indicator has been accepted where ADX is considered to be a reliable indicator of classical chart pattern development. It is said that low ADX readings that are less than 20 generally arise just before pattern breakout. From the low ADX range, price breaks out in a trend eventually.

Direction of the ADX line
  It is important to see the direction of the ADX line for interpreting trend strength. When we find the ADX line is mounting, it is interpreted that the trend strength is increasing and price changes in line with the trend. When the line is dropping, trend strength starts to drop, and price enters a period of consolidation or retracement.   A common confusion is that a dropping ADX line means that the trend is reversing. With a dropping ADX line, we can only interpret that the strength of the trend is weakening. Only in the case of a price climax this does not hold true. Till ADX is above 25, a falling ADX line mostly indicates the trend as less strong.

Are blue chip companies a safe investment option?

Are blue chip companies a safe investment option?

Blue chip companies are the craze among new investors and traders because they believe that these companies are a safe haven and can offer huge returns in the long run. However, this may not always be true. There is nothing that you can be sure of when share trading. And like any other company, blue chip companies may also go below your buying price to end your trade in a loss. Stock investment needs a lot of research and study to select the best companies to invest in. Blue chip companies, no doubt, have better financials than  non-blue chip companies, but being less risky the rate of return from blue chip companies are also lower. So if you are planning to start your investment on the online trading platform, then you should know how to invest in stocks.

Blue chip Company

Blue chip companies are well-established companies that are stable and have a history of constant earnings and paying dividends. They have a strong balance sheet and a large market capitalization and trading in them is very liquid. They are less volatile and they perform closely correlated to the NIFTY index.

Advantages of investing in blue chip companies

Blue chip companies have a proven track record and offer consistent growth. The blue chip stocks are very liquid and thus you can trade on them easily. The dividend income provided by the blue chip companies add to your profits and also protect against inflation. They are comparatively less affected by inflation. Blue chip companies are a safer option to invest in the stock market.

Disadvantages of investing in blue chip companies

Blue chip companies are already established companies and thus have a slow growth rate. This means that the profit that you will make from a blue chip company is lower since they are less risky. There have been cases in the past where blue chip stocks have also gone bankrupt overnight. It is thus important to not blindly invest in blue chip stocks. Before investing in any company, one should conduct thorough research and know the fundamentals as well as the technical details of the company. Even when you invest only in blue chip companies, it is important to diversify your portfolio by investing in blue chip stocks from various sectors. This will protect your capital.

Bast indicators to trade agricultural commodities

Best indicators to trade agricultural commodities

Trading in agricultural commodities, much like any other commodity or stock trading can be made profitable with analytical and scientific approach induced investment decisions. Growth in agriculture is dependent on multiple factors which are influenced and controlled by nature and humans alike. Investors in agricultural commodities have multiple indicators and should analyze the available data to understand agro trends which will enable them to make informed decisions to maximize profit and limit the risks.

Following are some of the commodity indicators that an investor should focus on before making investment decisions:

1.Government policies and focus on agriculture: Government interest rates, subsidies, and support go a long way in determining the impact on the profitability of agricultural produce and in turn of the commodity market. A Government’s focus is one of the best indicators to determine the outlook of agro commodity market before investing in the same.

2.Weather conditions and harvest performance: In countries like India, a strong monsoon is essential for a good agricultural harvest. Investors can use weather forecasts and climate outlook to determine the future of the agro market. In case of droughts, the pressure of supply vis-à-vis demand would be high resulting in an increase in future prices and vice versa in case of a good weather forecast. Weather forecasts are critical agro indicators that help the investors in making profitable and timely decisions.

3.Land prices and inflation rates: Agriculture is land dependent and rising land costs, in general, indicate rising agricultural commodity prices. Similarly, even inflation can have an impact on the overall agro outlook and with rising costs the prices of agricultural produce are also bound to increase, hence making inflation an important indicator that can help determine the course of an investor’s decision in commodity trading.

4.Market maturity: Another important indicator to trade agricultural commodities is the market maturity level. It is necessary to understand the effects of speculation on agriculture commodities and their prices. A mature market will be relatively less affected by unabated speculation than an immature and fragile commodity market.

Investor friendly
Traditionally, agriculture commodity market has been investor-friendly and with the availability of necessary insights and ease of online trading, an investor can make conscious decisions and ensure good returns on investment.

Breakout or pullback: the higher probability trade

Breakout or pullback – the higher probability trade

Breakout trades and pullback trades are very common among traders who engage in trend trading in the stock market. Each of the trading methodologies has its own pros and cons. When you engage in stock trading, there will be many instances when you will have to apply one of the two strategies. However, most traders who do share trading restrict themselves to only one of the two types of trend trading. When you are looking for stocks to trade, look for those in a pullback or a breakout region.

Breakout

When stocks trend very fast they go slow in the middle and start basing. Basing is a horizontal movement where there is no clear trend indication. When stocks base, there is a balance between the supply and demand. In a breakout, the stock starts moving in the same direction of the original trend after having based for some time. This means the original trend is still strong and not about to reverse any time soon.

Pullback

In a pullback, a stock with a very dominant trend starts to retrace a bit and reaches a major support level (if it is in an uptrend) or a major resistance level (if it is in a downtrend) and then starts moving again in the direction of the original trend. Thus, a pullback is nothing but a short counter-trend move before the stock resumes to move in the original direction of the trend.

Breakout vs pullback

Breakout trades are very easy to identify and usually happen after some amount if basing. Most traders prefer the breakout strategy because it is simple and a trade with the stock trend. However, at times, breakouts may be false and may tend to stop you out. Also, the stop loss of a breakout trade is very big and thus, if the trade does not move in your direction, you lose a lot of money. Pullback traders are much safer since the stop loss is very less for a pullback trade as compared to a breakout trade. However if the stock is a very strong trend, then there may be times when you may never get a pullback, and thus will miss out on a very profitable trade. In order to trade the pullback strategy, you need to know how to identify the high probability support and resistance levels in the chart.

Comparative analysis of risk and reward: stocks futures and options trading

Comparative analysis of risk and reward – stocks futures and options trading

During the last twenty years, financial derivatives have appeared as one of the biggest markets of the world. Futures and options are the most significant segment of the derivatives market. The derivatives market is riskier compared to the stock market.   Derivatives are risk management instruments and their value is derived from an underlying asset such as bonds, share, index, bullion, interest, currency. Derivatives are used to make a profit by gaining access to cheaper money. They are used by securities firms, banks, investors, and companies. The derivatives contract is a standardized contract.

Types of options

Options trading is a type of derivatives contract. An option represents the right to buy or sell a security or other asset during a given time for a specified price. Options are of two types: ·

Call option: It gives the buyer the right but not the obligation to buy a given quantity of the underlying asset ·

Put option: It gives the buyer the right, but not the obligation to sell a given quantity of the underlying asset.

Stock Futures
  Stock futures are agreements to buy or sell a specified stock, i.e., the equity share of a specified company, in the future at a specified price. An investor, who is interested in purchasing a share, may buy the share in the stock exchange for cash.

The derivatives contracts are accessible on many online trading stock indices. The popular indices of options trading in India are the BSE Sensex and S&P Nifty. The everyday price changes will occur on stock index futures. Some natural calamities such as weather, debt, war, land reclamation and refugee displacement generally affect the index prices.

Stocks futures and options trading have certain risks associated with them. First-time investors need to study the market for some time, get a hang of how the market works before investing in them. A lot of fundamental and technical analysis is available online. As prospective investor should have adequate knowledge about the market.    When the risks are high, the gains are also more. However, an investor has to regularly monitor the investment and with the slightest signs of decline in performance, an immediate decision needs to be taken whether to remain in the investment or exit.

Does investing in gold beat inflation?

Does Investing In Gold Beat Inflation?

The answer to this question is YES! Investing in gold does help in beating inflation. Gold has always given a hedgerow against inflation. At any time when there is an insecurity or ambiguity in the market, investors start investing in gold. Gold is still a favoured medium of investment because of its liquidity.  While trading in gold, Gold MCX is a common terminology MCX or Multi Commodity exchange is a market just like stock market except here commodity trading takes place. MCX assists in online trading of commodity and settlement of future commodity transactions thus providing a common platform for risk management. There are various ways by which a person can invest in gold. Some of them are as follows:

1.    Bullion Market: The bullion market is one of the ways of investing in gold. It is a medium by which trade between buyer and seller is done for pure gold and silver. This market operates 24 hours in a day. This market is mainly an over the counter market. The transactions in this market are done predominantly either electronically or by phone calls. This market also enjoys a high turnover rate. The bullion market offers less flexibility because, in this type of market, gold or silver is in its tangible form that is either gold bullion bars or gold bullion coins. The value derived from gold bullion bars are based on the value of the content of gold present in the bars or coins In this market you have to pay the actual gold price.

2.     Gold Exchange traded funds or Gold ETF: It is a kind of mutual fund which invests in gold and the mutual fund units are listed on the stock exchange. This will require  demat and brokerage account.

3.    Gold linked products: Other gold-linked products like gold mining stock and gold bonds are options that are available to a person to invest in gold with the direct possession of gold.

4.    Gold Jewellery: Investing is jewellery made of gold has always been a major and popular source of investment in India.   These are some of the ways by which investment in gold can be made. So yes, it can be said that by investing in gold we can beat inflation because it is safe investment option as it is liquid. Investing in gold can also help you diversify your portfolio.

Drawbacks of trading the 52 week high and low

Does Investing In Gold Beat Inflation?

The answer to this question is YES! Investing in gold does help in beating inflation. Gold has always given a hedgerow against inflation. At any time when there is an insecurity or ambiguity in the market, investors start investing in gold. Gold is still a favoured medium of investment because of its liquidity.  While trading in gold, Gold MCX is a common terminology MCX or Multi Commodity exchange is a market just like stock market except here commodity trading takes place. MCX assists in online trading of commodity and settlement of future commodity transactions thus providing a common platform for risk management. There are various ways by which a person can invest in gold. Some of them are as follows:

1.    Bullion Market: The bullion market is one of the ways of investing in gold. It is a medium by which trade between buyer and seller is done for pure gold and silver. This market operates 24 hours in a day. This market is mainly an over the counter market. The transactions in this market are done predominantly either electronically or by phone calls. This market also enjoys a high turnover rate. The bullion market offers less flexibility because, in this type of market, gold or silver is in its tangible form that is either gold bullion bars or gold bullion coins. The value derived from gold bullion bars are based on the value of the content of gold present in the bars or coins In this market you have to pay the actual gold price.

2.     Gold Exchange traded funds or Gold ETF: It is a kind of mutual fund which invests in gold and the mutual fund units are listed on the stock exchange. This will require  demat and brokerage account.

3.    Gold linked products: Other gold-linked products like gold mining stock and gold bonds are options that are available to a person to invest in gold with the direct possession of gold.

4.    Gold Jewellery: Investing is jewellery made of gold has always been a major and popular source of investment in India.   These are some of the ways by which investment in gold can be made. So yes, it can be said that by investing in gold we can beat inflation because it is safe investment option as it is liquid. Investing in gold can also help you diversify your portfolio.

Drawbacks of trying to catch the extreme high and low of the market

Drawbacks of trying to catch the extreme high and low of the market

When an investor first starts trading, they invest in the extremes of the stock market. They either buy a lot of economical shares or they buy a few expensive shares. Both these strategies have their benefits and drawbacks. The benefits and drawbacks apply to both offline as well as online trading.

Investing in the high end of the market

What is a blue chip stock? A blue chip stock is a stock that belongs to a well-established and financially sound company which has operated in the market for many years. The market capitalization of such companies is usually in billions and the company will be the leader in the top 3 companies in its sector.   Blue chip stocks are considered as safe investments for investors but, they provide an array of disadvantages for small investors. The growth potential of a blue chip stock is very low which means that it will take a longer period of time to recover your investment. Also, blue chip stocks have low volatility which is one of the reasons they are considered safe. But, this leads to a methodical growth rate.   Since blue chip stocks have a higher price per share as compared to growth shares, even a small growth can lead to high profits.

Investing in the low end of the share market

What are growth stocks? A growth stock is a stock that belongs to a company whose profits have a tendency to grow at an above average rate as compared to the rest of the market.   “Buy low, sell high”, this is the most popular trading strategy about investing in the stock market. This basically means that the investor has to buy the stock when the price per share is really low and sell it when the price per share is high. This way the investor can earn a decent profit off of his investment. It sounds simple but, in reality, it is a misleading concept.

Due to market volatilises, the price of a stock could crash which would lead to losses than profits. The term high is relative, because of changing market trends, what seems high today could be low tomorrow and vice versa.  Hence, it is vital to conduct a thorough market research instead of blindly following trading tips before investing in any kind of stock – growth or blue chip.

Guide to commodity trading

Guide to Commodity Trading

Investing in commodities
is treated as a way to diversify the portfolio even when people have debt and equity funds in their existing portfolio. To evade inflation and also to participate in an invested that has potential for global growth, commodity trading is the perfect choice.   Indian markets have lifted the ban on trading in commodities in 2003. More and more individuals are now venturing into this lucrative field to gain more returns in spite of the risks associated.

Brief idea about commodity trading
Commodities mean any kind of product and trading in them is a longstanding practice. Spot and futures (derivatives) trading in commodity is known as commodity trading. Commodity derivatives trading is when a sell or buy position is taken built on the prospective value of agricultural commodities or other materials like metals, silver, gold or crude. The common platforms where people can trade in commodity derivatives are Multi-Commodity Exchange (MCX) and National Commodity and Derivative Exchange (NCDEX). Commodities futures trading is comparable to futures trading in equity. A short position (when selling it) or long position (when buying a contract) are the general trading styles in this trade.

Reasons to invest in commodities
Commodities allow investors to expand their portfolio and benefit from price movements. But, swings are unpredictable and venturing into this field with inadequate knowledge might lead to loss. A deep understanding of the demand cycles in the commodity market is important for the investors. Only surplus amounts should be invested in this market.

Procedure and requirements to start commodity trading
Firstly, you need to select a commodity broker for online trading and then fulfill the ‘Know your customer’ criteria. An agreement needs to be made with the broker. The supporting documents required are address proof, PAN and a photo identification.

Risks involved
The most common form of commodity trading is futures. The whole trading is based on predictions on the value of the particular commodity based on world conditions. As these conditions are not very defined and known, the predictions are not very accurate. This leads to a probability of substantial gain or substantial loss. So an investor needs to follow the commodity charts to show the movements of the specific commodity. These charts are available with many of the commodity trading firms.

Has crude oil hit an all time low?

Has Crude Oil Hit An All Time Low?

Crude prices seem to have hit an all time low. The recent fall in the oil prices seems to have created a lot of commotion among commodity traders. The fall in the crude oil prices is due to an increase in the supply of crude oil and no great increase in demand. Crude oil trading has seen such a big hit because there are a now a number of crude oil suppliers in the world but the demand for the commodity has only slightly increased over the years and thus a drop in the fall in crude prices.   With the sudden competition in this commodity, the firms are trying to give the clients a bargain by selling crude at very low prices. As in the case of the stock market, the price of oil is also directly impacted by the supply and demand. Like stock trading, crude can also be traded on an exchange when you open an account with a registered brokerage firm.

Is this a buying opportunity in crude?
 

Even though the prices of crude have hit an all time low, you may wait to see a reversal before entering the market. Looking for a trend reversal in the technical charts can give you an indication if the price is about to reverse. Candlestick patterns like double bottom and inverse head and shoulder pattern, or an uptrend signal in this commodity can be used to analyse the entry point in crude mcx.   Along with the technical charts, it is also important to keep yourself updated on news and other geopolitical tensions which may impact the price of crude oil. With the supply in crude increasing, the prices may tend to fall down further. Knowing the fundamentals of the commodity and the impact of news on it can increase the probability of the trades.

Crude futures

Before trading in crude futures, you should seek expert advice and trade only with a proper stop loss. The oil prices are volatile and trading without stop losses may end up wiping out your full trading capital. You could enter the crude market when you see prices making a higher high and higher low indicating a possibility of an uptrend in the crude futures price.

History of trading in agricultural commodity

History of trading in agricultural commodity

The history of trading in commodities dates back to thousands of years with early human settlements trading their agricultural produce and livestock for other livelihood essentials. Trading of agricultural commodities began as early as 8500 BC and as agricultural produce increased and supply-demand equations started playing a major role, the suppliers/merchants sought ideas to raise money for the piled up stocks that were waiting to be sold. Thus began future agreements and commercial trading of agricultural commodities. The first official commodities exchange market is said to have begun in Osaka, Japan in the 1700’s and since then the market for trading commodities has grown exponentially.

Agricultural commodity trading

Today, agricultural commodity trading is a widespread commercial phenomenon around the world with many countries having a developed legal platform and well established online system for trading of agricultural commodities with some of the biggest exchanges doing more than a billion transactions collectively every year.Agricultural commodity trading in India dates back to the pre-independence era with the establishment of Bombay Cotton Trade Association in 1875. India had a flourishing trade market till government imposed a restriction on trading of agriculture produce during the mid-90’s to control and stabilize distribution of agricultural produce due to frequent famines and drought situations. The commodity market in India was re-introduced in 2002 and agro commodity trading is now a flourishing market in the country.

Trading market in India

Trading market in India functions under the gamut of Forward Contracts (Regulation) Act, 1952, regulated by the Forward Markets Commission. Commodity trading market is driven by three major screen based multi-commodity exchanges namely MCX, NCDEX and NMCE which facilitate online commodity trading in the country. While Indian MCX is the 6th biggest commodity exchange platform in the World trading in bullion and minerals in addition to agricultural commodities, NCDEX is the major agricultural commodity trading platform in India with close to 25 agricultural commodities such as soybean, wheat, pulses, spices etc. being traded on the platform. The New York Mercantile Exchange is the largest physical futures commodity exchange in the World. Agriculture being the predominant source of livelihood for the majority of Indians, prospects of growth of agriculture commodity trading in India is unparalleled. With better forecast techniques and high-end technological support, trading in agricultural commodities could be a win-win situation for all.

How can you increase the odds of your trade by using the bank nifty chart?

How can you increase the odds of your trade by using the bank nifty chart?

Bank nifty is an index which represents the 12 most liquid banking stocks in the National stock exchange. These stocks are large capitalised stocks and it gives investors as well as the traders a benchmark to know how the banking sector is performing.   Most traders see the bank nifty charts along with the nifty charts to do online trading in the share market. Your broker may also be giving you trading tips based on the bank nifty charts.   The bank nifty has a correlation coefficient of around 0.88 with the nifty. This correlation has been seen for some time. The correlation shows that the bank nifty and the nifty follow a lot of similarity in their trend and trading patterns.   The bank nifty has a beta of 1.2 which means that the volatility is slightly higher as compared to that of nifty.

How can you increase the probability of your trades with bank nifty?


Technical traders tend to see the bank nifty as well the nifty charts together. They plot trend lines as well as support and resistance levels on both the indices. If you spot a strong level on the bank nifty and a similarly strong level at around the same point in the nifty, then these are very high probability trades. The high correlation between the two indicates that the nifty may also follow suit.   You can also use the betas to increase your trading odds. When you take unhedged trades then substitute the bank nifty futures for the nifty futures. The bank nifty has a higher beta and thus will move more in the same direction as the nifty and let you reap more profit.   You can also take a paired trade with the indices. If you have a positive bias on the index, then go long on bank nifty and short in the nifty index.

If the prediction is right then the bank nifty will outperform and give a positive return. However in case the price does not move in your direction, the nifty will make a profit and reduce your losses.   Care need to be taken since the correlation and the beta values may change over time.

How does season affect the price of agricultural commodities

How Does Season Affect The Price Of Agricultural Commodities?  

A commodity is something which is either grown or produced in the environment naturally. A commodity includes all the natural products or agricultural products. In commodity trading, the trade is done by trading in commodities rather than in shares like in the case of the stock market. The commodity price is determined by the supply and demand of the commodity. Online trading of commodities can also be done nowadays. And commodity tips are also available which definitely helps the commodity  trader.

Climatic conditions

Every nation aims to produce a major portion of their food consumption in their own land using their own resources. But the production of theses food grain is not always stable. And the reason for this instability can be various reasons the major being climatic condition or seasons. In India climatic conditions and price of the agricultural commodities have a direct impact on each other.  For example, if in a particular year the rainfall is less in the rainy season, then the production will turn out to be less due to the crops not surviving, which in turn will increase the price of the product. And if there is a good rainfall in the rainy season, which will increase the supply of the agricultural commodity, which in turn will reduce the price of the agricultural commodity. So here we can see that the climatic conditions have a direct impact on pricing of the product because the climatic conditions affect the supply of the commodity. So we can say that because climatic conditions affect the supply of the agricultural product, hence prices of the agricultural product are in an inverse relation with each other.

Impact on economy

In a developing country like India, agro commodities hold a lot of importance and value, as a major portion of people are engaged in agricultural activities. In a country like India, where farmers are heavily dependent on the climate or seasons, the government also aids the farmer by providing them with subsidies and another form of help.  And so any fluctuation in the price of an agricultural commodity due to the season has a huge impact on the economy of the country. Therefore, it can be said that the price of an agricultural commodity is affected by the season or the climatic condition.

How to apply news in your technical trading

How to Apply News in Your Technical Trading

Technical trading encompasses various models and trading rules which are subject to fluctuations primary to the strength of price movements and changes in volumes of trading. Some of the strategies include moving averages, business cycles, stock market cycles and regressions.   Usually identified through charts, this form of technical trading attaches a lot of importance to the latest press releases and news excerpts on the market.  It provides very specific information which is very volatile. The following are the various ways in which investors can benefit from reading between the lines of the latest news flooding the stock trading platforms.

1.   
News for everyone   Engaged in round-the-clock share trading, stock markets come up with public economic news that will impact their short-term and long-term investments. With information for everyone, investors from around the world can make the most of this moving market data to turning them into opportunities by acting diligently based on the information that is publicized.

2.   
Types of currencies to trade in   Global share trading is all about trading in pairs of currencies that span the entire globe. Economic releases concerning a particular currency will attract the attention of an investor to pick up the same. Going by the basic principle that the U.S. dollar lies on the opposite side of all the other currencies, a lot of importance is invariably given to U.S. news releases for the global investor groups to follow. However, it is mandatory for investors to delve into the role of the country which is offering information for technical analysis in addition to attaching significance to that piece of market data.

3.   
Timing of news releases   Another important factor governing the use of press release in stock trading is to look into the timing when a particular country has come up with a press release regarding its native stock. This timing is of major consequence enabling investors to keep a watchful eye on the market if they have a plan to act in accordance to the press release.

4.   
Type of releases   Every country is governed by certain economic guidelines and specifications, all of which have an impact on their stock prices. Socio-economic constraints like unemployment should be weighed alongside trade balances while anticipating the type of releases that will come up that week. It is hence the prerogative of the investor to identify the information that is important to him. Being in the present is the best way investors can make hay with a positive outturn of events.   In addition to the above-mentioned criteria, it is important to attach significance to the duration of which a particular news item makes an impactful appearance once it is out in public. Generally speaking, it is a common phenomenon to witness an impact during the first and second days after the news was released, and it can continue until the fourth day.

How to average a stock?

How to average a stock?
In stock market terms, averaging a stock simply means to re-evaluate the prices of the stocks.

Averaging down a stock

Whenever a stock is bought in online trading and it has since declined, there are three possible choices for you to make:

  • Hold on to the stock and wait for the price to rise
  • Sell the stocks that were bought to avoid further loss
  • Buy more of the same at a lower price, lowering the total cost

If the trader experienced is in stock trading and is convinced that the company whose stocks were bought will perform well and that the price drop is temporary, then additional profits can be made by averaging the stock price down. Then again, this will depend on whether the price of the stock is rising.
Another way of averaging your stocks down is to add more of the same stock shares to the original position at a lower cost price per share. If the same number of shares are bought, then it is called “doubling down.” The more number of shares of lower price you add, the more your average cost per share will decline.

Averaging up a stock

As opposed to averaging down of a stock, averaging up of a stock is to buy additional shares of the same stock at a price much higher than its initial value. By doing so, the average cost per share is increased. Averaging up of the stock is also achieved in short selling by selling the additional stock shares at a higher price than the initial transaction price.

While trading averages, the most common and best practice is to buy smaller amounts. By doing so, traders build their stock averages up in a classic pyramid fashion without letting it run big too fast. Whereas some traders tend to average up every time a stock price rises, others tend to wait for specific trend patterns to appear before buying in more shares.

There is no such thing as one right way to average a stock, be it averaging up or down. It all depends on the strategy that you chose to employ. However, there is a need to be careful while averaging your stocks as the upside / downside could be sharp.

How to calculate the risk: reward ratio?

How to calculate the risk: reward ratio?

Risk reward ratio is used by investors in share market to compare an investment’s probable return to the risk taken to achieve those returns. It can be calculated by comparing the risk i.e. the amount the investor could lose to the profit amount expected by the investor when the position is closed.

Example of risk reward ratio

Let us take an example to understand this better. While doing stock trading, an investor buys 200 shares of ABC Company at the rate of Rs 20/- and places a stop-loss order on his transaction at Rs 15/-. The stop-loss order ensures that the maximum loss incurred by the investor is limited to Rs 5/- per share. Risk: reward ratios cannot be calculated without a stop-loss order.   Meanwhile, the investor’s expectation is that ABC Company’s shares would climb to Rs 30/-. The risk taken by the investor is Rs 5/- per share to earn an expected share price of Rs 10/- per share. So the risk: reward ratio becomes 1:2.

Every trade in the share market whether it be online trading or through a broker involves some amount of risk. For the investment to be worthwhile, a riskier investment requires a greater return. Though different trading strategies determine optimal risk/reward ratios, the general concept is that when the ratio is 1:1, it signifies that risk equals the possible return. Quite naturally investors do not favour such trades when compared to trades where the ratio is 1:3 signifying that the potential return is three times the risk. Higher the potential return, more lucrative it is for the investor.

Calculating risk: reward
  Risk: reward is calculated on some expectations and predictions based on technical analysis of the past data. However, an element of uncertainty does creep in. So, to keep it at a minimum, risk: reward ratio is always calculated realistically, yet conservatively. This ensures that the investors can use this ratio to find out the nature of profit that they can expect before entering into the position. Especially for new investors, this ratio comes very handy.   In the money management field, to protect investors and their accounts it is necessary to know the risk: reward ratio for a particular trade. This is an effective risk management tool and it is highly recommended to be used before initiating any trading.

How to decide on a target price

How to Decide on a Target Price  

The Proponents of a Good Investment Strategy


Target Price from the point of views of Options and Stocks

Speaking of options, a target price comes in the form of a security to the buyer, enabling him to earn profits once the price crosses the pre-determined price. As regards stocks, the target price comes as a pre-set price given by analysts demonstrating the journey of the stock by the time it completes its 52 week tenure. Thus, a target price is a futuristic estimate of the stock after taking into account the forecast earnings along with the valuation of multiples. To sum up, target prices come as better indicators of the performance of a stock when compared to ratings.

Target Prices – Boon to Investors

Ratings have an innate characteristic of generalizing stock prices. With ambiguity clouding the decisions of investors, target prices come in as a boon to investors prompting them to make sound investment decisions. Being mindful of the varied preferences of investors towards their personal investment goals and preparedness towards risk, target prices are essential tools of share trading to make and benefit from good investment decisions.

Zeroing on Good Target Prices

Research reports present target prices which are both good and bad. While the good ones help investors to arrive at a well-informed decision regarding stock buying. This comes after weighing the parameters of risk when placed alongside the potential reward which the investor will earn when he chooses to either buy or sell a certain stock. In contrast, a bad target price has the ulterior intent to mislead the investor prompting him with a faulty “stocks to buy” situation. Hence, it is the prerogative of every investor to evaluate the target prices of a stock through the following 4 parameters.

1.    Forecast of EPS – The research report should invariably throw light on the earnings model of a company along with presenting the complete income statement supported by an operating cash flows statement.
2.    Assumptions of EPS Forecasts – The report should lay emphasis on the premise behind certain assumptions which were made as if to substantiate the reason behind every such assumption.
3.    Look into Valuation Multiples Used in the tabulation of Target Price – Valuation multiples include price per earnings (P/E), price per book (P/B) and price per sales (P/S). While P/E ratio is applicable to companies, P/B ratio makes its presence felt in banks.
4.    Assumptions which were made to substantiate the type of valuation multiples used – Reasonableness with assumptions which are in line with arriving at an earnings forecast or a valuation target should be ensured. Having understood the importance of the above-mentioned parameters in arriving at a good target price, an accurate move can then be made to benefit from a “stocks to sell” situation.

How to decide which is the best moving average pair to trade stocks?
Moving average trading strategy

The moving average is a simple technical analysis tool that creates a continually updated average price to smoothen out price data. The trader can choose the time period for which the average is taken. Moving average trading strategies are well-known and can be customised to any time frame, suiting short-term traders as well as long term investors of share market.

A moving average (MA) is used to lower the ?noise? on a price chart. To get an idea about the price movement, you need to look at the direction of the moving average. When the MA is angled up and generally the price is moving up or it is angled down and generally the price is moving down, the price is probably in a range.

Moving averages are of various types ?

This can also act as a resistance or support. In a stock market uptrend the moving average acts like a support so that the price bounces off it to a higher level. Similarly in a downtrend it acts as a resistance so that the price hits it and drops down. Simple moving average (SMA) is calculated by taking the simple average of the last five days. Exponential moving average (EMA) is a bit complex. However, it gives weight to the recent closing prices.

Moving average length

Average lengths ranging from 10 to 200 are applied to the timeframe of any chart depending on the online trading strategy. The timeframe that is chosen plays a vital role. An MA with short timeframe will react quicker than a moving average with a long timeframe.

Crossovers are one of the main strategies of moving average.

Price crossover is when the price crosses below or above an MA to indicate a probable trend change. Intraday trading strategies also include MA.

A golden cross is a buy signal due to the trend shifting up. We find it from a chart of two moving averages, when the shorter one crosses over the longer term.

A death/dead cross is found from a similar chart when the shorter MA crosses below the longer term one, signalling a down in trend.

We need to remember that moving average is calculated on historical data and the results might be random at times.

How to determine live futures quotes for commodities

How To Determine Live Futures Quotes For Commodities

When you are doing a future trading in the commodities market, you need live futures prices in order to trade. There are a number of platforms that offer you commodity futures prices. However, the commodity price should be live and not delayed in order to take a trade.   If you are trading online, then the platform that is provided to you by your broker will show you the various commodities traded in the exchange. In the live market, you will notice that the prices of these commodities are constantly changing. This is because the commodity prices change by the second and your online trading platform reflects the change in price. The platform provided to you by your brokerage firm is connected to the online trading platform used by the exchanges. The data thus gets channelled to you so that you can take live trades in the commodity market.

Why do you need live futures quotes?

In order to take a trade in the futures market, you need live data. Live data is when the price change reflects immediately in your platform and not with a delay. Intraday, as well as swing traders, look to open accounts with brokerage firms that give live futures quotes. Futures trading happen immediately and if you have a delayed futures platform you will get the data with a delay which will hinder your trade. Even a 2 second delay is enough to stop you from trading. You need immediate data from the exchange to be able to trade. The live future quotes should also reflect in your technical charts. This will help you analyze and take commodity trades with high probability.

Free websites

There are many free websites that offer live commodity futures quote. However, most brokerage firms in India also provide you with an online trading account. The data fed into them are also live. If you are using a website then the website mentions if the quotes are live or with a delay. In case they are delayed then you may not want to use it for trading purposes. Your brokerage firm will let you know if they are providing you with a delayed quote.A delay of even a few seconds can hinder your trade making you stop out. You will not be able to control your trade and monitor it in the case of a delay. Thus, it is important to look out for live quotes and only trade in a platform that offers live future quotes for commodities.

How to find out if the stock is being accumulated or distributed when the stock is basing?

How To Find Out If The Stock Is Being Accumulated Or Distributed When The Stock Is Basing?

Stock prices are said to be basing when they show very little or absolutely no movement in either the upward or the downward direction. When online trading, the technical charts will show a straight line. Share trading experts look for these basing zones because they then consider if the stocks are going to move up from the basing area or will start moving down. This kind of an activity when trading in stocks occurs after a rapid price movement. The stock price changes very less since they have an equal supply and demand.

What is ‘Accumulation/Distribution’?

The accumulation /distribution is a popular technical indicator which tries to find out the supply and demand of the stock. It helps you judge that when the stocks are basing, are investors adding on to their portfolio or slowly selling stocks from their portfolio. This can be analysed by checking for divergence in the stock price and its volume.

Like for example, if the stock is in a downtrend and all of a sudden there are a number of positive days starting to occur with high volumes, then this could signal that slowly the demand for the stock is picking up. The same situation happens in an uptrend also where there are a number of negative days for the stock with a   high volume. Thus, this accumulation/distribution indicator looks for stocks which are heading in the opposite direction to its price. As soon as traders spot this divergence, they wait for a reversal before making any further investment decisions.

Accumulation

Accumulation, thus, means a scenario where investors are buying a stock and a huge amount of money is being poured in the stock by traders and investors which will eventually lead to the stock price moving up.

Distribution

Distribution, on the other hand, is a scenario where the investors and traders are selling the particular stock slowly in the market.

Knowing if the investors are accumulating/ distributing when the stock prices are basing can let you take an informed trading call on the stock. They help you find out if the stock will breakout from a particular basing area or will start to reverse its direction.

How to form an nchart

How to form an NChart

Ncharts are technical charts that are provided by NCDEX. They are used for technical analysis and analysts use them to look for buy and sell opportunities in the commodities market. They come very handy when you are trading online. Like the share market charts, these Ncharts also let you analyse the commodity with the help of candlestick charts. Stock charts and the commodity charts are very similar, just that the asset that you are trading in is different.   With the Nchart, you get access to the technical charts of all the commodities that are traded on the NCDEX. Before you learn how to form an Nchart, you need to know the importance of technical charts.   Technical charts are used by analysts who study price action and price patterns in a commodity to predict the future price of the commodity. They believe that history repeats itself and thus, major support and resistance areas that have worked in the past will work in the future too. Technical analysts study these levels closely and also look out for patterns in the charts which give them a confirmation of their trades. Along with this, they also make use of the technical indicators which helps in increasing the probability of success in their trades.

Formation of an Nchart

The Ncharts are formed as per the trading price of the given commodity. The price of the commodity is recorded and then mapped on the charts. The high, low, open and close of the commodity are recorded and these are then plotted on the graphs. There are charts available for a number of time periods, and thus, the candlestick charts are formed accordingly. Volume is also a very powerful technical indicator which is closely looked at to form the Ncharts. These charts are formed by highly efficient software that uses scientific tools to plot these charts in real time.

Who makes these charts?

Ncharts are made by big institutions, brokerage firms and big mutual funds that trade in huge numbers. The technical chart basically indicates what price is doing at a particular point in time. It indicates the strength of the buyers and the sellers in a particular commodity at a particular time. Since these institutions trade in huge volumes, they are able to cause a significant impact to the price of any commodity. This along with some participation by retail clients forms the Ncharts.

How to formulate an MIS report

How to formulate an MIS Report

Management information system, also known as MIS, is a computer-based system that is used by brokerage firms to transform the data that they have into useful information. This lets them take actions and decisions for the betterment of their firm. It also helps in organising the business. It generates a report related to the financial statements as well as the performance reports of the firm. It also helps in decision making by using decision supporting tools.

Brokerage firms

Brokerage firms do stock analysis and company research. They carry out fundamental research and technical analysis to give trading calls to their clients. Stock analysis is the key to run the brokerage house and they make money by the brokerage that they generate when clients trade on their calls.   However, all that the company does needs to recorded. The MIS helps it in marinating a record and taking necessary action to improve the system. It lets the company run smoothly and take care of peak situations. In order to formulate an MIS report, you need a solution which offers a comprehensive functionality.

Formulating an MIS report
 

  • In order to formulate an MIS report for a brokerage firm, a few factors need to be kept in mind. ·
  • The report should have a robust security system. It should have dual authentication and an audit trail ·
  • The operational risks should be very minimal. ·
  • There should be an auto debit collection feature. ·
  • The MIS should be integrated real time with the risk engine ·
  • Billing should be automatic as well as paperless. ·
  • The MIS should be very flexible with the multi depository system and should be capable of handling CSDL as well as NSDL depository ·
  • It should be able to handle multi-branch as well as multi-account system ·
  • The facilities that one should look out for is a stop transfer as well as cancellation facility. ·
  • The billing has to be parameterized for each client ·
  • The inventory maintenance should be inbuilt ·
  • It should be an exhaustive module for MIS reporting and should be able to handle digital instructions ·
  • It should be able to do a financial account modelling. In order to formulate an MIS report, these things need to be kept in mind.
How to invest in blue chip companies?

How to invest in blue chip companies?

If you are a beginner in the stock market, then your broker will initially ask you to invest in blue chip stocks. Most first time traders only trade in blue chip companies in the share market because they are high-valued and stable stocks. They are the stocks of well-established companies that have constant earnings and benefit those who look to invest in stocks for a long time. If you are considering some safe and less risky stocks to buy, then you should consider investing your money in blue chip companies. They offer security and dividends from time to time. The prices of blue chip companies do not move a lot but they pay regular dividends to make up for it. The dividends also help protect your money against inflation. Blue chip companies have a strong balance sheet and a very good business model. They grow consistently and pay dividends from time to time. However, stock trading has its own share of risks and thus even if you are planning to invest only in blue chip companies you should know how to invest in them.

How to invest in blue chip companies
Understand the company

If you are a long term investor then you should know the basic business model of the blue chip company that you plan to invest in. Analyst reports, as well as the quarterly and annual results of the company, will give you a better insight into the future of the company.

Time of investment

If you have been advised to invest in a blue chip company by a broker for a long period of time to gain good returns, then decide for yourself if you can wait that long. Many traders may not be happy locking their capital in the share market for a very long term and may look for quick and short term trades.

Understand trading

Trading or investing in a blue chip stock just because your broker asked you to do so is absolutely not recommended. You should understand how trading is done. A basic study on the technicalities as well as the fundamentals of the blue chip company can help you take an informed decision.

Diversify your portfolio

Do not invest all your money a single blue chip stock. There have been instances when blue chip stocks have gone bankrupt overnight. Diversify your portfolio into different blue chip stocks from different sectors to protect your capital and reap good returns. Knowing how to invest in blue chip companies will help you take an informed investment decision.

How to judge high probability supply and demand levels in a technical chart?

How To Judge High Probability Supply And Demand Levels In A Technical Chart?

Technical analysis looks at candlestick charts and tries to find out high probability supply and demand levels to take a trade. It is important to look for high probability setups in the stock charts because they increase the probability of your trades. The whole concept of stock trading is based on the theory of supply and demand. However, just any supply and demand level will not give good trading setups. It is important to know the ways to find out the high probability levels in the share market and take better trades in the Indian stock exchange.

Key indicators

Supply and demand are the key indicators in the financials of a stock. It is the imbalance in the two that causes stock prices to either go up or down. When you observe the technical charts, you will find these areas where there is a big imbalance between buyers and sellers or where the supply is changing to a demand and vice versa. Professional traders spot these levels to take trades in the stock market.

As per popular belief, if a particular supply or a demand level has been hit many times it means that it is very strong and a high probability level. On the contrary, when a supply or the demand zone is first formed, it is only the first instance that is of high probability. When the stock keeps coming back to the level repeatedly, it signals that the buyers who wanted to execute a trade at that level have already caught the trade and now there are no new buyers waiting at the level to cause a price movement up. Thus, if you see a very sharp move from a newly formed supply or demand level, it can act as a high probability zone. However, after repeated touches, the zone tends to become weak.

Multiple time frame analysis

Multiple time frame analysis also lets you spot high probability supply and demand levels. If the level on a smaller time frame chart coincides with a level on a larger time frame chart, then the probability of that level working out is very high. The higher the number of overlapping zones, the better the probability of success at that level. The stock charts have many supply and demand levels on them. However, as a trader, you need to find and take a trade only on the high probability levels.

How to know if a stock is selling at a premium

How To Know If A Stock Is Selling At A Premium

Your brokerage firm will tell you which stocks to buy and which stocks to sell. They will also let you know the stock price as well as if the stock is selling at a premium. Premium and discount are commonly used terms in the share market. Stock premium means that the share is trading at a price higher than its NAV. A stock that is trading at a discount is trading below its NAV.

Net asset value (NAV)

The net asset value per share or the NAV of a company is calculated based on the value of all the investments and company assets minus the liabilities that it has which is then divided by the total number of shares of the company. The share price in the secondary market may be higher or lower than the NAV. This difference is called a discount (if it is selling below the NAV) or a premium (if it is selling above the NAV). Selling at a discount means you buy for less than the NAV. Selling at a premium means you buy for more than the NAV.

Reasons for stocks to be selling at a premium
 

Stocks are sold at a premium due to a number of factors. Changing interest rates, the economic scenario, news about the stock or market sentiment can be few of the reasons why a stock will be selling at a premium. However, just because a share is trading at a premium does not necessarily mean that its outlook is positive and it is a must buy. You need to consider various other factors before investing your money in the stock. When you buy a share at a premium you should have made thorough research in the company to pay more than its NAV. If the future prospects of the company are bright and if you think that the sector is going to outperform, then you may want to pay more than the NAV. However, in case you are wrong, the share may even go down and start selling at a discount. Your broker may be able to advise you on which stock to buy at a premium and add them to your portfolio to profit from them in the future.

How to participate in a trending market

How to participate in a trending market?

What is a market trend?
 

An anticipated tendency of the financial markets to move in a particular direction over time is known as a market trend. They are divided into three categories – secondary for short time frames, primary for medium time frames and secular for long time frames.

How to identify market trends in the stock market?
 

It is vital to understand the direction of the trend in the share market. The stock trading trend can be upwards, downwards or sideways. Investors usually invest in a stock when it is going upwards and keenly observe it to detect any flaws, which is an indication to sell the stock immediately. Time is an essential factor while analyzing trends. The monthly trends of a stock carry more weight than the weekly trends. The daily changes in prices are not considered to analyze trends. The longer the trend lasts on a particular stock, the more the weight it carries.

Three adamantine rules for trend trading
 

1.    Invest and forget Most of us have the tendency to exit a trade too early. In other words, we live in the constant fear that the stock prices might fall so it’s best to exit the trade right away. No amount of research or books can prepare us for this temptation. This is the hardest thing in trading. Just let the seed grow and don’t dig it up to check if it is growing.

2.    Analyze the charts There is an overload of information available on the internet today. If there is a minute fluctuation in the market trends, there are a thousand explanations for why this happened. Most of the time, this information will be false. The large traders enter and exit a trade for reasons known only to them and in most cases they guess it themselves without a logical explanation. It is best to analyze the charts for reliable information.

3.    Pick the top third While trading, most of the investors tend to pick the bottom most or the top most stock in a market as it has less risk. In reality, professional traders participate in the top third of a move because this niche gives the maximum benefits in a short period of time. These trend trading tips will help you invest wisely.

How to trade in commodity agricultural products

How To Trade In Commodity Agricultural Products

The agro commodity trading has a lot of potential since they have a significant impact on the income as well as the economy of a country. It plays a very important role in driving the demand of a country. Commodity trading is very popular because of the leverage that it offers and also because it follows technicalities better than equities.

Agricultural commodity trading in India

 

Agriculture commodities are traded in commodity derivatives. Commodities trading makes investors look beyond investing in stocks and shares and thus helps them diversify their portfolio. The Indian mcx exchange allows retail traders to trade in commodity futures. Before, trading was done in the physical form and thus retail traders could not participate in the commodity trading business. With exchanges introducing online commodity trading, trading in agricultural commodities has become very easy and simple. There are three commodity exchanges in India. The National commodity and Derivative Exchange, the National multi-commodity exchange of India Ltd. and the Multi-commodity exchange of India Ltd. Traders and investors can participate in agricultural commodity trading through these exchanges once they open a commodity account with a registered broker. Trading in agricultural commodities is less volatile and hence less risky than trading in equities and equity futures. Thus, most traders and investors prefer to trade in the agricultural commodity market. In order to trade in agricultural commodities, traders should be well aware of the fundamentals of the commodity. Seasonal effects or any news impact on the agricultural commodity should be known in order to take a high probability trading position.  

How to trade in agricultural products in the commodity market
The agricultural commodities are traded in futures. The lot size will vary from one commodity to the other as well as from one exchange to the other. The lot size may also be quoted in different units. Exchanges allow settlement in both cash as well as well physical delivery of the agricultural commodity. However, if you need a physical delivery, you will have to intimate the exchange in advance.  

Requirements to open an agricultural commodity account
In order to be able to trade in agricultural commodities, you will need to open a commodity account. For this, you will need a bank account, a PAN no, a demat account, an agreement with the broker and a KYC.
Rubber futures - the basics of trading in them

Rubber Futures – The Basics Of Trading In Them

Occurring naturally in the fluid of its plant, rubber is very appealing to traders who trade rubber futures in the commodity market. Rubber has a wide range of applications and is also exported. Trading in rubber is very popular due to its demand as well as because of its qualities. A trader, who trades in commodities, can use his judgement and analysis to predict the rubber price.

Rubber trading

The rubber futures are traded on the commodity exchanges in India. The commodity is one of the primary industries in the world. Rubber finds its use in the automotive industry as well as in the footwear industry. It is expected that India will become the topmost producer of rubber in a few years due to a number of factors. It has the benefit of having extensive plantations and the easy availability of labour at cheap costs which gives it an edge in rubber production over other countries in Asia. This will affect the prices of rubber in the market.

Factors that affect the price of rubber

There are a number of factors that affect the price of rubber. The demand for automobile tyres has a significant impact on the price of rubber. This will have a major effect on the spot price of rubber. At times, the price of rubber fluctuates dramatically due to a sudden increase or decrease in the demand for automobile tyres. The price of rubber futures is dependent on government policies. Subsidies and trade restrictions imposed by the government has a very significant impact on the price of rubber futures. Weather also plays a major role in deciding the price of rubber. The production of rubber decreases dramatically when there is heavy rainfall.Rubber is a very popular commodity traded in the Indian mcx and ncdex market. You will need to open a commodity trading account with a broker to be able to trade in rubber futures through the exchange. A number of factors decide the price of rubber and thus, you need to be aware of them to be able to correctly predict the price of rubber futures and take a trading position in this commodity.

Should beginners trade in natural gas?

Should beginners trade in natural gas?

Natural gas is a very popularly traded commodity in the commodities market. It offers a huge potential for the seasoned traders to make some really good money. However, natural gas stocks are very volatile and beginners in commodity trading may not be comfortable trading in them. Natural gas movements are very sudden and intensely volatile. Thus, unlike trading crude mcx which is easily predictable, trading natural gas in the Indian mcx needs a lot of expertise. The commodity is affected a lot by  weather conditions. Trading in natural gas needs to be done with a lot of caution following proper stop loss techniques.

Fundamentals that you need to know to trade natural gas

At 10.30 am EST every Thursday, the US Energy Information Administration (EIA) releases information regarding the supply levels of natural gas. Traders track this data very closely to find out how much of the natural gas commodity entered or exited the US storage facility from one week to the other. The time of the year has a major impact on the inflow and the outflow of the commodity. In the winter months, traders are interested in how much natural gas was withdrawn from the storage. During summers, traders look out for how much natural gas was added to the inventory. The weekly data lets traders and analysts compare the current inventory levels as well as the injection and depletion rates to the last year’s data. The data variation as per season creates a bullish, bearish or a neutral trend for the price of natural gas. Traders also keep a check on the weather reports to trade in natural gas. The temperature fluctuations affect the demand for natural gas. Analysts look at meteorological forecasts to trade natural gas. However, one needs to bear caution since the meteorological forecasts are not always accurate.

Technical analysis to trade natural gas

Along with the fundamental factors, one needs to know how to analyse the technical charts in order to get high probability buy and sell levels of natural gas. Since natural gas is very volatile, you should keep a strict stop loss in order to protect your capital. Beginners in the commodity market generally shy away from trading in natural gas because of the huge volatility in this commodity.

Should the exchange introduce option trading in commodities?

Should the exchange introduce option trading in commodities?

“An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date”. As the name suggests, the buyer of Options has the option to either exercise the option and take over the underlying asset or let it expire it and lose the initial sum of the amount paid to secure the options.

Commodity Trading

Commodities are another item in addition to traditional stocks and securities which are allowed to be traded on exchanges. Commodity trading in India is facilitated by three major exchanges namely Multi Commodity Exchange (MCX), National Commodity and Derivative Exchange (NCDEX) and National Multi Commodity Exchange of India (NMCE). Commodities trading were re-introduced in India in 2002 after a gap of more than 40 years and trading option for commodities is currently restricted in India. The commodities market, ever since re-introduction have been on the rise and with substantial amount of investments flowing in the need to deepen the commodity derivatives market in the larger interest of Indian economy and with the commodities market attaining stabilization, the Securities and Exchange Board of India (SEBI) has opened conversations with leading commodity exchanges in India about options trading in select commodities.

Options trading in India

Options trading in India are allowed for fixed number of stocks, indexes etc., the list of which is maintained by the exchanges and updated from time to time. A regulated and well-directed introduction of option trading in commodities would help in boosting the necessary flow of capital in the economy which is a positive from the economy point of view. From the investor’s point of view, trading in commodities provides them necessary diversification as commodity options have the backing of a real tangible underlying asset and not just a piece of paper as in the case of stock options. Options’ trading in commodities also provides necessary liquidity to the investors. The Chicago Board of Trade (CBOT), a part of the CME group is one of the oldest and biggest international exchanges trading in commodity options. In India, the Indian MCX and NCDEX are the top two commodities trading exchange in the country which provides a ready base for the introduction of option trading in commodities.

Step by step approach to take a trade

Step by step approach to take a trade

A step by step approach to invest in the stock market helps traders take planned trading decisions keeping emotions aside.  A trade plan is a must for a stock market beginner so that he does not take actions impulsively.There are a lot of opportunities to trade in the Indian share market. The Indian stock exchange allows trading in shares, commodities and currencies. A few stock trading steps need to be followed to trade cautiously.

What do you want to trade?

This is the first thing that you need to decide before you enter any market. You need to analyse what you are most comfortable trading in. If you are a beginner, you may want to trade only in stocks. With some expertise, you may wish to start trading stock futures, commodities and currency.

Risk capital

Deciding on how much you are ready to risk also plays a key role. You should set aside a trading fund knowing that the markets are volatile and you may even end up losing your money.

Knowledge

Having some fundamental and technical knowledge makes you a more informed trader. It is important that you study these so that you can take better trades in the market.

What kind of a trader are you?

If you can devote a lot of time to trading and are a very patient person then you may look to trade intraday. However, if volatile and sudden market moves are not your thing then you may wish to take positional trades.

Taking a trade

Once you have decided on all the above factors, you need to have a few steps to execute a trade. Always begin with the main index. Know what the index is indicating. If you are a stock trader, then list down all the stocks that you trade and start analysing them one by one.You should first begin by analysing the trend of the stock. Once you know what the trend is, look for major support and resistance levels on a smaller time frame chart. Draw those levels and place a stop loss a little away from the level. You may also wish to add a few technical indicators to act as a confirmatory tool to your trades. Once your trade gets executed, you need to book profits as per your trading rule.   Trading with a trade plan is what differentiates a professional trader from a novice trader.

The reasons for the volatility of gold in the commodity market

The safest commodity that first-time commodity traders can trade in

Commodity trading is very similar to share trading where you buy low and sell high. But the only difference in commodity trading is that, unlike shares where you can buy a single stock, you need to buy commodities only in futures. Trading in futures means that you get a leverage to trade the mcx commodity market. Here you only need a fraction of the total amount in order to place a trade. The good part is that your rate of return increases considerably when you trade in commodity futures. On the flip side, your loss percentage also increases by the same amount.

Choose carefully

The commodity markets are volatile and thus, you need to select the commodity that you wish to trade in cautiously. Natural gas, for example, is a very commonly traded commodity but beginners usually shy away from this commodity due to its high volatility.   As a beginner, you should look to trade in a commodity that you understand about. Most popular commodities among the beginners are gold, silver, crude and base metals like copper and zinc. Gold especially is a hot favourite among many traders.   You can trade in smaller denominations of gold in the Indian mcx market. You can trade in gold futures for as low as 1 gm or as high as 1 kg. This is a great respite to first time traders who would like to experience the trading world before investing a lot in the commodity market. Once they are comfortable, they can start investing more in the market.   Crude oil and the base metals are also less volatile and follow technical’s very well. As first time traders, you may also want to trade in these commodities.  

Pay attention to forecasts

Most seasoned traders prefer trading in the commodity market because commodities follow technical’s better than equities. Commodities are traded all over the world and are thus very liquid. It is, however, important to know the news and the various numbers that are forecasted so that you are able to judge how to trade the commodity.   Economic reports and other geopolitical factors play a major role and impact the commodity price. You need to be aware of these factors and analyse the technicals of the commodity along with these fundamental facts.

The reasons for the volatility of silver in the commodity market

The Reasons For The Volatility Of Silver In The Commodity Market

Silver is an important commodity. It is a precious metal which finds its uses in industries, jewellery, photography and in coins. Like the gold price, the silver price too is very volatile. A number of factors affect the price of silver in the bullion market. The fluctuation in the demand for silver in industries, geopolitical uncertainties, a falling dollar and a rising crude oil price, all of these play a major role in the volatility of the silver price.   Like the gold mcx, silver too can be traded on the mcx in the commodities market. There are a few factors that lead to the volatility in the price of silver

Industrial demand

Silver finds its use in industries. Its applications are many. It is used in batteries, microcircuits and in conductors which increases its demand. With the rise in the middle class and their spending capabilities, the industrial demand for silver has risen further. Retail investors tend to invest in silver ETF’s which is a further indication of the demand for silver.

Price of gold

Keeping all the fundamentals of silver aside, it is the gold price that drives the price of silver. When the market is bullish, speculators turn to buying precious metals. This leads to a rise in the demand for silver. Silver is a smaller market than gold, and thus, a little bit of increase in the demand for precious metals is enough to take the price of silver higher.   The price of silver also falls fast when there is a lot of pessimism in the market. Analysts suggest investing in silver during a recession and selling it during a boom in the market.

The US Dollar

There is an inverse relationship between the USD index and the price of silver. At the time of recession, the USD is considered safe and thus, investors take out money from commodities to invest in USD. This leads to a fall in the prices of silver. This is the reason why the prices of most precious metals fall at the time of recession. So although silver is considered as a hedge against inflation, it may not be used to hedge against short term recession.

Price of oil

The prices of oil and silver have a very strong relationship. The price of silver is positively correlated to the price of oil. Since silver is an industrial element, the demand for oil and silver rises as the demand for industrial output increases.   The above factors are the key reasons for the volatility in the prices of silver.

The safest commodity that first time commodity traders can trade in

The safest commodity that first-time commodity traders can trade in

Commodity trading is very similar to share trading where you buy low and sell high. But the only difference in commodity trading is that, unlike shares where you can buy a single stock, you need to buy commodities only in futures. Trading in futures means that you get a leverage to trade the mcx commodity market. Here you only need a fraction of the total amount in order to place a trade. The good part is that your rate of return increases considerably when you trade in commodity futures. On the flip side, your loss percentage also increases by the same amount.

Choose carefully

The commodity markets are volatile and thus, you need to select the commodity that you wish to trade in cautiously. Natural gas, for example, is a very commonly traded commodity but beginners usually shy away from this commodity due to its high volatility.   As a beginner, you should look to trade in a commodity that you understand about. Most popular commodities among the beginners are gold, silver, crude and base metals like copper and zinc. Gold especially is a hot favourite among many traders.   You can trade in smaller denominations of gold in the Indian mcx market. You can trade in gold futures for as low as 1 gm or as high as 1 kg. This is a great respite to first time traders who would like to experience the trading world before investing a lot in the commodity market. Once they are comfortable, they can start investing more in the market.   Crude oil and the base metals are also less volatile and follow technical’s very well. As first time traders, you may also want to trade in these commodities.  

Pay attention to forecasts

Most seasoned traders prefer trading in the commodity market because commodities follow technical’s better than equities. Commodities are traded all over the world and are thus very liquid. It is, however, important to know the news and the various numbers that are forecasted so that you are able to judge how to trade the commodity.   Economic reports and other geopolitical factors play a major role and impact the commodity price. You need to be aware of these factors and analyse the technicals of the commodity along with these fundamental facts.

What are the factors that are influencing the prices of agricultural products?

What Are The Factors That Are Influencing The Prices Of Agricultural Products?

The commodity market is traded all over the world and there are a lot of factors that influence the prices of agro commodities. Commodity trading is the second biggest market after currency trading. The Indian mcx exchange lets you trade in agricultural commodities and crude mcx. It is also very transparent and allows online trading.   The size of the commodity market is huge and it also has a lot of varieties of commodities to trade in. It thus becomes very difficult to precisely identify the reason for the fluctuation in the prices of agricultural products. However, there are a few key factors that influence the agricultural commodity prices.   The imbalance between supply and demand is the key reason for the fluctuation in prices. The price of any commodity is constantly changing. When the demand of a commodity is higher than its supply, price increases. Similarly, when the supply of the commodity is higher than the demand, price decreases. The constant imbalance between the supply and demand leads to changes in commodity prices.   Weather Agricultural goods are dependent on the weather conditions. Any sudden change in the weather condition directly impacts the price of agricultural products. Inadequate rainfall or drought causes scarcity of agricultural products in the market. This leads to a price move upwards as the demand is higher than the supply. When the situation normalizes, the price starts moving down as the supply starts to increase. Political conditions The economic and the political conditions of a country also impact the price of agricultural products. A war can lead to major volatility and fluctuation in the price of agricultural products Government policies Changes in government policies impact the price of agricultural commodities. The policies related to import and export of agricultural commodities and the cost implications to buyers and sellers make the agro-commodity prices volatile. The increase in import duty of an agricultural product will lead to an increase in its price and vice versa. Other factors like currency movements and inflation also influence the price of agricultural commodities. All these factors should be considered before trading in agricultural commodities since they impact the price of the commodity to a great extent.

What are the factors that are influencing the prices of non - agricultural products?

What Are The Factors That Are Influencing The Prices Of Non-Agricultural Products?

In terms of volume, the commodity market is the second biggest market after the currency market. Commodity trading is not only very rewarding but is also less prone to manipulation. However, it sometimes gets difficult to find out the exact reasons or factors that influence the price of non–agro commodities. The Indian mcx market lets you trade in a variety of agro and non-agricultural commodities like crude mcx.   There are a few factors that should be considered when trading the non-agricultural products. These dynamics have a significant impact on the price of the commodities and leads to an increase or a decrease in its price.

Political turmoil

The political condition of a country has a major impact on the price of non-agricultural commodities. War eases tension. An example is the war in Iraq, the major oil producer. This led to a lot of volatility in the price of crude. Crude prices went up and down with a very high frequency. Thus, any political event that hampers the normal running of a country can have an impact on the prices of non agricultural commodities. Trouble in the Middle East can interrupt the delivery route of oil, leading to a volatile oil market.

Supply/demand

The imbalance of supply and demand leads to changes in the price of non-agricultural products. If the supply and demand are in sync, there will be no price fluctuations. However, this is something that never happens. With the increase in supply, the price of the commodity goes down. Similarly, an increase in demand leads to a price rise.

Inflation

Inflation is another factor that influences the price of non-agricultural commodities. When inflation increases, the cost of a commodity increases.

All these factors have a very significant impact on the price of non-agricultural products. It is important to closely study each commodity individually to analyze the impact of each factor on its price. Some factors that may affect the price of oil significantly may not affect the price of gold to that extent. Thus, each commodity has its own reasons to fluctuate.

Taking trades based on technical charts and fundamental analysis increases the chances of success in the trades.

What are the features of an nchart?

What Are The Features Of An NChart?

Ncharts are now available on the NCDEX website. It is a technical analysis chart which hosts a number of features that will help in your commodity trading. When you are stock trading and trading online, these technical charts let you gauge the market trend and spot the major support and resistance levels to buy. Like the share market, Ncharts let you see the technical analysis candlestick charts to be able to spot high probability trades.   The features of the Nchart make it very convenient to use. It gives a lot of information that is needed to trade in the commodity market.

There are two versions – the basic and the premium version of Ncharts

·         The Ncharts are used to see the commodity prices. The price fluctuations of the commodities can be seen in the Ncharts.
·         The Nchart also lets you know the depth of the market.
·         The technical charts have various options to choose from. You can filter what you what to view and see the detail accordingly.
·         The Ncharts provide you with a long term continuous chart. The benefit of this is that now you have more data to analyse the trade which only makes your trades high probability trades.
·         There are intraday charts too for the intraday commodity traders. You are also provided with a comparison chart as well as a seasonal chart for each commodity in the NCDEX. The seasonal charts are very important to trade commodities since every commodity has a different harvest season and it impacts the price of the commodity a lot.
·         Spread charts are also provided in the Ncharts .They let you know the liquidity of the commodity traded.

Technical indicators are confirmatory tools that are provided in the technical analysis charts. They help in identifying a trend as well as indicate the end of a trend. These technical indicators have also been provided in the Ncharts. Also check the spread MBP provided in the Ncharts .

The premium version of Nchart has a few other features
  The premium or the advanced version of Ncharts have some additional features like the live scanner which lets you scan for the commodities that you want to trade in. It gives you an advanced view of the charts. You can customise your workplace and make your own customised watch list in the premium version. This lets you keep all the commodities in your portfolio together so that you can easily manage them.

There is an alert manager feature. The alert manager warns you if the commodity has reached the price where you want to trade. After analysing the commodity, you will have to feed the buy price in the Nchart. When the commodity reaches the price that you have mentioned, it gives you an alert to take a trading call.
You can also export the data to excel and have access to the spot charts. Carry plots feature, linking the quotes to excel and tick by tick trades are a few other features provided to the premium Nchart users.

What are the future prospects of steel long commercial?

What Are The Future Prospects Of Steel Long Commercial?

Trading in steel is not only very popular but also very lucrative. The Indian steel industry had seen a big up move due to the developments in the year 2007-2008. The demand for steel rose and the economy of the country was also resurgent. This led to a very rapid rise and India became the 3rd largest producer of steel in the year 2015.Commodity trading in crude steel became very popular owing to the optimistic demand for this commodity.   Steel in India India is the largest producer of sponge iron in the whole world. The per-capita consumption of steel is only set to grow with the increase in the urban population and thus, this commodity has a very good future prospect. The stable growth of the Indian economy and the increase in both the supply and demand of this commodity makes it a good investment option. The Indian mcx exchange allows trading in commodities. Commodity trading is very popular because it is not only very liquid but also less volatile than the equity market. You will need to open an account with a brokerage firm in order to trade in the steel commodity. Future prospects of steel The steel industry opened up for private investment as per the new industrial policy regime. The steel commodity has now been removed from the industries that were reserved for the public sector and it has been exempted from compulsory licensing. The steel industry has had a big respite since the government now permits import of foreign technology as well as FDI. The initiatives taken by the government has given a lot of strength to the steel sector. There is a rise in entry, participation as well as growth in this sector. The existing steel plants have been modernised and a number of new players are entering this industry. The modern state of the art technology is attracting many investors to the steel sector. The rise in the domestic demand for steel is another reason why many domestic entrepreneurs are seeing the steel industry to be a rewarding investment option. The future of steel is definitely very bright. The rise in demand, as well as the government initiative, is surely giving it a big boost.

What constitutes towards price volatility in maize futures?

What Constitutes Towards Price Volatility In Maize Futures?

Commodities, in general, tend to have high price volatility. It is the volatile markets that attract speculators to trade in the futures market. If the commodity is volatile, you end up paying higher for the same product. Futures trading allow you to hedge against price risk. Maize futures can be traded on the mcx and the ncdex exchange. The price of maize is volatile due to a number of factors. The fluctuations can be both due to the domestic and the international market. Fundamental Factors The supply and demand is very inelastic in the maize market. This leads to a lot of volatility in prices. This volatility creates risk in the maize futures. The short run elasticity affects the price of maize to a great extent. The production of maize depends a lot on the weather and other climatic conditions which can defer from year to year. Thus, there can be no fixed way to predict the maize produce every year. The result may be an oversupply or an undersupply of maize in the market. The demand for maize is relatively stable and is very much related to change in income and taste. The price of maize does not affect the demand to a great extent. A small change in the demand or supply of maize can have a significant impact on the maize futures prices. This leads to a lot of volatility in maize futures price. Maize has a production cycle which is seasonal. The crop has a huge supply during the harvesting season and slowly its supply tends to reduce over the year. This seasonal effect is used to predict the trend of the maize futures price. Apart from these factors, government intervention in the export and import of the maize crop affects its price and leads to fluctuations. It is important to know all these fundamental factors of the maize crop to be able to judge its volatility and take a trading call accordingly. Maize futures Maize futures can be traded on the ncdex exchange when you open a trading account with a broker registered with the exchange. It is important to know the impact of seasons and various government policies on maize in order to increase the probability of profiting from trading in maize futures.

What is a risk: reward ratio?

What is a risk:reward ratio?

Every investment that we make in the share market has a risk associated with it. It is said that higher the risk, the chances of getting a higher return is high. For a particular investment, the relationship between the risk present and the potential/expected     return/reward from that investment is referred to as risk reward ratio.

When assessing the risk:reward ratio, the risk-free rate of return is used as the benchmark. If an investment is said to involve risk, then the reward from that investment should be higher than the risk-free rate of return to such an extent that the investor is fully rewarded for the extra risk taken. The investment is said to have a poor risk:reward ratio if the reward is not compensatory for the risk taken.

Calculating risk:reward ratio

The risk:reward ratio for a single investment is calculated as: (Expected return of the asset – the risk-free rate) / Beta of the stock i.e. Risk:reward ratio = (Expected Ret – Rf) / Beta   Most of the individual investors like to invest their money in stock trading by just checking the immediate past performance of the share. Either they are unaware of the various fundamental and technical analysis of the stock market or they feel that those analyses are too technical for their understanding. They tend to go ahead with the investment through online trading based on their gut feeling rather than based on some proper analysis.

A good insight
  For the individual investors to do proper money management, out of the various financial market analysis available, risk:reward ratio gives a good insight into the proposed return of the investment.  Firstly, this ratio is totally objective – it gives a number based on a calculation. Numbers don’t lie. Generally, most investment decisions are based on a little bit of gut feeling, but basing a decision on numbers is a good option.   Secondly, each individual has their own tolerance for risk. So an investor can take an informed decision based on their own appetite for risk.
Professional investors make their investment decisions based on various financial factors and this ratio is certainly one of them. Individual investors also can use the risk:reward ratio to make an informed investment decision.

What is price basing in stocks?

What Is Price Basing In stocks?

There are many instances when you see stock prices just moving sideways without a direction. This is called basing. A Base is a chart pattern used in share trading. These patterns occur after a fast upward or a downward move .It is basically a consolidation area. When you do an online trading, you will be able to spot such basing zones often. Using other fundamental and technical strategies can help you take a trading position in the stock at these basing areas.
·         At the basing level, the stock price changes are minimal. This is because the demand and the supply tend to have the least imbalance at this level. When you are trading in stocks you need to look out for such levels to take a trade.
·         The basing period can last from a few days to several months. This happens due to the fundamentals of a company and also because of the market environment.
·         When a stock has had a very fast and a steep move, it tends to base a lot. This lets the stock digest the move. The basing area is analysed along with the performance and the market scenario as well as the price and the volume indications each day.
·         Basing is when a stock shows very less or no upward or downward movement. There is no clear trend in the stock. This is a consolidation phase which either breaks in the opposite direction of the initial move or breaks out and tends to continue in the original trend.

What happens in the basing phase?

When the stocks start to base, it is basically the institutions and traders who are either adding the stock to their portfolio or are selling the stocks from their portfolio. This is called accumulation and distribution. If the stocks are being accumulated then the basing will break out and the stock will move in the original direction of the trend. In the case of a distribution, the stock will start moving in the reverse direction

How to trade basing zones

Trading basing zones can be risky because there is no clear trend indication. You can, however, trade the base by entering and exiting the market quickly. If the basing zone coincides with a higher time frame support or resistance level, then this can be used to take a trade accordingly. Trading the base, or a breakout or a reversal from the basing zone is one of the popular strategies used by technical analysts. You should, however, trade bases carefully since they tend to be very volatile. A proper stop loss is recommended when trading stocks that are basing.

What is the future of agricultural products in the commodity market in 2016?

What Is The Future Of Agricultural Products In The Commodity Market In 2016?

The agricultural market plays a significant role in the economy of a country. Statistics show that around 60 percent of rural India depends on agriculture for their livelihood. Agriculture is one of the contributors to the Gross Domestic Product (GDP) of a country.

India is the largest player in the spice commodity market. It has the largest consumer base and also exports spices to the rest of the world.

Agro commodity is traded in Indian mcx. The commodities market has seen a lot of factors work together to sustain and grow the sector in India.The rise in the household income and hence consumption, increase in agricultural exports and new technologies in the food sector have all contributed to its growth. The agriculture industry has seen a huge participation from private companies who have spend immensely in technology and research. The growth in organic farming is another very important part of this sector.

Commodity trading can be done through the mcx and ncdex exchange when you open an account with a brokerage firm. Almost all the brokerage firms in India allow online commodity trading.

The Future

The future of agricultural products in the commodity market in 2016 is very promising. Several investors have invested in this sector and a number of schemes and initiative have been taken by the government to grow this sector. The government of India has announced a number of measures to improve agriculture in India. It has addressed issues like soil and water and has targeted for village electrification to improve farming. Improvement in the fertility of soil and supporting organic farming is the key agenda of the government in the 2016 budget. Water efficiency is the other key area that the government promises to tackle.
The year 2016 is expected to see better returns in the agro industry. The increase in investment and better irrigation facilities are a boost for this sector. The government has also introduced schemes for warehousing and cold storage of the agricultural products. The sector is bound to grow owing to the reduction in transport costs and improved management. The introduction of genetically modified crops will improve the yield of agricultural crops. The agricultural sector does look promising in the year 2016.

What is the future of non-agricultural products in the commodity market in 2016?

What Is The Future Of Non-Agricultural Products In The Commodity Market In 2016?

The non-agro commodity trading sector has a lot to cheer about in the year 2016. Commodity trading in India is expensive as compared to other countries. The union budget has brought a lot of relief to traders who do online commodity trading. The reduction in commodities transaction tax is definitely a boost to trade non-agricultural commodities like crude mcx and copper mcx. Commodity trading was not very lucrative among retail investors due to the high taxes and fees. Local state taxes, commodity transaction costs and the cost of getting a physical delivery of a commodity was deterring many from entering this market. The union budget 2016 brought some respite to commodity traders. The commodity transaction tax was introduced in the union budget 2013-2014.This was not accepted by the traders as well as the exchange.

Commodity transaction

The Indian market sees a lot of participation of traders who prefer to trade in the bullion market that is gold and silver. The metals and energy sector also see a huge participation. The commodity market is very liquid and offers a good market depth. The commodity transaction cost is implied only to non-agricultural commodities and hence there was a lot of opposition among traders and investors. The cost had an impact on price discovery as well as on the market efficiency. The cost of trading rose almost to 300 percent due to the imposition of CTT.

The road ahead

The road ahead for the Indian non-agricultural products in the commodity market is very promising. It is bound to get a change with the launch of new products. The commodity market may also open trading in options to increase liquidity. The launch of indices is also in the cards. MCX is the leading commodity exchange in India followed by NCDEX and NMCE. The exchanges are well regulated and allow retail participation as well. You can trade on the non-agricultural commodities in the exchanges once you open an account with a brokerage firm. Commodity trading is done in futures. It is thus advised that you trade non-agricultural commodities with strict stop losses to protect your capital.

What to look for in an MIS report

What to look for in an MIS report

Every business needs to manage its processes as well as its operations. The MIS report is a tool that helps to manage the business. The brokerage firms help customers do stock trading. They do stock research and help customers do share trading in their accounts. The broker gives trading suggestions based on fundamental research and technical research. When trading online, their clients look at these reports in order to make successful trades.   However, there may be instances when the operations of a brokerage firm do not work as per expectations. There may be many kinds of neglect that the customer may be complaining about. This makes the upper management concerned about the business operations.

MIS reports in detail

This is when the management looks at the MIS reports. MIS is the short form of management information system. The managers look at the MIs reports to get to know the day to day activities of the organisation. These reports are then evaluated by the management to check the daily activities of the business. The report lets them get to the core problem of the running of the business. It lets them take an informed decision as well as track the progress of the business.

The MIS report collects data from various areas of the business. The system generates reports that are sent to the management on a daily basis. However, they can be programmed to generate reports only on demand as well.   Many brokerage firms that operate in large scale have a dedicated team who work only on gathering business information and creating the MIS reports. If the business is large then they tend to use complicated software to generate the MIS reports. Small businesses can do it with simple programs and spreadsheets.

The management looks at the sales and revenue as well as the expenditure of the business. Separate MIS reports are generated for each department and are passed on to the concerned management. The data is then compared with the last year’s data to see the progress of sales and revenue.

The MIS report gives information on the number of trades taken by the clients, the turnover of the company etc.

MIS reports need to be relevant to the business area as well as should be up to date. It needs to be accurate because the reports are a major decision-making tool for the running of the company. It should be structured and easy to follow.

What to look for in an nchart?

What To Look For In An Nchart

Ncharts are technical charts provided by NCDEX to trade in commodities. Like stock charts, they are also used for technical analysis. Whether it is the share market or the commodity market, the candlestick charts let you spot high probability trading opportunities. When you are trading online you can make use of the Ncharts to analyze the commodity trades for yourself.

When you are trading commodities with the help of Ncharts, there are a few things that you need to look out for in the NChart

Trend

Trend is the first thing that you should look for in the Nchart. Once you select the commodity to trade in and open its chart on the NChart platform, find the long term trend of the commodity. You will then need to switch to a short-term chart of the commodity to look for trading opportunities. Always remember to trade with the trend because it increases the probability of success of your trades.

Support/resistance levels

Support and resistance levels on the charts show areas where there was the maximum imbalance in demand and supply. When using the Ncharts, spot the major support and resistance levels on the commodity chart. Any pullback to the level makes it a very high probability trading opportunity.

Reversal signals

Look for reversal signals in the Nchart. These reversal signals are formed in the form of a candlestick pattern like a head and shoulder formation or a double top and double bottom formation. You may not always find these candlestick patterns at every reversal. In such cases look at the Nchart to see if the commodity that was moving up is now making lower highs and lower lows or a commodity moving down is making higher highs and higher lows. This is when a reversal gets confirmed.

Technical indicators

The advanced level Ncharts give you access to the technical indicators. Technical indicators like moving averages, Stochastics and MACD can be plotted on your chart in order to get a better confirmation of your trades. These indicators are used to analyze trend or to check the strength of the prevailing trend. It should, however, be noted that the technical indicators are lagging and thus need to be used along with the support and resistance levels.

The NChart offers a lot of features which you would like to look at in order to trade commodities in the NCDEX exchange in India.

When should you invest more capital in the market?

When should you invest more capital in the market?

We often hear the terms related to stock trading – bull market and bear market. Let us explain these two terms for the stock market beginner.

Stock market basics

Market types

Bull
market is when the economy is going great, the GDP is growing and stock prices are constantly growing. It is a good time to invest in the stock market in the bull market is easy. You can pick any stock as all share prices are rising during that time. However, we don’t have bull market forever.

Bear market
is when a recession is looming, the economy is bad and stock prices are going down. In such a situation investors find it difficult to select a stock in the stock market in which they can invest to gain profit. One of the options is to get into short selling to make some quick money. Another way is to wait and watch the market till you feel that the market is about to go up or just started going up. When the bear market is about to end, it is a good time to invest in shares in the anticipation that the prices will go up and you can make a handsome profit.

When and how much to invest?

Many people are scared to invest in stock markets. Others find it difficult to decide when to invest. On occasions stock prices do fall. However, the stock market goes up in the long run. Even in a bear market investing small amounts systematically and regularly has its own advantages. In the long run, the profits and losses are adjusted and as the stock market goes up you end up in profit.   Also, investing in a single stock can lead to loss, but investing wisely in a diversified portfolio ends up in making a profit.   Opening an online trading account has made investing in shares easy for individuals and first-time investors. The trick is to select a good stock based on analysis, invest in a diversified portfolio and stay invested. In the bear market instead of panicking and selling the stocks, it is advisable to remain invested and reap profit in the long run.   Investing more when the bear run is gradually getting into a bull run is a way to gain more profit from wise investments. Investing at the start of a bull run is also a great way to earn a profit.

When should you not do stock averaging

When should you not do stock averaging?

Online trading involves evaluating the stocks that you have already bought by either averaging up or averaging down. While averaging down involves buying of stock when the prices of the shares are low, averaging the stocks up involves buying stocks when the cost prices are high in the stock market.  Tips Technical analysts often come up with stock tips on when you should not do stock averaging and here are some of them:

·         Do not average down or sell short when the price of the stock is above its 30 weeks / 200-day average
·         Avoid selling short or averaging the stock down when it is on an upward trend
·         You should not average your stocks when the stocks are highly volatile
·         Refrain from averaging your stocks down or selling short in a strong bull market
·         Do not do stock averaging if the margin requirements are strict
·         You should stay away from averaging your stock if you cannot handle high level of risk involved

Averages

Another suggestion by analysts is to avoid buying more stocks when the price of the stocks falls very significantly. Such a situation is an indication that the stock is not behaving in the market in the way you anticipated it to behave. At times, every one of us makes the wrong choice. In such a situation, it is important to realize the mistake and refrain from trading averages. However, in a state of denial, traders might end up convincing themselves and buy more stocks that have declined, which is a wrong thing to do and has to be avoided at any cost. That is why it is important to consult expert analysts and trade wisely. It is extremely crucial for investors and traders to assess the risk of the stock averages involved. Because if the stock prices don’t behave as expected, then the loss suffered will be magnified. Experts suggest that investors should do stock averaging only if they are equipped with a big fat bank account or else they should avoid averaging their stocks since the risk profile is high enough to erase all that you have gained and also lure you into a false sense of security which will do more harm than good.

Why are candlestick charts better than line charts and bar charts?

Why are candlestick charts better than line charts and bar charts?

Candlestick charts are the most commonly used technical charts all over the world today. These are popular stock charts owing to the way they display the price data on a two-dimensional graph. However, there have been other kinds of charts too like the line and bar charts in stock trading. These charts were also used to plot the price of the stock on a graph but became less popular over time. Your broker gives you trading tips based on the analysis that he does on the candlestick charts along with using some technical indicators to increase the probability of the trades. Charts have been used in trading for a very long time. There were hand drawn charts earlier which have now advanced to high-end charting using complicated software. These charts used to help traders analyse the price as well as the trend of the stock being traded.

Line charts

Line charts were the earliest used charting technique which used to plot the closing price of the stock each day .A rough line joining all these points used to form a line chart. Line charts had very less information and thus traders had to look for another charting method that gave them more data to analyse. However, many traders who only see the closing price of a stock still use the line charts

Bar charts

Bar charts were the next generation charts which plotted the open, close, high and low of the stock price. This was much detailed information that traders were looking for to trade the stock market. The bar charts are still very popularly used by many traders being only slightly different from the candlestick charts

Candlestick charts

The present generation chartists use candlestick charts. These charts, like the bar charts, depict the open, close, high, and low of the stock price. However, they have an extra element to it – the colour. The candles which open low and sell high have a different colour than the ones that open high and sell low. Thus, the bullish candles are easily differentiated from the bearish candles due to the colour of the candle. This gives the graphical charts a better visual and makes trading and analysing charts easier.

Why do you need a trend indicator as well as an oscillator in the same chart?

Why Do We Need a Trend Indicator and Oscillators in the Same Chart?    

Notwithstanding the fact that each trading platform is governed by a set of indigenous indicators that are specific to it, the most predominant types include trend Indicators and oscillators. Basically attached to the concept of trend trading, a trend indicator comes across as an indicator that is directly applied on the chart. On the flip side, a stock oscillator is denoted by a set of indicators that are visible in a separate window, just below the actual chart.

A Sneak Peek into an Oscillator

A stock oscillator comes as an extremely useful indicator to traders as it is much more demonstrative when compared to the actual price of the stock. This indicator takes into cognizance a prolonged period when compared to the actual price. This tendency thus prompts traders to base their decisions on the oscillator without relying blindly on the stock price. Stock prices are known to provide false alarms. It is in this context, that traders are advised to place their bets on an oscillator in contrast to being exclusively guided by a price.

The Situations of Overbought and Oversold Levels

An advantage comes draped in the form of an oscillator making its presence felt in ranging markets providing information regarding levels of overbought and oversold. This is of paramount importance as traders can trade “Put Options” in overbought conditions and “Call Options” in oversold markets.   When the indicators are divided into trend indicators and oscillators in stock charts, the prime advantage of using an oscillator is to benefit from a well-thought-after move when traders have the benefit of looking into the trends of multiple periods as compared to a lopsided view of attaching importance to a fixed price operating at a particular period of time. Hence, it comes as a wise move to move along with the oscillator.

Plotting of Oscillators
 

Oscillators are usually plotted at the bottom of the chart. This comes as a convenient move to zoom the window for the chart to occupy the entire screen space. Professing an element of convenience, a move to include trend indicators and oscillators in the same chart paves the way for accuracy in the technical analysis using the oscillator. Lending a helping hand to stock research, it is a useful move to count waves or look for a series of top highs and bottom lows on the oscillator.   The combined effect will then be able to provide a complete perspective to arrive at profitable trading with binary options. It is for this reason importance should be attached to multiple time frames in contrast to oscillators being used for day-to-day or short-term charts.

Why is currency trading very rewarding?

Why is currency trading very rewarding?

“Currency trading is the act of buying and selling different currencies of the world, usually with a motive of earning profits by tapping the volatility and fluctuations of currency values in the forex market.” Currency trading market is the largest investment market in the World in terms of daily average turnover which is close to 4 trillion USD, much larger than the turnover of any traditional stock exchange. While forex trading could be very risky, a proper study of the currency market and scientific approach can very well mitigate the risk and reward the trader with good returns.

A focused approach

Following are some of the reasons why a focused approach to currency trading could be very rewarding:
1.    Largest investment market: With large volumes of transactions, it becomes easy for an investor to enter or exit the market at any point instantaneously without the worry of drastic price fluctuations while executing a transaction.
2.    Round the clock accessibility: Since the currency market covers currency trading across the world, the market is open for 24 hours a day and for almost all seven days of the week enabling the investor to invest at any point in time as per convenience.
3.    Profitability: Small amount of investment can get you started in currency trading and the potential to make a profit is always high. A sound analysis of supply-demand position of a currency is the key to earning profits.
4.    No commission: Online currency trading is free of any commissions as the concept of commission does not exist. This saves money for the investor and also scores a brownie point over traditional stock investment which is always coupled with commissions that eat into investor’s profits.
5.    Stop loss guaranteed: An investor has the freedom to determine the price at which he wants to enter and exit a trade and the transaction is always cut off at the set price. This provision eliminates uncertainty for investors who can then freely invest in the market as per their risk appetite.
6.    High leverage: Higher leverage allows the investors to hold a bigger investment with little investment upfront. This allows the investor to realize a profit on the entire sum of investment held without actually paying the entire investment sum immediately.

Decisions of investment

Investment in the currency market is certainly not without its set of critical risks. However, informed and analyzed decisions of investment can make an investment in this market very rewarding.

Why should intraday traders first analyse the nifty chart before picking up stocks to trade?

Why should intraday traders first analyse the nifty chart before picking up stocks to trade?

Many a times traders notice that even though the stock that they have picked up shows a tendency to move up, still it stays neutral and then slowly touches the stop loss, only to turn back to the bullish trend once again. This is a common occurrence in intraday trading. Most traders fail to analyse the reason for the same. Even though the stock patterns and the trading tips seem to be very high probability, the trade does not work out or else ties their capital to the market for a very long time. The basic reason for this is that the nifty charts are doing something else.

Nifty chart

Nifty is an index which represents 50 different stocks from various sectors. It is the weighted average of all these stocks. Not all stocks follow the same trend at the same point in time. Even if they follow the same trend, some may be highly bullish while others show only a little move to the upside.   Thus taking an intraday trade just by analysing a single stock does not solve the purpose. You need to first check the nifty charts and then take trades as per the stock market tips.

How should you analyse the nifty charts to trade intraday stocks

Before you begin your trading day, it is important that you first study the nifty chart and see its trend. It is also important that you mark the turning points in the intraday nifty charts to know from where the trend is likely to reverse.

Once you have analysed the nifty chart, you need to pull up those stocks which have a trend pattern similar to nifty. Thus, if nifty is in a bullish trend on the intraday chart, pick up stocks that are in an uptrend too.   If you end up picking a bearish stock when the trend of nifty is positive, the movement in the stock will not be substantial because the overall market sentiment is positive. Hence even if your stock is a great pick as per its technical’s, it will still either not work out or tie up your capital for long, thus letting you miss out on other trading opportunities.

Hence analysing the nifty charts is the key to making quick money intraday. You should take a trade as per the nifty trend so that you are able to book your profits in the stock fast.

Why should you stay aware from stock market rumours?

Why should you stay away from stock market rumours?

An information, report or story that is presently circulating, but is not the actual information or the actual truth is known as a Rumour. A rumour can also circulate in the stock market. One of the characteristics of a rumour is that it cannot be verified because it can arise from sources like media, friends, and the company itself sometimes, meanwhile undisclosed news about a company can be verified.

Rumour vs undisclosed news

One of the major reasons as to why people lose money in the Indian share market is because they believed in a rumour circulating in the market. And people tend to believe in such rumours because they are formulated in such a way that it affects the trading psychology of a person. Hence, the person involved in stock trading should be able to make out the difference between a rumour and    undisclosed news.

Rules to avoid rumours

1. Always select stocks which are frequently traded in huge quantities, that is stocks with adequate liquidity and are broadly covered by the analyst. Stocks that do not have sufficient liquidity or are not traded in huge quantities are breeding ground of manipulation or rumours. As they are tiny companies on which ample information is not available
2. You should not always believe in the random trading tips that someone might give you, and go on to invest just on the basis of such rumours or tips. Instead, always try to invest in a company on the basis of its fundamental features.
3. You should be mindful and not invest in shares of a company in which the share price has a sudden hike without any improvement in the financial position of the company. Such is a red-flag situation which involves some kind of manipulation.
4. If your broker is persuading you to invest in some share, always do a research about those shares yourself. As there might be a possibility that your broker is selling you the share in favour of someone with deliberate intentions of doing so.
5. Lastly, you as an investor must always be alert, aware and informed about where you are investing.   If you keep all these things in mind you can easily avoid rumours and be safe while trading in the stock market.

How to increase your returns in the commodity market

Investing in commodities is a good way of diversifying your investment portfolio. The three major categories in this segment are—energy (crude oil, natural gas and the like), metals (gold, silver, and copper to name a few), and agriculture (including wheat, rice, coffee, and sugar). Ensure that your foray into the commodity market is not turning into gambling or speculation due to making uninformed decisions. Keep these tips in mind to help maximize your returns in the sector.

Find the right broker

See if the broker or brokerage house you opt for is a member of the exchanges you want to trade in and check on their knowledge of the commodity markets. Check if they are offering you zero brokerage facilities and other such benefits. Credibility or standing in the industry, as well as the quality of their trading platform, should be verified before you sign up.

Arm yourself with information

Staying informed is always handy when it comes to stock trading or dabbling in commodities. Not knowing what you are dealing with and instead putting your money and faith in a broker should not be your long term plan. Read up on expert views and analyses of the market and track commodity prices for a while before you place your money.

Maintain a balanced portfolio

Divide your investment portfolio between the different asset classes to offset any unexpected developments. In the commodities segment also, you can spread your investments in the different categories. For example, in the event you suffer losses in metals, you might be able to recover at least part this from agriculture or energy.

Look to the future

The price movement in commodities is different from that in stocks. The ability to gauge the future movement of a commodity is key in maximizing profits in this segment.

Trading in minimum quantities and not investing in too many commodities at one time are wise moves. And last but not least, remember that commodities are completely different from stocks and what is positive news in equity might not bode well for commodities.

Alice Blue commodities trading account helps you trade in the indian mcx at zero-brokerage on all your trades.

How to Trade in Gold Silver and Other Commodities?

All through the history, pricing of precious metals like gold, silver collectively referred to as “bullion” and other commodities have been less volatile than bonds and equities. So, these make for great diversification options. Forcommodity trading in India, one needs a commodity Demat account.

Here, physical stocks of these metals and commodities are not required. But you will need a minimum balance in your account to be able to pay your brokerage margins. Also, you should have the price equivalent of one unit of bullion trading. At any given time, that amount should be equal to or more than the current value of 10 gram of gold for gold mcx or 1 kilogram of silver for being able to initiate transactions.

Opening a commodity demat account

A commodity demat account is one that is approved by the National Securities Depository Ltd (NSDL). To open such an account, you will have to enter into a pre-defined agreement with brokers. The procedure includes information required by them to know you, below mentioned are the details they seek.

KYC (Know your client)
Identity proofs
Terms and conditions of broker
Terms and conditions of exchanges
Personal details like PAN number, Savings bank account number, etc.
Where do the bullion and other commodity trading happen?

The Multi Commodity Exchange of India Ltd or mcx India is an independent commodity exchange based in the country.

Where can I find the price information on these commodities?

Finance-centric newspapers carry prices, relevant news and articles on such commodities. Brokers also provide research and analysis support for bullion price drivers.

To narrow down your search, check prices regularly using tools like mcx live that are useful especially in deciding how to trade or hold current investments. Websites update the details of opening price and closing rate of bullion and other commodities on any particular day. Also, their current values are updated here in real time and are accessible for free.

How to decide on a brokerage?

Brokerage charges are based on the contractual value. Typically the brokerage is 0.10% to 0.25% of the contract value. The brokerage will also differ based on the commodity. So the mcx goldprice all go into arriving at this amount. But the exchanges set a maximum limit for the brokerage, which cannot be exceeded. There are further transactional charges, which are levied based on how you decide to trade, whether by cash or delivery.

These are some of the very basic ways in which you can trade with these commodities also called “futures” in the exchanges like mcx.

Options trading: A guide for beginners

If you are wondering what is options trading? Here is a quick look to understand the concept. An option is a contract between a buyer and seller for an underlying asset and is valid for a predetermined time period. Apart from indexes and futures, the stock is the most common type of asset. Since options derive its value from the underlying asset, this is a type of derivative.

What do such contracts mean?

The contract may be of two types call options or put options. The option allows the buyer the right to buy (referred to as a “call”) or sell (referred to as “put”) the asset but does not make them obligated to do so. This means that the buyer can choose to either go ahead or withdraw from the contract. However, this contract binds the seller to go through with the deal at any date before the expiration date.

How to exercise options to make a profit?

The underlying stock can be bought or sold at a price called the strike price.

To get a profit on calls, the price of the asset must go above this price.
For puts, the price of the asset must go below the strike price for one to make a profit.
If a buyer does not exercise an option within the stipulated period, one loses the invested amount. Selling the options is far more complicated and also comes with a lot more risk. Usually, market players employ various strategies in futures and options trading to make them work to their advantage.

What are the options available in India?

Nifty options are one of the derivative trading tools. These options are meant for trading a popular stock market index called Nifty. This is the National Stock Exchange’s benchmark stock index for the equity market in India.

What is the options price based on?

The price of options is based on negotiations between buyers and seller. The options prices are driven by:

The buyers and sellers expectations of the future prices.
The relationship of the option’s price with the underlying price of the asset
For options trading in India, there are many players who rely on options trading tips given out by brokerages and experts in the field.

How can options be liquidated?

Three ways to liquidate options are:

By closing buying or selling of the options: This means that the holder of the option trades it.
By exercising the options: This means that the holder of the option goes through with the contract.
By abandoning the options: This means that the holder of the option does not go through with the contract. This will also mean that the options holder will lose the initial amount invested.
As with other financial instruments, one has to study the risks involved before venturing into investment in options trading as they are subjected to market changes.

Stock market basics for beginners

If you are looking to invest in the stock market, you will understand that you could either stand to earn more or lose what you have invested. Learning the stock market basics is a fundamental step towards increasing your knowledge about the working of the stock market and the reasons for stock price fluctuations.

The Stock Market

This is a complex system in which ownership of companies is extended to the public by means of “stocks” or “shares” in return for their investment

The stock trading system

The stock market consists of millions of investors. Each of them with varying views, which can be diametrically different. When one investor sells a specific stock, there is someone else who is willing to buy the same stock. Both the investors cannot be correct at the same time. Therefore, one profits while the other may incur losses. Thus, stock trading is considered adversarial.

The key drivers of stock prices

Positive or negative news about a company, sudden buying or selling of shares of a company, and performance of a company are all influencers driving a change in the prices of a company’s stock. In the Indian stock market , inflation or the state of the economy also tends to change the price of the stock, irrespective of the performance of that particular company.

The best time to buy or sell stocks

As a general thumb rule, one would consider the best time to buy a stock when there is a pessimistic outlook regarding its performance. In contrast, the best time to sell a stock would be when there is a positive expectation regarding the performance of that specific stock. However, one would have to have a clear understanding of the underlying reasons behind the fluctuations in stock prices to make trades work to their advantage.

The art of banking on expertise

Though a novice may find it complicated, there are experts who have mastered the share market basics, and have been trading for a number of years. It would prove to be of immense benefit by taking the support of a brokerage firm or investment advisor. This way one can minimise the risk of losing and capitalise on the expertise while exploring the share trading basics.

It could take years to learn stock market working, but technology and tools that are now available make the learning a bit easier. Someone who has experience in the financial market and someone you trust can be the best source of guidance if you are venturing the unfamiliar territory of stock trading.

How to trade in Forward contracts

Trading in forward contracts has been prevalent in the forex market while the commodity segment has only recently opened up to this. Forward trading in the commodity market is offered by the National Commodity and Derivatives Exchange Ltd (NCDEX) and the National Multi-Commodity Exchange of India Ltd (NMCE). About 27commodities are offered by the NCDEX while rubber can be traded as forward contracts at the NMCE.

A certain percentage of the trade value is collected as margin by the exchanges and if the seller defaults in any way, 90 percent of this margin goes to the buyer. Here are some features of forward contracts that can help you understand them better.

  • Forward contracts are traded in the over-the-counter (OTC) market and are usually deals between two financial institutions or one such institution and its client. In forex trading, the exchange rate is fixed in advance as per the contract between the bank and its customer
  • The purpose of introducing forward contracts in commodity trading was to curb speculative activity while attracting genuine investors to the exchange platform.
  • Delivery of commodities is compulsory in forward contracts and this can be done only by genuine participants.
  • Commodity prices of castor seed, coriander, cumin, gold, maize, sugar, and turmeric have attracted the most investors in recent times.
  • Forward contracts in commodities are aimed at reducing counter-party risk and promoting trade in agricultural commodities.
  • These are expected to bring in more flexibility with regard to the commodities being traded.

The twist in the tale as far as forward contracts go is that whenever the price of the commodity in question changes, one of the parties in the contract profits while the other incurs losses. An increase in price increases the benefits to the buyer while a decrease bodes well for the seller. Lack of adequate knowledge about the segment can prove to be your undoing.

Insufficient research, failure to track commodity prices, and no understanding of the trading process can sound the death knell for novice investors. Thus, it is important not to be taken in by the lure of quick money when looking to trade in forwards contracts.

Futures trading: How to go about it?

Trading in forward contracts has been prevalent in the forex market while the commodity segment has only recently opened up to this. Forward trading in the commodity market is offered by the National Commodity and Derivatives Exchange Ltd (NCDEX) and the National Multi-Commodity Exchange of India Ltd (NMCE). About 27commodities are offered by the NCDEX while rubber can be traded as forward contracts at the NMCE.

A certain percentage of the trade value is collected as margin by the exchanges and if the seller defaults in any way, 90 percent of this margin goes to the buyer. Here are some features of forward contracts that can help you understand them better.

  • Forward contracts are traded in the over-the-counter (OTC) market and are usually deals between two financial institutions or one such institution and its client. In forex trading, the exchange rate is fixed in advance as per the contract between the bank and its customer
  • The purpose of introducing forward contracts in commodity trading was to curb speculative activity while attracting genuine investors to the exchange platform.
  • Delivery of commodities is compulsory in forward contracts and this can be done only by genuine participants.
  • Commodity prices of castor seed, coriander, cumin, gold, maize, sugar, and turmeric have attracted the most investors in recent times.
  • Forward contracts in commodities are aimed at reducing counter-party risk and promoting trade in agricultural commodities.
  • These are expected to bring in more flexibility with regard to the commodities being traded.

The twist in the tale as far as forward contracts go is that whenever the price of the commodity in question changes, one of the parties in the contract profits while the other incurs losses. An increase in price increases the benefits to the buyer while a decrease bodes well for the seller. Lack of adequate knowledge about the segment can prove to be your undoing.

Insufficient research, failure to track commodity prices, and no understanding of the trading process can sound the death knell for novice investors. Thus, it is important not to be taken in by the lure of quick money when looking to trade in forwards contracts.

how to invest in shares? Your guide to healthy investing

Stories about people making a fortune from the share market are not unknown. On the other hand, traders? losing all their capital overnight is also something not unheard of. What differentials a profitable trader from a non-profitable trader is proper planning and risk management before entering the Indian share market.

In order to meet your long-term wealth goals, it is first important that you know the basics of equity trading. This will help you decide whether to invest in the equity shares yourself or invest through a mutual fund.

Plan Your Finances

Before taking the plunge into the equity market, set aside a capital, which you can afford to lose. If you are a long-term trader then it is important that you have adequate insurance and enough savings for any emergency. This is required so that you may not have to liquidate your stocks to meet personal expenses.

Use Proper Stop Loss

Professional traders follow stop loss and make money. Novices, on the other hand, stick on to a loss-making trade only in the hope of making a profit. If you are investing your money, accept if your trade is wrong and get out of a loss-making trade immediately. This not only cuts your losses but also lets you invest the money in another trade, increasing your chances of profiting.

Start Early

Investing long-term in the stock market is more profitable than short-term trades. It is important that you start investing early to reap the maximum benefits and also see your financial targets meet.

Knowledge

Knowledge is the key to healthy investing. Don?t just blindly invest in the market because your friends and peers are doing so. It is important that you learn about the stock market and how it works before putting your money into the stock market. Technical analysis is the study of charts, which lets you gauge market trends, and is used for short-term investments. Financial analysis is the study of the fundamentals of the company and helps you take a long-term position in the market. Proper knowledge will protect you from blindly following stock tips from various sources.

How to do intraday trading?

Traders choose their trading style on the basis of a number of factors. These include an individual?s risk taking appetite, the amount of time that he is able to spend on trading as well as his personal psychology. Most active traders are intraday traders.

If you are planning to start trading in the stock market and are interested in intraday trading, then there are a few rules that will help you on how to do intraday trades on the Bombay Stock Exchange or the National Stock Exchange.

A Few Rules On How to do Intraday Trading

Before you plunge into stock trading, it is important to invest only what you can afford to lose. Intraday trading is riskier than staying long term in the stock market.

Intraday traders do not carry any position overnight. They square off all the positions before the end of the day. Thus, it is important that you trade on only in highly liquid stocks. When you do online share trading, trade only in the large cap stocks so that you do not hold on to the share after market hours because of no buyers of your stock when you plan to sell it.

When trading intraday, you need to take actions fast. It is recommended that you do not have more than 2 or 3 open positions at a time when trading intraday. This is to ensure that you do not get messed up and start taking wrong actions if you have a number of open positions.

Stay away from the market on any major event day, like budget or other economic announcements. The market tends to be very volatile on these days. It is very likely that your stop loss will get hit on these days.

Stay away from fear and greed when trading the market. If the trade does not work in your favour, book your losses immediately. Also, if the trade moves in your favour, do not wait and book your profits immediately.

Pros and Cons of Intraday Trading

Since intraday traders do not carry any overnight position, they do not need to worry about any events that may happen after the market hours. On the flip side, intraday traders are unable to take advantage of market gap ups or huge profits in a strong trending market.

How to open a trading account online?

To understand how to open a trading account online, it is better if the pre-requisites are taken care of. To trade for equity in the Indian stock market, any investor is required to open three accounts: a savings bank account, a DEMAT account and a trading account. Each account is mandatory and has its own function.

Bank Account:

Having a savings bank is mandatory before you start online share trading. All your finances with regards to purchase and sale of shares will be managed through the savings bank account.

DEMAT Account

SEBI, Securities and Exchange Board of India, the regulatory board for trading in the Indian stock market, makes it mandatory for every investor to hold a DEMAT account. A DEMAT account is a bank account for the securities you trade in. The shares you buy are deposited in your DEMAT account and the ones you sell are taken out from this account. DEMAT stands for dematerialised. It will dematerialise your physical shares into this account for easy and faster transactions. All DEMAT account holders necessarily have to possess a Permanent Account Number (PAN).

Trading Account:

A trading account, for online stock trading, is to be opened by each and every investor with their choice of broker or firm. A stock broker facilitates trade between buyers and sellers with any exchange market, for e.g. Bombay Stock Exchange,

National Stock Exchange.The process to open a trading account is easy. For starters, you need to choose your broker. It is advisable that you do the necessary market research before you choose your broker. Taking into account every feature like, brokerage fees, services, customer support and likewise will lead you to an ideal broker or firm.

Choosing your broker finishes most of your work. After that, you will be required to fill a KYC or Know Your Customer Form and account opening form, coupled with some validation checks done by the broker or the firm.After all these stages are processed, the broker or firm will provide you with the details of your account. Time taken to give you the details will vary from firm to firm. It is very useful for those who indulge heavily in intraday trading.

How to open a Zero-brokerage account?

In today?s scenario when online trading accounts are offered by so many brokers, opening a trading and demat account has never been easier. Each broker comes with their own terms, conditions and commissions and choosing one suited to your needs can be difficult.

A common option is to open zero brokerage trading account with one of the many players in the banking industry. Here are a few common questions most first time traders have:

1. How do I open my demat account : Talk to a registered depository participant (DP). You can get information from the National Securities Depository Limited or the CDSL Central Depository Services Limited website.

2. What documents do I require : To open a zero brokerage account, you must fill up a form and submit it, along with your photos, your PAN card, bank statement and address proof. Other documents depend on what the company wants.

3. Am I the only beneficiary of the account : You can nominate a nominee who will receive the benefits of your securities transactions in case of any untimely events

Once you open your account, your depository participant will give you the account number that you will require for all future transactions. When you wish to sell or buy a security, you leave an instruction for delivery with your DP, who executes the trades on your behalf and you account is debited or credited with the losses and gains.

Most accounts offer you advantages such as low commission but many now have the option of zero brokerage on transactions as they charge a flat fee to facilitate transactions on your behalf.

With alice blue online, you have a choice between four unique zero brokerage plans that cater to the trading needs of a variety of individuals. With separate plans for seasonal, active and heavy traders, increase your savings along with your profits, as there is no longer a need to shell out heavy commissions for each trade that you make. Do unlimited trading by only paying a flat brokerage free that is suited to your needs as a light or heavy investor.

How to do online trading
Introduction

In this new era of technology where everything is fast paced and online as it brings ease and clarity in working to the customers. Even share trading can be done online. Online trading is a common terminology used nowadays by anyone interested in the stock market.

Online trading- what does it mean?

Let us now understand what online trading actually means. Online trading or investing online is a procedure by which an investor is able to invest in securities electronically. Online trading has become a normal thing these days. Any person who can operate a computer with internet can easily do share trading online. The investor need not physically go to a stock broker as it all happens online.

Steps to be taken to do online trading

Step-1: The first step towards online trading is to select an online broker. This online trader will help the investor by providing him with trading tips to trade in the Indian stock market. They need to carefully select an online broker keeping in mind the services that the investor will the need, the amount of money he wants to invest, and how frequently he wants to trade.

Step-2: The second step is that now the investor will have to open an account with the brokerage firm selected by the investor according to his needs. To open this account, some details might need to be provided to the online brokerage firm.

Step-3: In the third step the investor will have to make several choices like if he wants a joint account or an individual one, etc. The next choice is if the investor wants a cash account or a margin account. A cash account is one in which the investor will need to have the money to invest in shares. But a margin account is like a loan account from the brokerage firm. This margin is given on the basis of the equity the investor has in his account.

Step-4: The last and the final step is to start investing in the shares using the trading indicators. The investor needs to carefully analyse all the company he is investing in, and the investor needs to be fully aware of any frauds and take help from the brokerage firm if needed.

How to invest in the Bullion market?
How to invest in the Bullion market?

The bullion market is a platform where traders trade on precious metals, gold and silver. These are essential commodities and have a lot of commercial and industrial use. Gold and silver also hedge against inflation. In order to trade gold MCX you will have to open a commodity trading account with a brokerage firm. The Indian MCX market is regularised and thus you can do gold trading with full transparency. The gold prices are linked to the international market and are quoted per 10 grams in the Indian commodity exchange. It is a gold 995 or gold 999 that is traded.

Ways to invest in the bullion market ·

Gold futures – The gold futures are traded in the MCX. These are futures contracts and hence come with an expiration date. You can either sell the quantity that you hold before expiry or rollover your position to the next contract, in case you target is not met. Trading futures is risky and thus you should trade only under expert guidance. A lot of economic factors decide the price of gold.

Gold ETF’s – Gold ETF’s are gold that is held in the electronic form. They are better than buying physical gold. Being in an electronic form there is absolutely no risk of it getting stolen. You also save on locker charges when you buy gold ETFs. Gold ETFs are also easy to sell in the secondary market. There are a lot of companies that have their gold ETF’s which can be traded in the securities market.

Gold bars and gold coins – This may be the traditional way of investing in gold. However, care should be taken that you buy physical gold only from banks or reputed dealers. Gold that is bought from the banks assures you of quality. This method of investing in gold incurs storage cost too. Investing in gold is very popular in India as it is seen as a safe investment. India is one of the biggest exporters of gold jewellery in the world. Gold, unlike other risky assets that are traded in the security market, do not offer high returns. They are however safer that the other assets which make it a very popular investment option.

How to open demat account

If you are interested in trading in share market the first and foremost step is to open a demat account. A demat account is a dematerialised account, that is, there is no physical ownership – the share certificates are transferred electronically. A demat account is mandatory for you to purchase or sell shares. Similar to a demat account, one must also open a trading account so that you can invest in the stock market.

The reason to open a trading account is that, to trade in the stock market, one must be registered with the stock exchange. Stock brokers are registered members of the stock exchange, so you can also appoint a stock broker to conduct a trade on your behalf.

Steps To Open A Demat Account

Many people have the illusion that opening a demat account is a difficult process, but in reality, opening a demat account is quite easy. The following steps can be followed to open an demat account.

Step-1: Get in touch with a depository participant (DP) with whom you are interested in opening your online trading account or online demat account. These depository participants act as a mediator between the investor and depository. Only a DP can open a demat account for an investor.

Step-2: Now you will have to fill up the online demat account opening form. Photocopies of some documents like PAN card, identity proof like passport, driving licence etc. and address proof like ration card, etc. and photograph of the investor will also be required along with the form.

Step-3: You will now be required to sign a contract with your DP which will comprise of all the rules, regulations, rights and duties of the investor and the depository participant. You will receive a copy of this contract.

Step-4: After the verification of your documents is done, the DP will open your account and give you your demat account number or beneficial owner identification number (BO ID). All your online share trading will be done using this ID. Now that your Demat account is opened you can invest your money in shares, debentures, bonds etc., you must also keep in mind that there is no need to maintain a minimum number of securities in your demat account.

How can I invest in share market

If you dream of becoming financially independent, investing in stock market is a good option. In order to succeed in making this dream a reality, one must have a solid foundation of the basics and fundamentals of the share market. The saying that “incomplete knowledge can be lethal” holds true for the stock market. One wrong decision can ruin your investment. However, not taking the call at the right time may lead to losing an opportunity to make healthy profits. It is hence required to have complete and correct knowledge of its working and the news of the market. Before entering the Indian stock market, a thorough homework is required on the part of the investor to have a safe and healthy wealth portfolio. These are the basic steps to for a fruitful investing life in stock market.

1. Understanding expectations and needs which will define your goal Before jumping in the playground of the financial market it is very important that every investor knows their need and has an understanding of what they should expect from the market. This helps in keeping your goal clear especially when one is in tight situations to take a call on an investment. Having clarity in your goal always helps in taking the right decision!

2. Planning and executing your investments. Planning before executing your investments is always a good move to have a safe and low risk investment. One should identify their markets to include in the portfolio and then select the companies for which the stocks need to be bought or traded for. Determine the intrinsic value of stocks and the return that might come using various analysis tools. Once this is done, the investor has to get a demat account for managing the funds for investing in stock market and then identify a known and reputed stock broker who will work with you for certain charges to help trade in stock market. Usually stock brokers help in getting a demat account, and these days, with online stock trading, this step has become even simpler.

3. Maintaining your investment portfolio After purchasing stocks and making your financial portfolio, managing it is also an important part of the process. One needs to keep track of the investments make by them. Keep a look out for more diversification of the portfolio and try to compound your stocks. Investing the profits to buy more shares of well performing stocks is ideal. Sell the bad performing stocks at the right time to minimise risk and losses.

How does stock market work

In order to understand the working of share market, one needs to understand the basic components of the Indian Stock Market. Stock/Share, brokers and investors and traders – these are the three main parts of the share market.

What are Stocks/Shares?

Stock or share of a company is a share in the ownership of the company. Companies release their share in an IPO, i.e., initial public offering, which sets the base price of the shares depending on the number of shares released, giving an estimate of the company’s worth. The company gets to keep the money during the IPO release, after which investors and traders trade the stocks in stock exchanges like Sensex and Nifty.

Who are investors and traders?

Investors and traders are the players on the field of the financial market. Investors are long term players. They are the ones that are looking to gradually build wealth by buying stocks and other financial instruments of different portfolios over an extended period of time. Investors usually rely on market fundamentals or management forecasts and price or earning ratio. Since investors are looking for a long time commitment with their stocks, dividend paying stocks are always preferred as everyone wants to have some money coming in at regular intervals. To have a healthy amount of wealth accumulated over time, investors are always on the look out to increase profits by reinvesting them to buy more stocks. Traders are the short term players. Traders aim at generating profit in a short term using the fluctuations of everyday stock market to make profit. Depending on the term in which traders trade a stock, they are classified as: ·

  • Position traders: the ones that trade from months to years ·
  • Swing traders: the ones that trade between days to weeks ·
  • Day traders: the ones that trade within the day ·
  • Scalp traders: the ones that sell within seconds to minutes

Traders use technical analysis tools to try to make profits by buying shares when the price is low, and selling them when the price is higher, or vice versa in case of a falling market, which is known as short selling.

Who are Brokers?

Brokers are the aggregators of the financial market. The stock exchanges cannot keep track of everyone that is trading on the floor, which is why they have given licenses to people that bridge the gap between the investor and the stock exchange. Be it on the floor trading or online stock trading, brokers provide service to the investors by buying and selling shares at the best price.

Online trading and the rise in number of discounted brokers that provide their services online has been a great boon to the present time investors and traders.

How to buy and sell shares online in india

You have always wanted to invest in shares and now that you have received your first salary, you are all set to buy your first shares. But, are you ready for it? Let us find out the basic requirements that need to be catered to before you start to buy and sell shares online.

Get a Demat Account In today’s world, the shares are held in a dematerialized form (demat accounts). The National Securities Depository Ltd and the Central Depository Services Ltd are the only two who can hold the depositor’s certificates in electronic form, being the only two depositories that exist in India. The Depository Participants are those who act as agents for the depository. You need to approach a Depository participant to create a demat account so that the electronic forms of your share certificates are held just like a bank account.

Get a PAN Permanent Account Number (PAN) is a requirement from the Income Tax department. You need to get a PAN in order in trade in shares.

Get a UIN (if required) The Unique Identification Number (UIN) is required by SEBI if you want to invest in shares where a single investment is above Rs. 1 Lakh.

Find a broker In order to trade in stocks, you need to get a broker. People like you and me cannot directly go to Securities and Exchange Board of India (SEBI) and start trading. We need to choose a broker who is registered with SEBI. There are many online share trading brokers available in India through which you can trade in the share market. Brokers will help you to buy and sell shares. Now, you are ready to trade in stocks. There are certain methods for the same:

Market order: When you are ready to buy or sell shares at the market rate, then it is called market order. This gets executed immediately at the current market price.

Limit order: Unlike market order, you need to mention the buying or selling price. As soon as the stock price comes to that price, your order will get executed.

Stop-loss share trading: To reduce losses, stop loss and trigger price are used. You can specify the amount that you are ready to lose. For intra-day trading this is important.

How to trade in the futures market?

“A futures contract is an agreement between two parties – a buyer and a seller – wherein the former agrees to purchase from the latter, a fixed number of shares or an index at a specific time in the future for a pre-determined price” according to Kotak Securities.

When the actual transaction is executed, all the details are agreed between the two parties. The futures contracts can be freely traded on online share trading exchanges as the general criteria like contract sizes and expiry dates are standardised. Futures trading is done anonymously as typically buyers will not know who the seller is and vice versa. Further, the stock exchange guarantees every such futures contract. Futures contracts are given on diverse types of assets – stocks, indices, currency pairs, commodities and much more.

The futures market is risky and commodity trading in futures is a risky business. Futures trading is not for everyone and the person entering this trading needs to have adept knowledge about how the market and the contracts work. Once you decide to enter this market fully aware of the risks involved, please find the three ways in which such trade can be done.

Do it yourself You can decide to take the plunge fully by trading in your own account. You can do the necessary research, maintain margins, manage funds and order trades. This mode has the maximum risk and a lot of time needs to be devoted to finding out about the workings of the market. However, when the gains come, the satisfaction is totally yours.

Open a managed account Similar to an equity account, you can open a managed account where the power is with your broker to trade on your behalf. The broker being a professional will be able to take informed decisions. However, it is your responsibility for taking any contract call and losses incurred.

Join a community pool Offering the least risk in the futures market, you can select a group of commodities that you can invest in by joining a community pool. In this pool funds are combined and trading happens as one. This needs to be managed by an experienced broker as overall risks associated with futures market still exist.

Oil futures: How to trade in them?

Oil futures are standardised, exchange-traded contracts dealing in crude oil. There are two parties – a contract buyer and a seller. The contract fixes a future delivery date when the buyer decides to take delivery of a definite quantity of crude oil, such as 200 barrels from the seller at a prearranged price. In spite of the name, crude oil is never actually traded. These are just the contracts for crude oil futures.

Multi Commodity Exchange of India Limited. (MCX) is the independent commodity exchange in India. They deal in the commodity market. Oil is one of the many commodities that they deal in. Crude oil trading in India is done in the futures market and traded on Indian MCX. In order to trade in oil futures you need to first open a demat account and get a broker. Once you get both, you can start trading on crude MCX.

How to buy oil futures?

Your broker can buy it on your behalf. If you have an online trading account, you can directly buy it online. You need to select the buy and sell option of commodity category and under that MCX FO. When you select ‘crude’ in the drop down list, a list of crude oil futures contracts will be displayed. You may select a particular date and traded price. It means that you have to settle the crude oil futures by that date.

Fixed dates are given for each month and you may select any of them. Crude oil is traded in lots of 100. You will need to buy a large number of crude oil contracts. The margin needs to be checked and the entire amount need not be paid. This is the greatest feature of futures trading. As an example, if you buy at Rs.2000/- , 100 numbers of crude oil, Rs.20000/- need not be paid up front. Based on the margin, the payment due might be Rs.2400/- or so. The actual price depends on the exchange rules.

How is the oil price fixed in India?

Crude oil price in India is determined by two factors – the international crude oil price and the rupee-dollar exchange rate.

How much capital should you trade with?

Share trading is like watching a Christopher Nolan movie. It looks complicated the first time but once you understand it, there is nothing like it. The key here is to have a proper understanding of money management. How much money you need depends on the style of trading that you wish to do, where you trade, and also the market you trade in. While traders do make as well as lose money, whether this activity suits you or not depends on your financial position. While any recipient of the so-called ‘hot tip’ can trade, making money consistently is possible only when you have sufficient knowledge of the markets and skills for technical analysis, which is the science of forecasting prices based on historical data of the share market.

A well-defined objective of return expectations is the basis of a trading strategy. Just like each cricket chase has a defined target, you will need to define a reasonable expectation of return on your capital. How much capital to be introduced? Rs 25000/- is just an indicative minimum, but depending on one’s strategy one should figure out what is an appropriate capital requirement based on one’s style of investing or day trading.

Guidelines Design a strategy to pick stocks/contracts to trade/invest in:

To win a game, you will need to decide the right mix of players – batsmen, bowlers, and all-rounders. In the same way, you will need to work out a list of stocks, indices, options, etc that work for you in order to achieve your return objectives.

A clear well-defined risk management strategy:

You will need to define a clear risk management strategy. If a bowler is having a bad day on the field and is being whacked for runs, he needs to be taken off. In the same way, formulate a strategy of how diversified the portfolio should be, to cut out losers and hold on to winners.

An entry and exit strategy:

This constitutes well-defined rules about when to enter based either on fundamental factors like results, sales growth, etc or technical factors like breakout, etc, along with a clear exit strategy, for example, the outcome of financial results or price below a moving average, etc. Keeping in mind a few basic rules is sure to make your run on the stock market a rewarding one.

How to place a buy order?

The key to share trading is that you should be able to buy shares which can yield better investments. When you are buying stocks for the first time, it gets all the more confusing with the parameters and the values involved. The share market is a complicated affair and to make good profits you need to understand how to buy shares. Here are a few steps that will help you in placing a buy order.

The Various Parameters

Selection of the exchange – First of all you will need to select the stock exchange in which you want to trade. You will need to make a selection between the Bombay Stock Exchange and the National Stock Exchange. Symbol – You will need to enter the letters of the company whose stock you are planning to purchase. Product – There are two choices here. Either you can go with cash or Intraday depending on the type of trading you want to do. Quantity – Here you will need to enter the quantity of the shares to purchase Order type – There are two options available here. Limit order and the market order. Here is a brief understanding of what they are.

Market Orders

The market order is the simplest, most straightforward way to buy or sell stock. You place an order to buy or sell shares, and it gets filled as quickly as possible at the best possible price. Market orders carry no time or price limitations. Stocks with high trading volume process the trade immediately. Stocks with a low trading volume may take longer to trade.

Limit Orders

Limit orders are the flip side of market orders. With a market order, you want the trade to go through immediately and they are not price sensitive. With a limit order, you want a specific price for a purchase or sale regardless of how long getting that price takes. Time is the key here as you are willing to wait to get what you want. Another benefit of the limit orders is that they allow you to trade without paying close attention to the share market. Price – This parameter is not required in case of market orders. It is needed only if you are looking to buy limit orders. Once you are through with these steps, you are ready to buy shares and start trading like a professional.

How to set a realistic risk/reward ratio?

A share market is a place where you can have unexpected returns as well as losses if a proper strategy is not in place. For a faster calculatio
t the money management issues and also prevents the investor from taking risks beyond his capacity even before investing in share trading. It also improves trade probabilities and forms an integral part of your strategy for portfolio management. One of the characteristics of the equation is when the prices are as per your expectations the reward/risk ratio declines.

Steps for a realistic Reward to the Risk factor in investment:

Online trading can be profitable, and a large section of the public plays the sole card of investing and trading single-handedly with their knowledge and expertise. The following steps can ensure a more realistic approach to the situation when faced with the dilemma of whether to invest or not.
1) Thoroughly study the stock value and the nature of the commodity/share in question.
2) Assign an upper and lower threshold limit that you feel suits your requirement.
3) Calculate the risk vs reward factor and fine tune it to your desired level.
4) If it is within the acceptable ratio then you can have a projected figure of your reward before investment.

A simple calculation as shown under, explains the concept: Since the investor is taking a risk, the risk ratio must be at least 1:2 where 1 is the amount invested, or risked. Here, 1:2 means that if you have an investment of Rs.100 then the reward is a 100% increment to the value invested which gives Rs. 200 in reward.

This, when exercised on large values, can yield sufficient margin of profit and gives the investor the necessary motivation to invest. Setting a stop-loss value will ensure the trading stops at a tolerable risk factor protecting the base principal investment if the conditions unexpectedly go haywire. Generally, brokers and portfolio managers play with a ratio of 1:3 to have a good margin on the product that you invested and have multiple winning options.

How to measure volatility of the market?

Intraday Trading deals with transacting in stocks on the very same day. Day traders usually ensure profitability by leveraging large amounts of capital in highly liquid assets to take advantage of tiny price movements. Though it’s dangerous, to master the day trading strategies, here are some day-trading tips for you.

1. Entry Points To use this technique, the first thing you need to do is to figure out the kind of stocks you want to buy. To ensure that you make the most out of day trading, you need to look for two things, liquidity and volatility. Once you figure the kind of stocks you’re looking for, these could be your entry points. ·

Intraday candlestick charts ·

Level II quote and ECN Intraday candlestick charts prove to be the most efficient of all and show you the right candlestick patterns, technical analysis and volume to put your investment into the same.

2. Pivot Levels

This intraday strategy involves profiting from the daily volatility of stock. One needs to buy low at the start of the day and sell high at the end of it. Price target is simply the clear sign of reversal.

3. Trading The News

Share trading in India is on a rise and therefore, news channels usually cover it 24×7. One needs to follow the news trends carefully to understand when to buy and when to sell. When a slightly positive piece of news comes out, you buy and when the negative piece comes out, you sell. So, you always should look out for the biggest news to use this method.

4. Fading

This strategy involves sorting stocks after rapid moves upward. When you can safely assume that either a stock is overbought or existing buyers are scared, the price target is set by the renewal of interest among investors.

5. Scalping

One of the most popular strategies, scalping, involves selling as soon as stock becomes profitable. The price target needs to be set right after profitability has been attained. It might sound simple, but scalping requires a lot of skill regarding predictability and ability to calculate minute inefficiencies. Intraday trading, though risky, can yield a lot of profits once you get a hang of it. An online trading account is a must to get involved in any trading. You must be able to gauge when a stock becomes the most profitable and is ready to be sold. Therefore, it is important to read the charts regularly.

How to place a sell order?

When dealing with trading options such as stock trading, bond market, commodity market, or financial derivative market, the investor can place a ‘sell order’ on the option he chooses to trade. In simple words, when that trade option reaches a designated value, higher or lower than the purchase price of the stock, as discussed between the client and the broker, the broker sells the shares. The process of initiating a sale is known as a sell order.

Common types of orders:

Market Order: This is the first trade order that that instructs the broker to buy or sell a particular stock. It is one of them most reliable ways of executing an order in the share market. Limit Order: When you specify a minimum amount of security when you sell, that order is known as Limit order. Stop-Loss Order: A stop-loss order is one which is executed once the value of the purchased share reaches a predetermined value. This option helps in preventing losses if the value of the purchased stock plunges in the market. Conditional Order: If a predetermined criterion is not met in trading, then the transaction and process are cancelled using a conditional order. Market on Close Orders: Market on Close order executes near the closing price of the day and makes it possible for the trader to have the maximum benefit.

Steps to place a sell order:

You can sell shares through a traditional brokerage firm or with an online trading account. You can set the order with your brokerage firm while entering into a contract while entering the market to buy shares. In event of selling an order follow the following steps:

Step 1: Decide on the number of shares to trade. Be specific.

Step 2: Always place the order below the support level where the stock has had a difficulty of falling. Identify the support level by taking into account the historical data of the stock via a histogram. Placing the support value at 5-15% below your purchase price helps, but it is up to the investor to decide it as his final call. Choose the type of ‘order’ you want to place according to the stock.

Step 3: Specify the price you are willing to accept and place a “limit” order. If the position is volatile, then choose the comfortable price limit to set a minimum sale price. This price becomes the “market” order that you have decided to sell at, and your stock is sold immediately when the market hits the determined price.

Step 4: Set up a conditional limit to gain maximum return when the price hits an upward scale. Monitoring the market will give you maximum sale return on your stock options and setting an order must always be on the historical data and current market conditions.

How to read the stock market

If you’ve recently developed an interest in the stock market and want to invest, it’s obvious that you have a few companies in your mind already. But, how safe are they? Have you investigated enough? To remove these doubts, it is mandatory to understand the stock tables/sheets and make an informed decision before stepping into the world of online share trading. This guide will help you do the same. Following is the image of a standard stock table and given are the guidelines on how to read the same:

1. Column 1 & Column 2: 52-Week High and Low

These columns indicate the maximum and minimum price at which a particular stock has been traded in the past one year so that you know where your stock has stood in the game of online trading in the previous year. However, these columns do not show the cost of trade of the last day.

2. Column 3: Name of the Company and Type of Stock

This column points to the abbreviated name of the company and the stock symbol attached to it. If there is no stock symbol, it merely symbolises a common stock, whereas various acronyms imply different classes of shares. For example, “pf” indicates “Preferred Stock”.

3. Column 4: Ticker Symbol

The stock ticker tape you see moving across the screen while watching any financial channel on TV uses the ticker symbol of that particular company. Every company has their unique ticker symbol by which they can be identified. If you want to know the ticker symbol of the business you want to invest into, you can see them online.

4. Column 5: Per Share This column includes the dividend paid annually on each share. If this space does not have any value, it implies that the company has not paid out dividends yet.

5. Column 6: Dividend Yield The dividend yield is calculated by annual dividends per share divided by the price per share of the stock. It is the percentage return on the dividend if the company provides any.

6. Column 7: Price/ Earnings Ratio This particular column indicates the proportion of the price of that particular stock and its actual earnings. It can be used to determine if the stock actually holds a good value or not.

7. Column 8: Volume The total number of shares traded in a day is listed in this column, but only in figures of hundreds. To know the actual numbers, you need to add “00” at the end of the values given in the said table.

8. Column 9 & Column 10: High and Low The kind of information that is very easily available on any share market news would be the Day High and Low. It is the range of the prices, or in layman terms, the maximum and the minimum cost people have paid for that particular stock.

9. Column 11: Close The close price the last trading price recorded for that particular stock.

10. Column 12: Change The change in dollar value of the stock is compared with the previous day’s closing price and is the net change of that stock. If at the end of the day, the live stock-market claims that a stock is “up for the day”, it simply meant that the net change was positive and vice-versa. Apart from the given steps, one also needs to regularly follow the stock market not just in the newspapers or the channels, but also online as most of the websites include way more information than any newspapers do and hence, help you a lot.

Hassle Free Online Share Trading Platform

A common folly with many investors is to ignore the importance of the brokerage charges levied. The fee structures offered by different brokers should be carefully studied before appointing a broker. Studying the fee structures will help you do away with the 0.1 and 0.01 percentages adding up to your investments as a huge sum at the end of the year. There are different fee structures followed by brokers that can be customised depending on your needs as an investor. Thus, it is essential to have a fair understanding of the fee structure in stock broking.

Types of fee structures

There are two major ways in which brokerage may be levied by brokers, either on a variable or a fixed basis.

In a variable based brokerage, an investor is charged a fixed percentage of brokerage fee on the volume of trade being done. So, the brokerage you pay depends on the quantum of investment and the number of trades you do. Brokerage firms charge varied brokerages depending on the type of trading like intra-day trading or a delivery.

If the stocks are bought and sold on the same trading day, the trade is intra-day; if they are held till the next trading day (be it the next day, next year or a decade after) it will be termed as a delivery.A fixed structure of stock broking is when you pay a fixed amount of brokerage on a trade irrespective of the volume of trade. The latest entrant into the market is a zero brokerage stock broker. The advent of online tradinghas considerably cut down the overhead costs of brokerage firms in India allowing the firms to offer zero brokerage or low brokerage trading accounts charging zero or very low brokerage on the trade delivery. An investor must choose among different fee structures depending on the objective of trading.

Hidden costs

Although a firm may advertise about no brokerage or having the lowest brokerage charges in India, an investor must watch for ‘not so explicit’ costs. Apart from the brokerage, there are other services charged by brokerage firms in India like an annual maintenance charge on the account, transaction charges charged by the exchange, stamp duty, and taxes like securities transaction tax and service tax on the brokerage.

Periodic checks

Brokerages cannot be ignored by any investor. One should keep a record of all transaction receipts and look at the brokerages charged. Traders should check if the brokerage is changing and all the costs are included in the receipt. Whether you are a frequent or an occasional trader, ignoring the fee structure can affect your returns considerably.

Thus, it is important to understand the fee structure and analyse your investment for the right returns.

Trading platforms: What are the different types?

Types of Trading Platforms

A trading platform is defined as a software that keeps track of the trading account handled by investors of traders in the share trading market, in addition to allowing them to place their trades in the share market. Most of the times, a trading platform shares pertinent information regarding market analysis through the use of tailor-made software that provides valuable trends in the stock market trading. This feature helps both the share traders and investors to understand the market through diagrams and charts. Flashing all the real time changes in the stock market on stock screens comes as a benefit to traders to grab opportunities of buying and selling of stocks depending on the prevailing market condition.

Types of Trading Platforms

Floor Trading

This is the oldest form of stock trading where traders and stockbrokers assembled at a specified place called the trading floor to engage in the buying and selling of financial instruments. This trend of trading seen before the 1980s eventually paved way to a modernised platform of stock trading, thus becoming the best trading platform for investors and traders.

And all these transactions involve a human element called as an “Open Outcry” as a means of communication between them. Speaking of the venues, they are generally the stock exchanges or future exchanges which are thronged by these investors communicating through gesticulations that are specific to them, like hand signals.

The Essentials of an Electronic Trading Platform

With the advent of technological advancements impacting every sphere of human life, stock trading too witnessed a metamorphosis, paving way for computers to take over human power. Adopted by countries across the globe, the use of computer software revolutionized the concept of stock trading bringing in the convenience of online share trading. In the parlance of financial markets, an electronic trading platform also termed as online trading platform is an interface that enables investors and stock traders to place orders for financial products such as stocks, bonds, derivatives, commodities and currencies through a software program.

Requiring the intervention of financial intermediaries such as brokers, investment banks and stock exchanges, the electronic trading platform offers a volley of benefits to traders. Ideally enabling any trader to engage himself in share trading, this trading software breaks the geographical barriers of location, allowing investors to trade from any location.

Depositories and their roles?

Understanding a Depository:

Created to facilitate online trading, a Depository can be likened to a Bank. While a bank is used to store money, a Depository is an institution where bonds, equity and mutual funds can be stored in a dematerialised form, accessed and used for online trading. Whether you dabble in the stock markets or on the MCX India (Multi Commodity Exchange of India Ltd), being part of a depository makes it easy for you to conduct any kind of transaction.
What is a Depository Participant?

In order to become a part of a Depository, an individual must go through a depository participant. A depository participant may be a bank, agent or financial institution with which the individual must open a Demat account. All the shares and bonds must then be submitted to the depository participant for dematerialization, after which they are linked to the stock exchange. Once this is done, the investor may transact on the stock market, receive payments and bonuses and even sell or transfer his shares

India has two depositories which take care of the trader’s needs.

  • CDSL or Central Depository Service Ltd, a Mumbai-based depository, which had 9800000 demat accounts as of 30-6-2015
  • NSDL or National Securities Depository Ltd., which had 1.39 crore Demat accounts as of 30-6-2015
    Benefits

A depository participant not only solves logistical issues of Stock Trading by enabling you to transact on your own with zero brokerage but also gives you the ability to ride market trends by instant transactions. Instead of calling your broker every time you want to purchase or sell, you can save time and grasp every opportunity by transacting online. With tools like MCX live, which provide real-time prices of stocks you can stay informed about trends that can make a substantial difference to your financial portfolio. With these tools, you are well-equipped to take decisions, which will enable you to emerge as a successful trader. In addition, a depository

  • makes it easy to avoid physical damage to your securities and bonds
  • does away with the intervention of brokers for issues such as change of address or transmission
  • Makes it easy to transact on behalf of a minor
  • avoids stamp duty

Easy to associate with and manage, depositories have brought stock trading within reach of the common man.

How is the Indian stock market regulated?

The Securities and Exchange Board of India (SEBI) is charged with the responsibility of ensuring the orderly and healthy growth of the country’s securities market while safeguarding the rights of investors. The Forward Markets Commission (FMC) was its counterpart in the commodity futures market in India.

What is SEBI?

Set up in 1988 as a non-statutory body for regulating the stock exchange and other trading platforms, SEBI became an autonomous body in 1992 with fully independent powers. All intermediaries in the Indian stock market come under the purview of SEBI. These market intermediaries are categorized by the services they provide and include stock brokers, portfolio managers, merchant banks, bankers to issues and the like. SEBI conducts frequent inspections of intermediaries to ensure compliance with its rules and regulations. It keeps an eye on equity share distribution, promotions of zero brokerage schemes and so on.

Powers and responsibilities entrusted to SEBI include:

  • Authority to prohibit insider trading
  • Regulation of substantial acquisition of shares and takeover of business
  • Prevention of unfair trade practices
  • Preserving shareholder’s interests through regulation of intermediaries
  • Promotion of efficient services by brokers, merchant bankers, and other intermediaries

FMC Merger

The Commission, headquartered in Mumbai, had authority over all three national and six regional bourses that facilitate forward trading in 113 commodities. Edible oil seeds, food grains, spices, metals, and fibres all come under this.

Recently, the FMC was merged with SEBI in a first major instance of two regulators blending into one. This decision was propelled by the unveiling of the National Spot Exchange Ltd. The scam which was widely thought to be a regulatory failure attributed to the FMC. Commodities market entities have been given a time frame of one year to adjust to the new rules and regulations. Commodity prices have been more susceptible to speculative and illegal activities.

The merger aims at strengthening regulation of the commodities market, facilitating domestic and foreign institutional participation, and launch of new products like options. It is hoped that this move will make it easier for SEBI to regulate the trading of non-farm products like gold, silver, crude oil and base metals, of which the latter two are traded in paper form and are non-deliverable.

Participants in the stock market and their roles

As most of us understand, a stock market or a share market is the place where buyers and sellers make financial transactions based on stocks. In the indian stock market, These stocks or shares also include securities (tradable financial asset) listed on either stock exchange or available for private trading.

Market participants of stock market:

  • Individual Retail Investors
  • Institutional Investors, e.g. – mutual funds, banks, hedge funds
  • Publicly held corporate trading their own shares

Individual participants of stock market and their roles:

Traders and Investors

In a financial market along with the investors, co-exists the traders. While the investors aim at a long-term investment, the traders are the ones whose entire focus is on the market conditions while purchasing shares or indulging in online trading. It is the traders who aim at making financial benefit when the market fluctuates.

While most of the big institutions, banks, mutual funds, etcetera acts as both investors and traders, an individual entity entering the stock market needs certain financial instruments as pre-requisites for financial interactions.

They are:

1. Holding a Savings Account

2. Having a Demat Account

A Demat account is a dematerialized account, where the shares and securities are held electronically. The Demat account number is mandatory as it needs to be quoted for enabling electronic settlement of trades taking place.

The advantages of Demat account are:

  • As Demat account is a virtual account, it is safe prompt and less costly.
  • As this account can only be operated with the help of an internet password and transaction password, it is less susceptible to forgery and fraud.
  • It is beneficial to investors as it is prompt in the registration of shares and ensures faster communication.
  • It provides adequacy and liquidity of securities

3. Holding a Trading Account

Similar to that of conventional bank account, a trading account can hold along with stocks, cash, securities and any other kinds of investments. It allows the account holder to compartmentalize their accounts in order to avoid confusion.

Stockbrokers

A stock broker is an individual who transacts the stocks and other securities for its clients through the stock exchange. They are usually associated with a brokerage firm or a broker-dealer and works in exchange of a commission. These individuals, before becoming a stock broker, require undergoing rigorous training for obtaining the required license for this profession. Though initially, because of hefty fees, affording a stock broker was difficult, these days, stock market and share market is everybody’s game for the existence of discount brokers who allow you to trade for a much lesser commission.

Depository and depository participants

A depository as the name suggests is the foundation where financial assets like bonds and mutual funds can be kept by investors in a dematerialized form. The 2 depositories in India are:

1. National Securities Depository Limited(NSDL)

2. Central Depository promoted by the Stock Exchange, Mumbai.

Benefits of depository system

1. It is safe as the transfer of securities happens electronically, in the form of electronic book entry.

2. As it is an electronic storage, fear of physical damage is eliminated.

3. It makes the transaction easy for the end-user as it saves the user from a merry go round for registration and payout of the shares and securities.

4. It is a mandate that the settlement will occur on the 5th working day from the trading day, enabling faster settlement and more liquidity.

For a Depository to communicate with the clients or investors, and vice-versa, the investor needs to open a Demat Account, which can be opened just like any other bank account is opened, i.e.- by proving an address proof and identity proof to the bank.

Advantages of Opening Zero Brokerage Trading Account

Technology has made life easier in a lot of arenas. Stockbroking has also not been left untouched. Brokers earlier had to maintain offices in different cities to run their business in order to meet clients. In 2010, online brokers started operations and online trading picked up in India. Later on, with the relaxation of KYC norms, brokerage firms in India were able to open trading and demat accounts without physically meeting the clients. This reduced the cost to these firms and, in turn, they are able to offer lowest brokerage charges in India or charge no brokerage fee at all. Zero brokerage trading accounts charge no brokerage or a fixed brokerage independent of the volume of transaction. This change in the market brings a lot of advantages.

Rest to pressurised trading

A zero brokerage stock broker has no particular benefit by pushing more and more trades. As the firm does not earn brokerage on your volume of trade, the traders have got rid of the force to trade more.

Investor saves money

A person’s hard earned money when invested in stocks was eaten up by brokerage earlier. In the current scenario, investors tend to save a lot of money on that front.

Safe for beginners and amateur investors

With firms offering the lowest brokerage charges in India, amateurs can get into the stock market and learn by investing without burning their fingers with a heavy brokerage.

Aids heavy traders

A low brokerage trading account helps in scalping, where traders get in and out of trades within minutes to earn a small profit. Hence, day traders are indulging in heavy trading by saving a lot on the brokerage.

The stock market in India has had very less penetration with less than 1% of people investing in the stocks. The growth of online trading has made a huge difference providing real-time quotes, easy monitoring and flexibility to place an order from anywhere at any time. With the added advantages of zero brokerage accounts, the market, brokerage firms and investors stand to gain a lot. So don’t be held back. Open a zero brokerage trading account to grab your share of this untapped market and be a part of India’s growth story without the pinch of brokerage charges.

Fee Structure in Stock Broking

A common folly with many investors is to ignore the importance of the brokerage charges levied. The fee structures offered by different brokers should be carefully studied before appointing a broker. Studying the fee structures will help you do away with the 0.1 and 0.01 percentages adding up to your investments as a huge sum at the end of the year. There are different fee structures followed by brokers that can be customised depending on your needs as an investor. Thus, it is essential to have a fair understanding of the fee structure in stock broking.

Types of fee structures

There are two major ways in which brokerage may be levied by brokers, either on a variable or a fixed basis.

In a variable based brokerage, an investor is charged a fixed percentage of brokerage fee on the volume of trade being done. So, the brokerage you pay depends on the quantum of investment and the number of trades you do. Brokerage firms charge varied brokerages depending on the type of trading like intra-day trading or a delivery.

If the stocks are bought and sold on the same trading day, the trade is intra-day; if they are held till the next trading day (be it the next day, next year or a decade after) it will be termed as a delivery.A fixed structure of stock broking is when you pay a fixed amount of brokerage on a trade irrespective of the volume of trade. The latest entrant into the market is a zero brokerage stock broker. The advent of online tradinghas considerably cut down the overhead costs of brokerage firms in India allowing the firms to offer zero brokerage or low brokerage trading accounts charging zero or very low brokerage on the trade delivery. An investor must choose among different fee structures depending on the objective of trading.

Hidden costs

Although a firm may advertise about no brokerage or having the lowest brokerage charges in India, an investor must watch for ‘not so explicit’ costs. Apart from the brokerage, there are other services charged by brokerage firms in India like an annual maintenance charge on the account, transaction charges charged by the exchange, stamp duty, and taxes like securities transaction tax and service tax on the brokerage.

Periodic checks

Brokerages cannot be ignored by any investor. One should keep a record of all transaction receipts and look at the brokerages charged. Traders should check if the brokerage is changing and all the costs are included in the receipt. Whether you are a frequent or an occasional trader, ignoring the fee structure can affect your returns considerably.

Thus, it is important to understand the fee structure and analyse your investment for the right returns.

benefit-of-opening-zero-brokerage-account

Most seasoned traderschoose their broking firm based on the brokerage feecharged by the firm. Investors, as well as day traders, keep this factor in mind to maximize their gains. There is a cut throat competition in this industry and thus,stock brokerage firms have started coming up with the best brokerage plans in order to lure more clients to trade with them.

4 benefits of opening a zero brokerage account
More profit

You make a profit by buying a stock or a commodity at a lower price and then selling it at a higher price.However, when you actually see the profit that is credited into your account, you find it much lesser that the amount that you would have calculated. This difference is the sum of the brokerage fee along with the government taxes. Withazero brokerageaccount, you save on thebrokerage fee and thus,pocket in more gains.

Lesser losses

Brokerage firms calculate the brokerage fee as a percentage of the total amount traded. This is irrelevant of you making a profit or a loss on a particular trade. Thus, with a zero brokerage plan, you tend to experiencefewer losses as well.

More trades

Day traders tend to look for small movements in the market. Since they need to wrap up the trade by the end of the day, they cash in their profits early. Their profit is always calculated over and above the brokerage fee. With a zero brokerage plan, they can now take more trades and book profits by catching small movements in the live market as well.

Brokering firms offer equity and a commodity trading platform. They fix a brokerage percentage on the trades executed by the client.
Online trading is the new trend these days. With the rise in the number of online traders, who are taking trades on their smartphones and laptops,trying to trade every market movement on the go, brokerage firms have started offering a zero brokerage plan to attract clients and get an edge over their competitors. Wait no more, open a zero brokerage account today with Alice Blue to enjoy trading seamlessly online.

Flat Fee Brokerage

In the real estate industry, it is when the seller enters into a service agreement with a real estate broker for a flat fee rather than the sale price percentage of the listing side of the transaction. It breaks the model that a traditional real estate service employs. Flat fee stock brokerscharge a fixed amount on every trade irrespective to the number of trades made. If you are someone who is involved in a trade multiple times, then you only pay a fixed price brokerage regardless of the nature of trade being done.

Your go-to for online trading

Most flat fee brokers provide their services online. So, if you are comfortable with Online trading then flat fee brokers must be your go to. If you are an active trader who is not looking for any kind of advice, research, recommendations or any other services, this is probably the broker type you should choose.

Lowest brokerage charges

Flat fee brokers provideyou the lowest brokerage chargesas they help you save upto 90% brokerage on most of your trades. With such high savings, you can consider investing in more trades. With one fixed price it becomes easier to calculate the cost per trade and helps you manage your transactions.

Flat fee brokers are legitimate

In thestock market, the flat fee stock trading brokers functionsimilarly like traditional brokers. They are registered with SEBI and multiple stock exchanges. Trading with discount brokers is as safe as trading with any other rational broker as they are registered with or governed by the same bodies (SEBI and Stock Exchanges).

Low brokerage trading account

Amongst, the many services providers in India, Alice Blue offers you a low brokerage trading account. With zero brokerage share trading and other facilities, Alice Blue offers you the best and affordable prices. Alice Blue is also one of the lowest brokerage charges in India providing online trading. The Flat Fee brokerage model has begun taking the Indian market by storm and Alice Blue is one of the few organisations at the helm.

Brokerage firms calculate the brokerage fee as a percentage of the total amount traded. This is irrelevant of you making a profit or a loss on a particular trade. Thus, with a zero brokerage plan, you tend to experience fewer losses as well.

What is zero-brokerage?

A brokerage agent or brokerage agent company charges a fee to facilitate transactions between buyers and seller. This fee is levied on sales, purchases, delivery or advisory services on these transactions.In a traditional brokerage system, the broker charges a brokerage fee for every time an investor places a trade. The amount of the brokerage varies depending on the size of the trade. For example, if an investor buys five lots on of a stock, he would be charged five times more than what he?d be charged for one lot of the same stock. The zero brokerage model changes this concept.

The broker can eliminate his scaling charges by offering zero brokerage on equity delivery trading and charging a flat fee for every order traded, or a small percentage in case of orders that are very small.

Advantages of zero brokerage

1. A zero brokerage account can come at a lower price than a traditional brokerage account offered by many agents

2. There is lesser discrepancy between the amount charged for a trade of a smaller quantity or a larger trade

3. Lesser overhead costs to brokers due to online share trading facilities translates into lesser costs being transferred to investors

How it works

A zero brokerage account opened at an agency of stock brokers charges a flat fee of a pre-determined amount per executed order. This ends up in saving around 90% of the brokerage fee you would pay to a traditional broker. It is easily calculated by multiplying the number of trades with the fixed brokerage to find out the total amount payable. Taxes charged on the brokerage are also not as much as the brokerage itself. Most brokers that offer this facility are listed on all the main exchanges in India, and an investor can easily trade in them. However, since a majority of them are provided online, advice and investment suggestions are hard to come by. Some brokers may also have some hidden charges, and an investor must look into this and gather full information before choosing a brokerage to operate their trading account with. For a more experienced investor, a zero brokerage account is ideal.

How does the zero-brokerage model work?

Zero brokerage trading is the recent trend in the financial market which is a new way of running the brokerage business. It has eliminated the traditional brokerage models and also the scaling charges related to it. Basically, the zero brokerage trading model is a unique model that offers no brokerage on Equity delivery trading which is very appealing to the investors. It works by charging a flat fee per order traded.Companies have offered this option as an incentive to more people to participate in the Indian equity market.

How does it work?

In a traditional brokerage, a certain amount known as the brokerage fees, is charged on every trade that you make, depending on the size of the trade. For example; If you trade 20 lots of Security A on NSE, you will pay 20 times as much as when you trade 1 lot of Security A on the NSE. This model is disadvantageous to all investors, big or small, as they end up paying a steep fee for the volume that is involved in share trading.

In a zero brokerage model, a flat fee is charged by the stock broker to the customer for all trades, regardless of volume traded. In some cases when the size of the trade is very small, a percentage of the trade is charged as brokerage, as opposed to the flat fee. The main advantage of this to the investors is a lesser cost of trading which may also encourage more trading activity and turn beneficial to the brokerage company. Therefore, you can trade an unlimited amount for a fixed monthly fee paid at the beginning of the month to your broker.

The main disadvantages to this sort of an account are the fact that there exists no personal touch as most zero brokerage account givers work as online trading companies. No investment advice is provided and the withdrawal procedure is complicated.

Zero brokerage accounts offer account opening across many different segments including the BSE, NSE, MCX, NCDEX etc.Besides just equities, zero brokerage plans are available for options trading, and even derivatives trading in India (one-time life fees for some accounts).

Futures & Options brokerage calculator
Futures & Options Brokerage Calculator

Simply put, a futures brokerage calculator tells you how much brokerage and taxes you must pay on your futures trading. The traders are charged with the prefilled taxes while trading. These taxes include brokerage tax, turnover tax, securities transaction tax (STT), stamp duty, SEBI tax and service tax.

How to Use Futures Brokerage Calculator – for traders

If you are on the NSE, you need to select your stock from the drop down box. All the securities available for trading are in the equity derivative segment with their updated lot sizes. The fields which are to be filled are, the buying price, selling price and brokerage in percent. Once these fields have been filled out, the futures brokerage calculation is done automatically. It will also show you statistics like ‘total taxes’, ‘taxes plus brokerage’, ‘profit/loss before/after brokerage and taxes’ etc. it also displays the break-even point. Taxes are levied in recognised stock exchanges. Apart from the brokerage tax, the others are levied at the same rate for all transactions. Service tax is based on the brokerage charges, which varies from firm to firm, and is for delivery and intraday trading.

Options Brokerage Calculator

This is useful to calculate the brokerage along with the other taxes. It is particularly useful to calculate the break-even points which are required for a particular stock or nifty. To do this, you need to select the stock from the drop down list in the ‘options calculator’. The lot size will be updated automatically. Once you enter the buy and sell price of the option, then the total charges paid are the losses from the trade. Some stock brokers charge on single leg or both legs. If the latter, then there is no need to change brokerage in other places.

Black-Scholes Option Pricing Model

The options brokerage calculator may not be suitable for all the traders. Generally, an option calculator uses a formula called a Black-Scholes Option Pricing Model, which is one the most revered valuation model. The model works like this: the model is filled with inputs like dividend, interest, number of days, option prices and implied volatility.
The model gives out a number of outputs. These outputs include a bunch of statistical values called ‘option greeks’, with the values delta, gamma, theta, vega, rho etc. These values will help you while trading online.

Alice blue brokerage calculators help you understand how much you stand to save in the indian stock market.Our web calculators are better than share calculators in excel.You can use it find out how much you will save if you subscribe to our zero-brokerage equity plan.

Intraday Brokerage Calculator

It can become very tricky to manage the costs associated with buying and selling shares. As if there weren’t enough costs associated with the operation, you will have to get the best deals from your stock brokers too. Most brokerage firms charge you mainly for delivery and intraday trades. You may need to check the brokerage that your broker applies from time to time. They will also charge something called ‘Annual maintenance charges’ which can eat into the fund that you have invested. The best thing to do would be to pay up a lump sum initially and avoid all of this. Intraday charges are a part of the various taxes you will be paying, such as securities transaction tax, stamp duty and SEBI charges.

What is intraday trading? How does it differ from trading forms?

Intraday trading, or simply, day trading, is what happens when you a stock or commodity and sell it before the day’s trading closes. So you buy and sell a position of the same number of shares of a company in one day’s session of share trading. Intraday trading brokerage is low when compared to the other cost, which is delivery. In a delivery, you will not be squaring off your position within the same day. You can hold on to it until you reach your target.

The intraday brokerage calculator is used for the equity segment in Indian markets. It is used to determine values like the total brokerage, total taxes, net profit or loss before and after brokerage considerations. There are calculators available where you do not need to download an excel file or find out these values. When you use an online calculator while trading online, all the information will be updated instantly and automatically.

The Break Even Point

Any trader will find it useful to have knowledge about the break-even point for their stocks or commodity. This is crudely said to be the selling price minus the buying price, without taxes and other charges. The intraday brokerage calculator helps to simulate this breaking even point once you initiate a trade. For traders it is very important to know the break-even price. Break-even price will be sell price minus buy price excluding brokerage and taxes.

This intraday brokerage calculator helps to simulate the break-even price after initiating a trade. As a trader, you need to keep in mind that the online intraday brokerage calculator does not take into account the minimum brokerage costs.

Brokerage calculators: What are the different types?
All about Brokerage Calculators

There are no free lunches! And this adage is true in the case of stock trading when a certain amount of money should be shelled out in exchange of engaging in financial transactions. Hence a brokerage fee is a fee demanded by an agent or the company the agent is associated with, for services rendered including all the negotiations, purchase and sale of stocks and their delivery. Traders who need advice on a particular transaction are also liable to pay brokerage charges which are calculated either as a percentage of the entire transaction or as a uniform fee. There can also be instances of a combination of these two types of fees which are charged by stock brokers.

Brokerage Calculators

Everything boiling down to money, it is important for stock traders and investors to have a heads up about market trends which will ultimately pave way for well-informed decisions. The exclusivity of every trader manifested through his interests and trading style thus make it imperative to extract the best from certain tools that have the power to reduce the expenditure of every trading decision, thereby providing a better return on investment. It is in this context that a particular brokerage calculator can bestow profitable returns to an investor.

Types of Brokerage Calculators

1.Equity Brokerage Calculator As the name goes, the equity brokerage calculator is best suited for traders transacting in cash markets, futures market or options. Arriving at an accurate trading cost, this tool lends a helping hand to traders in the effective management of their equity investments.

2.Currency Brokerage Calculator Enabling traders to be informed about the trading expenditure along with estimating the profit and loss components, the currency brokerage calculator comes across as a useful tool to control currency trading.

3.Commodity Brokerage Calculator Best suited to trade in the commodities market, this type of share brokerage is paid for information regarding the break-even point of a trade along with the returns that are associated with such a scenario. Hence this is an informative tool that facilitates lucrative commodity trading.

Advantages of a No Brokerage Trading Plan Inarguably, traders across the globe are skewed towards zero brokerage trading plans on account of low risk associated with such plans. Enabling traders to reduce their transaction charges, this plan comes as a safe means to offset the financial undercurrents of choosing a faulty trading strategy.

What are Discount brokers?
What Are Discount Brokers?

While dealing in stock market, the term “broker” is a common terminology used. A broker is a person who organises a deal between a potential buyer and seller in return for commission. A broker acts as a third party between the buyer and the seller. So a stock broker is a professional individual who deals in securities in exchange for commission. A stock broker is usually related with some brokerage firm.

Advantages of Discount Brokers Some of the advantages of appointing a stock broker are that, a stock broker is a professional and hence has in-depth knowledge about his field which will in turn be beneficial for the investor. The advice and assistance that a stock broker provides is also very useful for the investor. Another advantage of stock broker is that they can give the investor all the details about the company that they are interested in investing in. This way, the investor does not have to waste time as they do not have to spend time finding out about the company. A stock broker who purchases or sells securities for a reduced amount of commission (in comparison with a normal stock broker) is known as a Discount Broker.

This means that a discount broker provides you with the services of the stock broker at a reduced rate. Although they charge the lowest brokerage, the quality of work remains the same. Discount brokers have opened doors for all the classes of the society to avail the expert services of a broker, as they do not have to pay huge sums as commission.

Trading Plans of Discount Brokers Discount brokers are usually dealt with online and all the dealings relating to the securities (buying or selling) also takes place online, with almost no physical communication. These days, even zero brokerage unlimited trading plans are available, in which an investor can open an account in NSE and BSE. The investor has an unlimited trading plan in which he has to pay a nominal fee which can be either monthly or annually and then he can hold multiple accounts and trade in any or all of the sectors like MCX, BSE, NSE, and NCDEX. Some discount brokers also give the option of a lifetime plan wherein a fee has to be paid a single time to avail lifetime membership.

Why is a stock broker required?

Trading in the share market is risky and you need sound advice on when to invest, what to invest in and when to book profit and get out of the trade. This is why you need a stock broker who helps you take informed decisions.

The role of a stock broker

Once you open an account with a brokerage firm, you can avail the services of a stock broker. He helps you take the most profitable trades after analysing the market. A stock broker manages your portfolio since he is experienced and comes with years of experience in the industry. Apart from the share brokerage firms, there are also part time brokers who charge you a fee for their services. However, it is recommended that you only take advice from brokers from reputed firms.

Many brokerage firms will offer you the lowest brokerage as compared to their peers. You can look out for such firms since a low brokerage only means that you can keep more of your profits with you. Use the brokerage calculator to find out which company is giving you the best deal. The next and the most important role of a stock broker is to let retail traders trade in the share market. A stock exchange is made up of stock brokers who are its members. An individual cannot buy or sell a share directly from a stock exchange. In order to do so, he needs a member of the exchange who is the stock broker.

Stock brokers buy and sell shares for you as well as give you trading and investment advice. They charge a small commission for their services. They themselves also trade in the exchange. The SEBI has made it compulsory for every stock broker to be registered with it. This is to ensure that proper rules are followed in the stock market and there are no scams or frauds. These stock brokers trade electronically and profit from the share market. A stock exchange is a place where you can trade safely. The brokers follow all rules and also need to have enough capital so that they are able to conduct their business without defaulting on payments. Stock brokers form an important part of the share market and they are a helping hand all through your trading journey.

Zero brokerage unlimited trading: Is it possible?

With cut throat competition in the stock broking industry, share brokerage firms are giving lucrative offers to lure clients. Zero brokerage is one such facility that is offered to traders wherein they can trade free of cost without incurring any brokerage costs.

The traders can do unlimited trading with the stock broker without compromising on the services offered. Many stock brokerage firms have come up with this offer raising questions whether unlimited trading with zero brokerage is actually possible. Zero brokerage not only makes trading more painless but also attracts more clients. However, new clients still continue to pay the account opening charges and all clients pay the annual maintenance fee to the broking firm.

How do brokerage firms make money then?

Zero brokerage firms offer no brokerage trading on a particular segment, like in the cash market. They still charge for futures and options trading. Their main revenue is generated by institutions that use their specialised platform and services. Some brokerage firms will charge you for intraday trades but give you the zero brokerage facility only for delivery trades i.e. those trades that are carried overnight.

Why do brokerages offer zero brokerage trading and how does it help?

In India, the participation in the stock market is very low. The zero brokerage facility will instil economic growth and attract more investors to it, who over time will start looking to trade not just in the cash market but also in the futures and options market. In order to nurture the culture of investment in the stock market, this concept of offering zero brokerage account is definitely a great step. The initiative will help in growing the capital market of the country. The zero brokerage offer is extended only to individuals’ .Institutions as well as prop desks need to still continue paying the brokerage.

This is also because the corporate get access to high end software which is not available for retail clients. This helps in subsidising the cost for the retail investors. Most brokerage firms also let you take delivery trades by taking a loan from the firm. This is called margin lending. You, as an investor will need to pay a fee for the loan.

Brokerage Calculators: How are they useful?

Before getting into brokerage calculators, let us understand what brokerage is. To put it simply, brokerage is the cost associated with selling and buying of shares. Different brokers charge slightly differently and you can bargain with them on this price.

The brokerage percentage depends on the type of trading –

Intra-day – you buy a share and sell it before the end of day’s trading session. Thus, you make a profit or loss within a day.

Delivery – buying the shares, you hold onto them for days, months or years to make a profit of your target.

Trading Cost: Trading cost is the cost incurred while trading in stocks or shares. Trading cost not only brokerage, but also some associated charges that you have to bear. It is calculated as: Brokerage + STT + stamp duty + other charges.

Brokerage is calculated as – price X number of shares X agreed percentage (this typically ranges from 0.01% for intra-day to 0.30% for delivery)

Securities Transaction Tax (STT) the tax imposed in investors of stocks for any sale or purchase.

Stamp Duty is calculated as a percentage of the transaction value. It is a tax levied on documents and varies from state to state.

Service Tax is applicable on the brokerage only. We find from above that the components of trading cost are fixed except the brokerage. When you finally select a stock broker, check that the broker is actually charging the brokerage that both of you agreed to.

Also a periodic and random check on the stock brokerage is advisable. Brokers also charge another amount called the ‘Annual maintenance charges’ from your account. This is to be checked as if the AMC is charged monthly, then it eats into the funds that has been invested. Instead of paying a monthly AMC, it is best to pay a lump sum amount while joining. Generally, around Rs.500/- to Rs.750/- is charged by brokers for a life time.

Brokerage varies from broker to broker. Before going in for a broker, it is advisable to check and bargain for the brokerage that will be charged. This is vital as this contributes largely to the profit or loss that is made on the share and helps you to calculate the breakeven point.

Alice blue brokerage calculators help you to save on brokerage while trading in the indian stock market.The brokerage calculator tells you exactly how much you will save and makes the whole process transparent.

Cotton futures: How to trade in them

Cotton and textiles industry in India has been in existence for about 5000 years. At present it is the second largest industry in India and India is in turn the second largest cotton producer in the world.

Why is investing in cotton a good option?

Cotton as an agri commodity is spread across the country. Around 35 million people are employed in this commodity and cover a large range of industries of different sizes. Cotton prices in India are closely correlated to global cotton prices and hence the exporters find it easier to hedge.

Multi Commodity Exchange of India Ltd (MCX) offers cotton futures trading. You can either do commodity trading in the physical form or engage in future trading to make a profit. MCX offers an online platform for online commodity trading.

How to trade in cotton futures? ·

Open a trading account You can open a trading account with any broker. The basic requirements to open a trading account are:
Bank account ·
PAN card ·
Address proof Brokers will charge around Rs.250 to Rs.500 to open the trading account. ·

Choose a broker Plenty of stock brokers registered with MCX are available. You need to choose them carefully based on their reputation and after checking the various charges levied by them. The charges may include brokerage charge and transaction charge. ·

Minimum investment amount This depends on the extent of commodity trading that you would wish to get involved. However, a minimum of Rs. 10,000/- is a good amount to start with. ·

Transferring money to trade Various modes of transfer are available like net banking, cheques and demand drafts to transfer money to the trade. ·

Basic needs for trading An internet connection and the trading application installed on your machine is all you need to start trading in cotton futures. Brokers will give you daily tips and suggestions for trading. However, it is always advisable to do your own research and get tips from authentic sources before deciding on a particular trade. Relevant articles and spot prices on commodities are carried by financial newspapers. Many websites, some subscription-based, offer tips for the commodity market.

Trading time MCX operating hours are 10am to 11:30pm. Trading can be done anytime in this window.

Lowest brokerage share trading
Increase Your Profits, Reduce Your Cost – Learn About Low Brokerage Share Trading.

If you have booked a train ticket on irctc.com, you must have noticed ‘service charges’ being added to the cost of your ticket which is charged for providing a ready reference of tickets available in different trains, an online platform to buy tickets and delivering the ticket immediately to you. This precisely is the concept of share brokerage charged by stock brokers for they act as an intermediary between the investor and the stock exchange, facilitating sale and purchase of stocks online.

Basics of brokerage

There are many authorised stock brokers who help investors with share trading online by providing necessary financial insights and tips for investment and facilitate the transaction with stock exchange in return for a fee for their services known as share brokerage. There is no fixed limit for brokerage commission and the same differs from one share broker to another depending on the nature and volume of transaction and relationship with the customer. For an investor, especially new to the market, it is essential to understand the services provided by various online trading brokers, the amount of investment the investor is looking at and then compare the brokerage charges.

Understand brokerage to ensure lowest brokerage charges

Trading cost for purchase/sale of stocks comprise of various elements in addition to brokerage cost like stamp duty, security transaction tax, service tax etc. While most other trading costs remain fixed, brokerage charges vary from person to person, transaction to transaction. Relationship managers at stock brokerage firms often start by quoting higher brokerage charges and readily lower the same on negotiation.

Brokerage charges vary depending on whether the transaction is Intra-day – i.e. purchase and sale of stock takes place on the same day or whether the purchase is for Delivery – i.e. for holding the share for a longer period. Usually, brokerage charges are lower for intra-day transactions. Those who only require help in carrying out trading activities sans any value added financial services can go for Discount Brokerage where the share broker charges significantly lesser fees than a traditional broker, the major difference being that the broker wouldn’t provide financial advice or investment tips to the investor and will only facilitate trading of shares online. Understanding how the markets function is a complex task. While investing in stocks, an investor has to analyse multiple parameters to ensure a good return on investment.

Stock brokers: What is their function?

Stock brokers are licensed agents, ideally registered with Securities and Exchange Board of India (SEBI), who represent individuals or organizations to sell or buy stocks and other securities. This is the core function of a stock broker. In addition to traditional stock brokers, we have plenty of sites that offer online trading. This enables the customers to transact in shares from the comfort of their homes.

Over time share trading has gone a step ahead where the brokers also provide information to customers to help them traverse the slightly complicated path of stock investment. They provide research based advice on investments that is not only restricted to shares. So, the modern brokers act as a one-stop investment solution provider.

  • Buying shares Buying shares on behalf of his customers is the basic responsibility of a broker. He does it in various capacities based on the type of account the client has with him.
  • For a discretionary account, the client sets some guidelines for buying of share and the broker adheres to that. ·
  • For an advisory account, the broker’s job is to only to advise the client.
  • For an execution account, the broker buys the share that the client specifically asks him to buy.
  • Selling shares Selling shares on his customer’s behalf is the other core responsibility of a stock broker. As in the case of buying shares, a client can sign up for the already mentioned different types of accounts and the stock broker has to adhere to that.
  • Research and advice Researching economic, accounting and technical analysis of various companies to predict the way a stock will go, is a function of a competent and responsible stock broker. They regularly give inputs to their clients about which stocks to buy and which stocks to sell based on the market trend. Personalized service A dedicated relationship manager (RM) is assigned to a client by most of the brokers. The RMs monitor the client’s portfolio and give advice on buying and selling of shares along with other investment options.

For all these services a stock broker charges brokerage. This is dependent on the type of service that he provides. For online trading, the online trading brokerage is charged for the services offered.

What to look for in a Stock broker?
Introduction

A stockbroker is an agent who charges a fee or commission for buying and selling orders by individuals, or a company that functions as an agent, costing the investor for its services.

Choosing a stock broker or a stock broking firm can be more complicated than it sounds.

The following are few pointers to look for before selecting a stock broker:

1. Study the area and products on which you want to invest; choose the risk and reward ratio suited to your needs.
2. Analyse the cost involved in the services and trading platform.
3. Select the type of stockbroker as per your requirements
Stock brokers are of three kinds. Execution-only or discount brokers act on your trading instructions which you provide online or by phone. Another category is that of advisory or full-service brokers who will offer you advice and manage your portfolio. And lastly comes the discretionary type who takes care of the overall portfolio, trading and management of the portfolio they undertake. Choose the one who understands your needs and financial goals
4. The broker should be readily available and accessible. The trading platform and other service features must be quick and responsive.
5. Check the stock broker’s track record.
Look for a broker with experience in dealing with the kind of assets you are involved in and always ask for advice before making a move in the market. A little wisdom from your fellow investors and traders usually helps while hunting for a stock broker.
6. Flexibility
Flexibility in the range of services matters in trading. Make sure you customise your service pack to ensure features like tax-advantaged accounts to minimise tax so that you can have a good margin on your investment returns. Try to get zero brokerage so that you have a higher profit margin.
7. Stay Grounded
It is the stock broker’s business to generate commission and fees so always analyse his advice but take the final call yourself without being carried away by something bigger that you are not ready for!
8. Stay safe

Look for additional costs or hidden costs when you tailor your package. Choose a reputed stockbroker who has been around and comesly recommended by fellow traders. Look for long term players. Conclusion Never go for the first broker you reach out to. Study the market and the players and make the best decision suited to your financial goals.

Basic Stock market jargon and what they mean

A newbie to the world of investment or a veteran of many years; a fan of online trading or just old-fashioned broker trading; it doesn’t hurt to have a handy reference to all the jargon used in the Indian stock market. Here is a glossary of some common financial and investing terms in use.

Stock: It is “the capital raised by a company or corporation through the issue and subscription of shares.

Equity: This refers to the ownership interest in a company and can also refer to the value of the shares issued by a company.

Futures: Also known as a futures contract, it is an agreement between two parties to buy or sell commodities or shares at agreed prices but delivered and paid for later.

Derivative: Refers to a contract that gets its value from the prices and index of an underlying security that can be a stock, currency or commodity.

Option: It gives the right, but not the obligation to buy or sell an asset at a fixed price, on or before a designated future date.

Commodities: Raw material or agricultural product that investors can buy or sell. Examples of products in the commodity market include gold, coffee and copper.

Swaps: A financial transaction in which two entities agree to make payments to each other as per mutually agreed rules.

Call: It refers to an option that gives the investor the right to buy an asset at a particular price within a specific time.

Put: The counterpart of call, it refers to the option that gives an investor the right to sell a specific number of securities at a particular price before a fixed date.

Bull Market: A buoyant market with plenty of buyers but few sellers.Bear Market: A weak market where sellers outnumber buyers.

Broker: An individual who is a member of the stock exchange and acts as an intermediary between the buyer and seller in exchange for payment of a commission.

Brokerage: Commission paid to the broker and this is fixed by the Stock Exchange in India.

Intraday Trading: Buying and selling securities on the same day without taking delivery including commodity online trading.

Index: A gauge of the stock market calculated from the prices of some specific stocks, which helps investors and analysts to describe the market.

Blue-chip: Stocks that top the charts in terms of returns, yield, marketability, safety, and security.

Returns: The change in the value of a portfolio over a certain time period.

Dividends: The profit paid out by a company to shareholders.

Zero Brokerage: This is a model where you subscribe to plan and pay zero brokerage on all your trades.

Lowest Brokerage: Brokerage fixed by the Stock Exchange is the maximum chargeable. But brokers can offer discounts to clients.

Differences between Forex Equity and Commodity trading

As an investor, you have three segments to put your money on — forex, equity and commodities. While the forexmarket deals with currencies, the equity exchange is related to companies and their shares, while commodities deal with metals, energy, and agricultural products. There are quite a few differences between the three and it is important to understand each one before getting in the game.

Trading Alternatives: The forex market offers very few trading alternatives because a majority of traders choose to deal in only the major currency pairs such as EUR/USD, USD/JPY, and GBP/USD. Both the stock market and thecommodity market offer more alternatives to traders.

Ease of Trading: Trading in commodities is relatively simple since it is all to do with supply and demand. This is not the case with forex where success is more dependent on system and strategy. Trading on the stock exchangefalls somewhere in between these two and needs some research before you delve in.

Timed Trades: The forex markets are open five days a week and 24 hours each day. The stock exchange offers the shortest time window but the commodity markets stay open from around 10 am to midnight.

Short Selling: The forex market is a great opportunity for short-selling especially due to its immense liquidity potential. But this also means margins are much lower than with equity. The stock market is prone to high liquidity risks. Short selling in stock trading is more restricted.

Volatility: Contrary to popular belief, commodities are not as volatile as they seem. Metal and energy contracts have a cut off barrier of 6 percent up or down while stocks can move even 20 percent in a single day. For agricultural commodities, this stands at 4 percent. Forex is perhaps the most stable of the three here.

Brokerage: The brokerage rates are similar across all three segments, but greater volumes of trading will lower brokerage expenses. Thus, the forex market is likely to get an edge over the other two here.

Despite all these differences, all three have one thing in common — advent of technology has made it easy for newcomers with facilities such as online share trading and live tracking of commodity prices.

Different types of brokers and their benefits

Brokers are individuals or representatives of brokerage firms who negotiate transactions between a seller and buyer. Thus, they serve as facilitators in stock trading. They usually get a portion of the sale when negotiations are finalised, called a commission. Investment brokers, in particular, come under different categories based on the services they extend and advice they offer.

Full-Service Broker

A Full-Service Broker provides a variety of services to the clients. This includes doing the necessary research to base their advice, commodity trading, retirement planning and providing tax-saving tips are amongst a host of other such useful offerings. Although they are often highly priced, the key benefits here are:

  • Offers specialty investment expertise like reality planning and more
  • Provides recommendations based on research
  • Provides otherwise unavailable information and data
  • They are dedicated resources who can manage and execute all your transactions
  • Provides single-point operations across your investment portfolio

Discount BrokerA Discount Broker carries out buying and selling of stocks based on your orders, at reduced commission perhaps at a flat fee brokerage value. They may offer recommendations but you would have to do your own verification. They can subsequently give orders to transact on your behalf. Also, they do not provide personalised investment advice. They also do not provide additional services. Some of the benefits of a discount broker service include:

  • Low commission charged
  • Catering to the niche of trading only
  • Offers to facilitate trading on your behalf, based on your research
  • Anybody willing to invest can do so, even in small amounts

Online BrokerAn Online Broker works and connects with you over the internet. They often work across different brokerage websites. They mainly provide information like graphs, charts and trending news to complete your research. They sometimes even give stock recommendations. But one has to know about investment basics before utilizing their services. Some benefits of online broker include:

  • Charges a small fee or zero brokerage
  • Provides investment tips
  • Is accessible from anywhere
  • Provides a good access to useful information

So, understanding the different types of brokers and their services will help you choose the best one for trading online. Foreign currency trading or forrex trading can help you decide on the most suitable trading that meets your specific investment needs.

Different types of trading account and their benefits

If you want to get a foothold in trading of financial securities, there are a few things that you need to be aware of. The first step would be opening a trading account and a demat account. Quite a few banks and registered brokerage houses offer this facility to clients nowadays. The trading account can be linked to a bank account and is used to place buy and sell orders in the stock exchange. A demat account, meanwhile, is where the shares are held in electronic form to enable transfers when you buy or sell shares using your trading account.

Demat Account

Simply put, a Demat account is to shares what bank accounts are to money. Don’t worry if you do not know how to open a demat account. Just select a service provider who is a depository participant with either National Securities Depository Ltd (NSDL) or Central Depository Services Ltd (CDSL) and complete the application process. Once your application passes scrutiny, you will be given an account number or a client ID to access your account online. You may also be required to pay an annual fee, transaction charges, and any other associated fees, which will be specified in the rules and regulations.

Commodity Trading Account

A commodity demat account has to be opened with a commodity broker registered with the National Securities Depository Ltd (NSDL) and this will enable you to conduct trades with the National Commodity and Derivative Exchange (NCDEX), the National Multi Commodity Exchange of India Ltd, and the Multi Commodity Exchange of India Ltd (MCX). With a commodity trading account set up, you can invest in agricultural, metal and energy commodities.

Forex Trading AccountThe process of getting a forex trading account is similar to the others and once this is set up you can buy and sell any currency. Options include buying currency from the NSE or the MCX. One significant difference in the forex market is that you can buy futures that are to be settled up to 12 months later.

Quite a few clients of brokerage houses and banks might be eligible for perks such as unlimited trading and zero brokerage in all these segments. All three accounts can be opened simultaneously.

How to carry out a technical analysis of the market

If you want to get a foothold in trading of financial securities, there are a few things that you need to be aware of. The first step would be opening a trading account and a demat account. Quite a few banks and registered brokerage houses offer this facility to clients nowadays. The trading account can be linked to a bank account and is used to place buy and sell orders in the stock exchange. A demat account, meanwhile, is where the shares are held in electronic form to enable transfers when you buy or sell shares using your trading account.

Demat Account

Simply put, a Demat account is to shares what bank accounts are to money. Don’t worry if you do not know how to open a demat account. Just select a service provider who is a depository participant with either National Securities Depository Ltd (NSDL) or Central Depository Services Ltd (CDSL) and complete the application process. Once your application passes scrutiny, you will be given an account number or a client ID to access your account online. You may also be required to pay an annual fee, transaction charges, and any other associated fees, which will be specified in the rules and regulations.

Commodity Trading Account

A commodity demat account has to be opened with a commodity broker registered with the National Securities Depository Ltd (NSDL) and this will enable you to conduct trades with the National Commodity and Derivative Exchange (NCDEX), the National Multi Commodity Exchange of India Ltd, and the Multi Commodity Exchange of India Ltd (MCX). With a commodity trading account set up, you can invest in agricultural, metal and energy commodities.

Forex Trading AccountThe process of getting a forex trading account is similar to the others and once this is set up you can buy and sell any currency. Options include buying currency from the NSE or the MCX. One significant difference in the forex market is that you can buy futures that are to be settled up to 12 months later.

Quite a few clients of brokerage houses and banks might be eligible for perks such as unlimited trading and zero brokerage in all these segments. All three accounts can be opened simultaneously.

What is a Demat account and what are its benefits?

Shares and other such securities are held in electronic form instead of physical paper based certificates. The details of your investments are all centrally linked to one special account. This is called a dematerialised account or a Demat account. This is a now a government norm in India for individuals to buy, hold or trade shares and stocks. A single account can be used for both equities like shares and debt instruments like loans.

Who can help me open a Demat account?

If you are wondering how to open Demat account, you should register with an investment broker. Many banks offer the services of a sub-broker too. Once opened, the account number needs to be quoted for all transactions to enable electronic settlement of trades. To transact shares, every shareholder will have such an account.

What do I need for using my demat account?

To access your Demat account, you need internet connectivity, a password for your account and a transaction password. Once you are logged in to your trading account, you can initiate buying and selling of securities. The securities are automatically made through the account when the transactions are confirmed and completed by the user.

What are the benefits of using a Demat account?

Some of the advantages of using a dematerialised account for online transactions of securities are:

  • Easy & convenient: All securities can be viewed and managed through a single account. The bonus allotted to the investor or securities bought and sold will be immediately reflected in the account.
  • Electronic medium mitigates risks: Unlike physical certificates, there is no risk of misplacing certificates, theft or fire. It also avoids postal delays and loss of certificates during transit. The risk of forgery and damage are also eliminated.
  • No stamp duty: There is a 0.5 % payable for physical shares, which is avoided here due to reduced transaction costs.
  • Enables easy transfer of securities: Depositary participants are the people who are given the right to hold the securities on a shareholder’s behalf. These Depositories are linked with NSDL & CDSL, which handle securities in India.
  • Various modes of access: This makes it possible for traders and investors to participate from anywhere
  • No paperwork: Since all details are electronically available, there is reduced paperwork for shares or securities transfer and none for trading.
  • No restrictions on transactions: You can sell or buy even one share. So, with no specific minimum value, one can do unlimited trading.

There are many firms and agents who offer to help you with a Demat account with zero brokerage charges. So, having a Demat account is surely advantageous to take part in forex trading or investing in stocks.

Crude oil trading: How to trade in them?

One of the key commodities that hold an interest in trading is crude oil. This is because it offers high liquidity. Also, no matter what the market conditions are, crude oil trading offers excellent opportunities for profit. To do this, many options are open to investors. Each one comes with its varying amount of risk involved. It could be done as a direct investment with crude oil as a commodity or through ownership of related equities.

Direct methods of trading

Own it as a commodity: One can invest in crude oil by purchasing oil futures or oil futures options. Both these work differently. They differ largely in terms of the buyer and seller contracts as well as the obligations involved by either party. These contracts are exchange traded. Generally, futures are considered highly volatile. Also, this comes along with the necessity to do a fair amount of research and requires a large capital investment.

Purchase oil exchange traded funds (ETFs): The commodity-based oil traded funds or oil ETFs trade on the stock exchange and can be bought or sold just like stocks. The exposure to the amount of crude oil would depend on the amount of money one invests. For example, it could be as little as one share in a crude oil fund, which would translate to the percentage ownership of a barrel of oil.

Indirect methods of trading

The other way could be by buying energy-sector ETFs or energy related mutual funds. These financial instruments are energy-specific ones. Meaning they invest only in the stocks of oil and oil service companies. Also, these come with lower risk.

Key pointers for trading

Understanding crude oil contracts, the exchanges that deal with these futures trading, and factors that affect the prices are the key to trading in crude oil. The art of risk management by way of hedging or other strategies can prove to be extremely helpful for traders. Also, the techniques for managing risk can be beneficial to all stakeholders. There are numerous sources to base one’s investment in crude oil. For example, if one is looking for intraday trading, the mcx crude oil tips , which are updated real time can be helpful indicators to determine hold, buy and sell.

Crude oil trading as a specialized trading arenaWhile understanding key drivers like volumes, the intensity of trends and identifying the current participating crowd is of immense importance, this is a highly specialized arena. So, in order to get consistent profits through speculation, one needs to build on exceptional skills like keeping a tab on the crude mcx on a regular basis, read related charts and more.Learning what drives this commodity, its long-term price history and the various physical grade variations are some things that will help investors who wish to explore trading oil futures.

Share Prices: How are they affected by changes in the sensex?

The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the popular stock exchanges in India. Though there are others, most stock trading in the country is done through these two exchanges.

The Bombay Exchange Sensitivity Index or “Sensex” is a number that that is computed for the 30 largest and most actively traded stocks on the BSE. Whereas the nifty index is a number computed for the top 50 companies listed on the NSE.

Either of these two indexes can provide an insight into the performance of the Indian share market Market players observe the changes in their value over time and employ various strategies as a basis for their trading.

Share prices and the Sensex

Though the bse stock price listing has many companies, this index is calculated for the stocks that correspond to leading companies across a wide range of sectors in the BSE. These shares contribute to more than 50% of the total market capital in the BSE. Thus, a country’s stock exchange index is a quick way to determine and compare the performance of various markets.

The Sensex is an indicator of the health of the market. This means that any change in this number shows whether the prices of most shares have gone up or come down. The Sensex share price may increase or decrease. Let us consider each of these scenarios:

 

  • The Sensex rises This means that the share prices of the major companies have increased and the companies are doing well. It, in turn, means that their investors or shareholders are earning more.
  • The Sensex falls This means that the share prices of the major companies have decreased and the companies are not doing well.

The Sensex India is reflective of the Indian economy. If the leading companies are doing well, it spurs the economy onto a growth path. It means that people can expect an economic improvement in the country.

Reading the share market through the Sensex

Many factors like news about the company or country drive the movement of the Sensex. If there is positive news about the company, the share prices go up. So, does the Sensex. In contrast, a negative news about the company brings down the Sensex.

The Indian Sensex and how does it work

The Indian stock Exchange is widespread. Though there are stock exchanges in India like the Calcutta Stock Exchange, the Bombay Stock Exchange (BSE) based in Mumbai and the National Stock Exchange (NSE) based in Delhi are the most popular ones. As such, most of the stock trading in India happen through these two exchanges.

How to arrive at these numbers

The companies in these listings represent various industrial sectors of the Indian economy and have the most actively traded stocks on that particular exchange.

  • An index committee reviews and selects the list of companies from time to time. They adhere to strict criteria for this process
  • The free-float market capitalization method is used to calculate an index. Market capitalization refers to the value of a company in terms of its shares

The index for BSE is calculated considering the top 30 companies. The index for NSE is computed for the top 50 companies.

Significance of the index

There are many factors like news about the company or country, major acquisitions and company performances that drive the movement of the Indian Sensex. The Sensex India are important for many reasons. Some of the most important reasons are:

  • They function as standards of comparison for equity funds and other investments
  • They indicate the returns on money invested in stock market. Thus, they can be used for historical comparison of these against other investment forms like such as gold

The bottom line is that it is considered as a major indicator of the performance of the share market and thus the country’s economy too.

Nifty Charts: How to read and use them?

Stock charts are representations of the underlying technical analysis of stocks and other financial instruments. Many consider these as essentials for understanding the patterns and reasons for stock price changes. They provide all the key market information and often form an important supplement to base their trades. The Nifty chart is one such representation used for the index representing changes in the Nifty 50 listed on the National Stock Exchange (NSE).

Charts and the market

Market data are often graphically depicted in Nifty charts through two ways, the OHLC chart or the candlestick chart type, the latter being more popular among day traders in the stock exchange. Both these charts show the same market data. The data consists of high, low, opening and closing prices for a particular time frame.

OHLC charts

The open-high-low-close chart (or the OHLC chart) typically shows movements in the price of a financial instrument like a stock over time.

  • The vertical lines on this bar chart show the highest and lowest prices over one unit of time. For example, the price range of the stocks of the Nifty 50 companies over one hour or one day.
  • Tick marks project from either side of the bars. The tick on the left indicates the opening price and the tick on the right side of the bar indicate the closing price for the time period.
  • The bars are at times in different colours, which indicate whether the stock prices rose or fell during that time period.

The high-low-close chart (or the HLC chart) is a simplistic version of the OHLC chart. This chart identifies the range of the price action in the time unit. The range is from the highest price to the lowest price. It also captures the end result of this price action or the closing price for that time period.

For technical analysis, OHLC charts are frequently combined with other chart types such as line charts, which show the moving average, column charts that indicate the trading volume, and range areas, which are called Bollinger Bands.

Candlestick charts

The market data is also represented in the form of the Japanese candlestick chart. Here, the opening and closing prices of the financial instrument defines a rectangle that lies within this range for a time unit.

  • Each candlestick has a wick. The top of the wick represents the highest traded price. While the bottom of the wick represents the lowest traded price.
  • The rectangular region in between represents the opening and closing trades
  • Digitally displayed candlesticks in charts come in various colours indicating higher closing and lower closing

Often day traders prefer this because they show the “live action” or current price movements, which are indicated by the expansion and contraction of the candlestick’s body. They consider this easier to follow and also trade upon than the OHLC chart.

Accessing them online

There are many finance and stock market-related websites including the official NSE website that have up-to-date information regarding the market performance in these chart types. Apart from financial instruments like securities, it can also indicate the changes in various indexes like the nifty index.

Apart from being an invaluable source of important market information, seasoned market players in the bse and nse consider reading these charts as an art and novices may need to devote time to become well-versed with the nuances involved in using them to base trades and strategically use them to work to their advantage.

Nifty index: What is it and how to use it?
Nifty index

 

NIFTY INDEX: What is it and how to use it?

Nifty index or Nifty 50 index is the benchmark of the stock market index for Indian equity market. It is owned and managed by India Index Services and Products or IISL which is a wholly owned subsidiary of NSE strategic investment corporation limited. Nifty Index with a base index of 1000 and base capital of Rs 2.6 trillion is the largest financial product in India.

Nifty stock include the stock from various portfolios like banking, manufacturing, pharmaceuticals, energy and telecommunications. The Navratna companies of the Indian government take their place in all portfolios along with private companies like Mahindra & Mahindra, Bajaj Auto, Larsen & Tubro, Reliance Industries, Maruti Suzuki Pvt Ltd, Hindalco, Hero Motors, Tata motors in manufacturing. The financial portfolio has companies like ICIC, Axis Bank, Housing development finance corporation, State bank of India, HDFC bank and Yes bank to name a few. Dr Reddy’s laboratories, Lupin and Cipla are the major players from the pharmaceutical portfolio. The Nifty index is calculated on the stocks of these 50 companies comprising of Nifty 50.

The Nifty index captures the behaviour of the overall equity market and this is possible through Nifty stocks that provide traders and brokers’ real time data and analytics related to the stocks being traded. The current price, rise and fall in price through the day, percentage increase and decrease of the price, all data is provided on the screen to everyone interested in trading, making it easier for the brokers, traders and investors to take a fast and informed decision.

In India, Nifty is the benchmark index for NSE and Sensex is the benchmark index for BSE i.e Bombay Stock Exchange. Unlike NSE that was set up in 1992, BSE was established in 1875 making it Asia’s first stock exchange and world’s fastest stock exchange with a median trade speed of 6 microseconds. BSE is the 11th largest stock exchange that has a market capitalisation of $ 1.7 trillion with 5500 publicly listed companies. BSE Sensex index was developed in 1950 that provided a means to measure the overall performance of the exchange. BSE and NSE together form the backbone of Indian stock market.

NSE: National Stock Exchange
NSE trading
NSE: National Stock Exchange

NSE or National Stock Exchange is the leading stock exchange in India located in the financial capital city of Mumbai. It was the country’s first demutualised electronic exchange featuring a modern, fully automated screen based electronic trading that provides an easy trading facility for investors spread across the country. With a market capitalisation of US$1.65 Trillion, NSE India is the world’s 12th largest stock exchange which is used extensively by Indian and global investors as a barometer of Indian capital market.

NSE India was established in 1992 by the directives of Indian government by a group of diversified shareholders that include key domestic investors like Life Insurance Corporation of India, State Bank of India, IFCI Limited IDFC Limited and Stock Holding Corporation of India Limited and global investors like Gagil FDI Limited, GS Strategic Investments Limited, SAIF II SE Investments Mauritius Limited, Aranda Investments (Mauritius) Pte Limited and PI Opportunities Fund as a measure to bring transparency to the Indian capital market.

NSE Nifty or Nifty 50 is the benchmark stock market index of Indian equity market. Nifty 50 comprises of 50 Indian companies covering 22 sectors of Indian economy like financial services and industrial manufacturing. A free float market capitalisation weighted index, NSE Nifty has come up as the single largest financial product of India with a base value of 1000, and a base capital of Rs 2.06 trillion. The ecosystem includes exchange-traded futures and options (at NSE in India and at SGX and CME abroad), exchange traded funds (onshore and offshore), OTC derivatives (mostly offshore) and other index funds.

NSE margin is a comprehensive risk management tool for the derivative tool of NSE F&O i.e. Future and options. Future and options are the two of the most popular derivative instruments traded in the stock market. The Futures contract allows one to buy or sell shares at a certain price in the future, the options contract gives one the right, but not an obligation to buy (through a call option) or sell (through a put option) the underlying script at a specified date and at a specified price.

Since there is a certain level of uncertainty in the prices of both the options, NSE has introduced a portfolio based system for the purpose of margining. What NSE margin does is it allows the buyer to buy a certain amount of shares at a part of the total amount of the shares. This initial amount to buy shares is called margin. Basically allowing the buyers bring money and sellers bring shares to complete their obligations even though the prices of the shares have moved down or up.

BSE: Bombay Stock Exchange
BSE trading
BSE: Bombay Stock Exchange

Tracing its origins to the late 19th century, the Bombay Stock Exchange also known as the BSE India is located on Dalal Street in Mumbai. It lists more than 5,000 companies and is counted among the largest stock exchanges in the world. Its overall market capitalization amounts to $1.7 trillion. In 1995, the BSE switched to an electronic system of trading from the open-floor system. Stocks, stock futures, stock options, index futures, and index options are all listed on this Exchange.

Responsibilities The BSE is managed by the Board of Directors who formulate its policy. Its daily operations are handled by a managing director.

  • The BSE acts as the regulator in the securities market by putting in place various monitoring and surveillance mechanisms.
  • It can pinpoint irregularities or discrepancies in stock prices.
  • The BSE provides counter-party risk management in all transactions across its trading platforms.

Salient features It is the first in India to introduce equity derivatives and launch a free float index.

  • • Its systems and processes are designed to safeguard market integrity and enhance operational transparency.
  • • The BSE is the first exchange in the country and the second globally to obtain an ISO 9001:2000 certification.
  • • This is the first exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its unique BSE Online Trading System (BOLT)

Common terminology The BSE has a presence in over 400 cities and towns across the nation. Some commonly used terms in BSE are

  • BSE Stock: The equity shares of various companies listed on the BSE Trading System (BOLT)
  • BSE Sensex: Originating from the term ‘sensitive index’ it refers to the direction of companies that are traded on the BSE. It reflects the fluctuation in stock prices of listed companies. It is also known as the BSE index.
  • Rally: This refers to the gains made by the Sensex during the course of a day. If it persists for a few days, it is known as a market rally.
  • Crash: It refers to the decline in value of the Sensex.

There has been a manifold increase in trading volume on the Exchange over the past decade and a half. The BSE has many achievements and firsts to its credit and continues to innovate by introducing new applications and services.

Share Market: A History of the Indian Share Market
Share Market: A History of the Indian Share Market

A stock exchange is “a body of individuals, whether incorporated or not, constituted for the purpose of regulating or controlling the business of buying, selling or dealing in securities.” “Securities refers to shares, bonds, scrip, stocks, debentures stock, and other marketable securities of incorporated companies or similar, government securities, and rights or interest in securities.”

In India, the share market is a term used to refer to the two major stock exchanges in the country— Bombay Stock Exchange (BSE), and the National Stock Exchange of India (NSE). There are also 22 regional stock exchanges.

Looking Back

The Indian stock market traces its history back to the late 18th century when the trading floor was under the shade of a sprawling banyan tree opposite the Town Hall in Mumbai. A few people would meet under this tree to informally trade in cotton. This was mainly due to the fact that Mumbai was a busy trading port and essential commodities were traded here often.

Investor saves money
– The Companies Act was introduced in 1850 following which investors started showing an interest in corporate securities. The concept of limited liability also put in an appearance around this time.
– By 1875, an organization known as ‘The Native Share and Stock Broker’s Association’ came into being. This was the predecessor of the BSE.
– In 1894, the Ahmedabad Stock Exchange came into being primarily with the objective of enabling dealing in the shares of textile mills in the city.
– The Calcutta Stock Exchange was formed in 1908 with the intention of facilitating a market for shares of plantations and jute mills
– It was in 1920 that the Madras Stock Exchange took shape.
– In 1957, the BSE was the first stock exchange to be recognized by the Government of India under the Securities Contracts Regulation Act.
– The SENSEX was launched in 1986 followed by the BSE National Index in 1989.
– The Securities and Exchange Board of India (SEBI) was constituted in 1988 to monitor and regulate the securities industry and stock exchanges. In 1992 it became an autonomous body with completely independent powers.
– In 1992, the NSE was formed as the first demutualised electronic exchange in the country with the intention of ensuring transparency in the markets.
– NSE began operations in the Wholesale Debt Market (WDM) segment in 1994, the equities segment in 1994, and the derivatives segment in 2000.
– It was in 1995 that the BSE made the switch to an electronic system of trading from the open-floor system.
– In 2015, SEBI was merged with the Forward Markets Commission (FMC) with the aim of strengthening regulation of the commodities market, facilitating domestic and foreign institutional participation, and launch of new products.
Present Day Scenario

Today, the BSE is considered the world’s 11th largest stock exchange and the market capitalization is expected to be around $1.7 trillion. The market capitalization of the NSE is estimated to be over $1.65 trillion.

Over 5,000 companies are listed on the BSE while at least 1,500 figure on the NSE. In terms of share trading volumes, however, both the exchanges are on par. A far cry from trading under the banyan tree, nowadays people are able to conduct online trading sitting in the comfort of their home. Facilities such as zero brokerage, demat and live updates are all available easily now thanks to the widespread use of the internet.

Different type of markets?
Different Type of Markets

The Indian stock market can be classified into two depending on the type of financial instrument being traded. Thus, we have the equity market and the derivative market. The one feature they have in common is that they can both be purchased and sold. Here is a detailed analysis of the two:

What is the Equity Market?

In equity trading, those who hold equity are known as ?owners? of the company and its assets. Large companies raise funds through the issuing of shares and a buyer then becomes part owner of that company. This is a cash segment and the buyer and seller usually arrive at a negotiated price for trading. The buyer pays the entire value of the stock which can be obtained by multiplying the number of stocks with the current market price of one stock. This is similar to investing in a start-up or similar venture.

What is the Derivatives Market?

A derivative is an instrument that gets its value from various underlying assets. Futures, swaps, forwards, and options are all examples of derivatives. Stocks, bonds, commodities, currencies, and interest rates all qualify to be underlying assets. These are great for speculation and hedging. Future contracts and option contracts are the most common instruments used and trades are conducted in lots.

Features of Equity and Derivatives Market
  • The value of equity is dependent on various factors such as demand and supply, performance of the company, and economic or political events.
  • The value of derivatives is determined by the health of the underlying asset. So, if the asset is currency then its movement will determine the value of the derivative.
  • A transaction in the equity market is said to be completed once the stocks are transferred to the Demat account of the buyer.
  • A future contract in the derivative market has to be closed within a specific time and at a fixed rate.
  • An options contract in the derivative market also gives you the option of ignoring it altogether.

Both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) offer trading n equities as well as derivatives. The availability of online trading and facilities such as zero brokerage has increased the number of trades being placed in both these segments.

Call Option Basics
Online Share Trading: What are the Requirements

Stock market investing follows the thumb rule,?buy low and sell high?. However, this is only true in an upward trending market. Options, on the other hand, can be traded and profited from, irrelevant of the market direction. Options trading lets you make money from a bull, bear as well as a sideways market. Unlike share trading, options trading give you a lot of leverage. You can also minimise your loss by trading the different option strategies. Options are basically contracts which give the owner the right buy not the obligation to buy or sell an asset at a fixed price for a specific time period.

Basics of Call Options

You can buy the call options instead of buying stocks .If the stock price rises then you tend to profit from the call. With a call option, you get to take a leveraged position which in turn increases the profit percentage.

Call option is a contract which gives you the right buy not the obligation to buy a specific quantity of the security at a strike price until a fixed time.

The seller of a call option has an obligation to sell the contract at the strike price if the option contact is exercised. The call option writer is paid a premium for taking the risk that comes associated with the obligation.

Whether you are buying or selling the nifty options, it is important that you understand the risk involved in trading options. Novice traders tend to go overboard by seeing the potential profit that options have to offer and in turn end up making a huge loss. Proper risk management as well as proper education is the key to profit from options. If you purchase a call option, then consider buying the in-the-money contract. This is because the in-the-money contract will have a larger delta. A large delta signifies that a change in the stock price will correspond with the change in the options price very closely. Even though the in-the-money options are expensive because of the intrinsic value, they are less risky than the at-the- money and out- of- the money option contracts.

Online share trading: What are the requirements?
Online Share Trading: What are the Requirements?

The advent of technology has made life much simpler than it was a decade ago. The internet has revolutionised the way the world works and there is no aspect of life that remains untouched by this. Share trading is no exception and now one can sit at home or in office and place trades with the click of a button. The three basic things you will need before you can start online trading are access to a computer, a reliable internet connection, and a digital trading account.

Before You Start Off

A PAN card is a pre-requisite for most financial transactions today. Equally important is a bank account which offers online fund transfer options. All major banking institutions offer this facility to its clients. Opening a Demat account is the next step in the process. Many banks and brokerage firms offer these and you will need to consider various factors before you make your choice.

  • Brokerage charged ? some offer zero brokerage to new clients.
  • Demat charges ? these are usually on an annual basis
  • Account maintenance charges ? usually on a periodic basis

 

Begin Trading

Once this is done, transfer money from your bank account to your trading account. After your account is opened, you will be given a login id and a password which will enable you to operate your account and carry out your trades. The institution you open your trading account with is likely to provide you with tips and analysis reports on stock prices and movement of stocks in the share market.

Tips To Remember

There are some things you can keep in mind when trading in the Indian share market such as:

  • Choosing a Trading Style ? Think about the type of trading you want to do. Intra day trading and long-term trading are some of the options you can consider.
  • Stick With a Good Trading Plan ? Low risk high reward methods are a good way of attaining stability in the market. This will help you control the risk in the online trading game.
  • Know When to Sell ? Do not get greedy and sell when you have a reasonable profit. Set a target sell price when you buy the stock and stick to it.

As with most other things, trial and error works here too. It might take some time to understand the nitty-gritty of online trading, but hang in there and soon it will seem as if you have been doing this all along.

Risk management techniques for active traders
Risk Management Techniques for Day Traders

Any business has risk involved in it. Risk management is an extremely vital part of becoming an active trader. Basic rules and guidelines that a trader sets for him/herself will help in neutralising losses while keeping the investments safe.While trading on Indian stock market indexes like BSE India, NSE India, it is vital that a solid planning and strategy is set in place before trading. Following are some tips that will help in risk management while trading in Sensex.

1. Planning the trade

Like it is said for wars, ?a war planned well is a war half won?, it is important to plan the day’s trade in advance to have a clarity in mind while trading. Planning the points to buy and sell will help in maximising profits and reducing loss. Make a note of profit points and stop loss points during the day to ease yourself of last minute speculations and chances of making blunders.

  • Profit points are the points where traders usually want to sell the stock. These are usually the part of Nifty trends which are high points of the day?s trading of stocks when it reaches the resistance level. traders like to sell it at this point before the stock starts its downward trend.
  • Stop loss points are those points of Nifty trends where trader wants to sell stocks at a lower rate taking a loss but reducing the overall loss. This usually happens when the trade is not going trader’s way. It helps in reducing the overall loss but exiting at a time when the loss is minimum.
2. Calculating the expected return

It is not overstated to say that calculating the expected return is highly important. Not only does it force traders to think rationally through the trades but also provides a systematic way to compare all the trades that are there and choose the ones that are the most profitable.

3. Diversification and hedging

There is an old saying that one should never put all their eggs in one basket, the same is applicable in equity trading. SGX nifty gives an opportunity of having stakes in a diverse portfolio of trades that allow traders to minimize the risk of losing money when one of the trade falls. It is more about creating more opportunity rather than spreading risk.

Hedging is another option to safeguard your investment by taking a long position on one of your stocks and a short position on the stocks opposite to these stocks thus giving you the freedom to gain profits through both of them.

Put Option Basics
Put Options Basic

Many investors, who are comfortable with trading call options, tend to shy away from trading the put options. Put options add a completely new dimension to stock market investing. It is the reverse of a call option where a put gives the owner the right to sell a stock at the strike price within a specified time.

Basics of Put Options

Options give traders a lot of leverage as compared to share trading and thus most investors are attracted to the huge profit potential offered by options trading. When you own a put option, you get the right to sell at the strike price until the time the put option expires. Your maximum profit from trading a put option is obtained if the stock tanks down to zero. On the other hand, the maximum potential loss that you need to bear on a put option is the premium value that you paid to purchase the contract. This happens when the options contract does not work in your favour and you let it expire.

When you short a put option, you are obligated to buy from the put holder at the strike price. This is if the holder of the put option exercises his option before expiration. You get a premium for the risk that you take under the obligation. The premium received is the maximum profit that you can make from the trade. The maximum risk on selling a put option is when the stock price comes all the way down to zero.Put options are used to hedge a position in the stock market. They are less complicated than short selling the market.

If you plan to start trading the nifty options, it is important that you realise that trading options can be risky. They offer a huge leverage that maximises your profit percentage. However, in case the trade does not work in your favour, then an option will increase the loss percentage too. Proper risk management and sound knowledge is the basic key to trade and profit in the options market.

The option price also depends on time value and the Greeks. Professional option traders trade option strategies to maximise their profits from the options market.

What is margin trading?

Sometimes in the process of online share trading, traders buy and sell beyond resources that they own. This is done by borrowing or lending securities wherein a trader puts in a ?margin? with the intermediary, which is a percentage of the value of the transaction. This phenomenon is known as margin trading.

Whether you are looking at BSE trading or NSE trading, margin trading requires the opening of a margin account. The facility is available to all traders, whether they engage in online share trading or otherwise. Investors can open a margin account with a broker with a minimum margin amount paid in. Once the account is opened and operational, you can borrow up to 50% of the price of a stock that you want to acquire.

Margin trading is a leveraging mechanism that allows investors to undertake a larger exposure in the market than what is traditionally possible with only their resources. In India, the Securities and Exchange Board of India governs and establishes eligibility criteria for allowing the facility.

Initial margin, which is the minimum amount to be paid, is set at 40% of the value of the stocks to be purchased, while maintenance margin which is at 50% is the minimum amount of the security valued at 50% or more of the total value of the margin account. If any of the securities falls below a particular price and the above criteria is not met, the investor is given a ?margin call? from the broker where he must pay up the balance of the amount up to the maintenance margin.

Once a trader buys a security in the margin account, the investor gets the profits or losses as they are from his account. When a client is unable to meet the margin call, the broker usually sells the security and retains the profit from the sale.

Investing on margin is usually for a shorter term as the longer you hold an investment, the more return you require to break even. If you hold an investment on margin for a longer period, the odds are that you will make more losses than gains.

What is delivery trading?
What Is Delivery Trading?

Trading in the Indian stock market comes with both advantages and disadvantages. Online share trading is a popular avenue of trading for many investors. There are two types of trading for investors looking at short-term trading.

1. The first is Intraday Trading which is buying and selling a stock within the same day. It implies that no positions are held overnight and all positions are exited within the market hours. A benefit of this type of trading is that you receive margin benefits on intraday trading.

2. The second type is Delivery trading, when you purchase the shares on one day, and hold the position overnight so you take delivery of them on the next day. This is one of the most popular types of trading in the Indian financial market. The full price of the stock must be given, with no margin and the shares are deposited into the investors Demat account the next day.

The advantage of delivery trading is that you can hold positions in case you are facing a loss in the day that you purchased the securities, and exit the positions when the market opens the next day after performing your own market watch. However, delivery trading comes with a larger brokerage fee associated with it by most brokerage companies. The securities transaction tax is larger on a delivery trade than on an intraday trade.

Shares bought with a delivery option can also be sold as an intraday trade, while the reverse is not true. Unlike margin trading, you pay the full price of the stock when participating in delivery trading, which also means that the cost of investment increases in this form of trading. You cannot short sell in delivery trading, which means that you must actually hold the shares before you sell them. Your investment is also susceptible to market crashes, business cycles and other factors that influence the stock markets.

Another benefit of delivery trading is that there is no time limit for selling the stocks that you hold.

As an investor, you must always make an informed decision and make sure you understand the nuances of the type of trading you are undertaking, so that you do not face major losses.

What are the different market indices?

Market indices are used to find the state of the stock market. When the value of various stocks or investment tools are combined and expressed against a base value on a specific date to produce an aggregate value, that value is known as a market index. These indices are used to represent the whole stock market and are used by financial managers and investors to find the return on investments. Here are some of the indices used:

1. BSE Sensex

Bombay Stock Exchange Sensitive Index is commonly known as BSE Sensex. Being the oldest stock index in India, it is a collection of 30 actively traded stocks in the BSE that represent a cross section of all industries in India. The base value of this index was taken as 100 on 1st April, 1979. This market-weighted free-float BSE Sensex is considered as the stock market pulse in India that is used extensively in BSE trading.

2. NSE Nifty or CNX Nifty

Nifty, also known as NIFTY 50 is the stock market index of National Stock Exchange (NSE), the leading stock exchange of India. This index comprises of 50 traded stocks from different sectors on the basis of their capitalisation. These cover 22 sectors of Indian economy and provide a wide exposure to the Indian financial market that investment managers can explore. The rise and fall of the NIFTY depends on the price movement of the stocks that it contains and acts as a barometer of the capital market in India. There are some common stocks between BSE and NSE trading.

3. CNX Nifty Junior

After forming a part of the 50 stocks of CNX Nifty, the next group of 50 shares of liquid securities in India form the CNX Nifty Junior. This is computed by the free float market capitalisation method. The total free float market value of all the stocks compared to a base value is reflected by the index. The stocks listed in the CNX Nifty and CNX Nifty Junior are exclusive of each other.

4. NSE CNX Mid Cap

As the midcap segment of the share market shows a potential of high growth, this becomes a lucrative investment option. So a separate index comprising of 100 midcap tradable stocks that are listed in the NSE, tracks the midcap market.

Stock investing: What is money management?

Money management is the method of finding out where you are spending your money, and framing a well-thought-out plan for where you want it to go in the future. It is also a technique used to get the maximum interest-yield from the money that you invest. This whole process can be broken down in a few steps:

1. Set financial goals: You need to set very specific financial goals along with the time period. Goals can be segregated into short-term, mid-term and long-term. Find out the amount that you need to save now to achieve that goal.

2. Get organised: All the financial information should be in proper order so that you can access them anytime that you require without wasting time. A personal financial directory consisting of all the accounts and other financial obligations will help you to be organised.

3. Track spending: For a few months track your expenses. This will give you the opportunity to sort out your needs and wants and enable you to set up a budget.

4. Set a Budget: After examining the spending and deciding what your wants are, you can set up a budget and try to stick to it.

5. Save money: Saving at least 10% of your monthly earnings is a good practice that you can incorporate into your daily life. Depending on your financial goals, you can decide to save more.

Now, the question comes ? where do you place your savings? Certainly not under the mattress! There are various options like Banks, Mutual Funds, Post Offices, real estate and many others.

Investing in the Stock Market is a way to beat inflation. Buying stocks of a company make you a part owner of that company. Investing in the Equity Market gives you the chance to gain high returns on investment. However, when the gain is more, the risk is also high. If you are a new investor, it is better that you understand the basic working principles of the stock market before you start investing. This will give you the confidence to invest in the equity market wisely.

You can opt for online trading where you can buy or sell any stock at your will with zero brokerage. This gives you the flexibility to fulfill your saving requirements.

Investing: How to invest long term in the Indian stock market

Everyone will jump to the idea of making money in the stock market. But very few come out of this profitable. The Bombay Stock Exchange and the National Stock Exchange are two of the major stock exchanges in India. You need to open an account with a stockbroker to be able to trade stocks that are listed on the exchange.Stocks are definitely the best way to build a portfolio. The return is lucrative than what is offered by fixed deposits and other secure investments. However, it is also important that to profit from the stock market you keep your money invested for long.

Proper Planning

Before you start investing long term in the stock market, it is important that you have a proper financial plan. The money that you plan to invest long term in the stock market should not be taken into consideration for your other household expenses. You should invest long term in the market only if you have adequate insurance and emergency funds so that you do not need to liquidate the amount invested in the stock mart for your personal needs.

Psychology

Long term trading in the stock market needs a lot of patience. Greed and fear are what differentiates a professional and a novice trader. Your portfolio may show a loss at times when trading long term. You should always keep in mind that your time horizon for the investment is more than 3 years and thus short-term movements in the market should not be the reason to exit from the market.

At the same time stick to the long-term target and don?t let greed wipe out all the profits that you have made. Proper planning is the key to making profits in the stock market. Always use a trailing stop loss so that you protect your profits. Emotions should always be kept aside when trading in the equity market.

Diversify

Start investing in the equity market early and diversify your portfolio. If you are staying invested in the stock market for a long term then it is important that you do not put all your eggs in one basket. This may wash off your full capital.You should invest long term and pick up only good stocks after taking proper advice from a professional. In case you are not sure about doing it independently, then there are a number of mutual funds that help you manage your portfolio and let you stay invested in the Indian stock market for long.

What is an IPO?

As the name suggests, an IPO or an Initial Public Offering is the set of stocks that a company sells it for the first time to the public. A company in need of expanding its capital ?goes public? and makes it shares available to the public for the first time with the release of its initial public offering.

Which companies can issue an IPO?

IPOs are issued by private companies who intend to ?go public?. Private Companies, who intend to maintain their stature do not make investments in their shares available to the public. Some of the bigger market players have still not issued their IPOs: McDonalds, IKEA among others. A private company who intends to go public releases IPOs for the purpose. It is not just privately owned companies who issue IPOs but also government owned companies divest a part of their stakes to the public. The largest ever IPO issued in the Indian stock market is of Coal India Limited in the year 2010. National Highways Authority of India (NHAI) is the most recent IPO issue at National Stock Exchange.

Why and why not do companies issue their IPOs?

The first and the most important direct benefit that a company derives from releasing an IPO is the financial benefit. The company widens its scope of earning as it widens its ambit of financial investors. Especially during instances of a bullish stock market, that is when the equity market experiences a financial boom, public companies experience escalating profits. Such benefits attract a company to go public.The liquidity in the capital of the company increases. Since the company has gone public, it faces a bilateral benefit where the company enjoys increased market share and more and more people get to know about the company and its offerings so there is increased awareness.The companies can also facilitate their merger and acquisition activities in return for the sale of their stocks.In totality, a company increases their financial involvement in the market. Although issuing IPOs and greater involvement may not be all good for a company. Going public makes it mandatory for a company to share its information. Flooring all the company details, out to the public, comes hand in hand with the sale of IPOs and this can be risky at times. Legal costs and management discrepancies due to involvement of major shareholders in the management of the company becomes a costly affair for the company.

Effect of IPOs on the economy of the country

An increase in the IPOs is always a good sign for the economy of a country as it signals more funds into the share market. During recessions, although, companies refrain from stock trading due to impending losses.

What is a trading account? What are its benefit?
What Is A Trading Account

A trading account is like a bank account, but used for different purposes. It is owned by an investor that can hold stock, money, investments and even foreign money. This is managed by an investment dealer at a financial institution. The investment dealer advises the investor to adopt a trading strategy where he holds his assets or an investment strategy with which he can invest in shares in the Bombay Stock Exchange or other stock markets.

The benefit of owning a trading account is very obvious. If an investor wants to invest in a company listed in the stock exchange, he must own a trading account as it registers the investor with the stock exchange. The mediator between the shares for sale and the investor is the stock broker. He has the license to buy shares from the stock market on behalf of investors.

Intra Day brokers

Some stock brokers are intra-day brokers. Intraday traders will buy a stock and re sell it before 24 hours when the stock goes up to make a profit or when the stock continuously drops to lose less money, depending on the moment they think is right. Because of the flexible nature of the trading account, intraday trading can take place in the market today.Stock trading has widened the spectrum of investing globally. Stocks and bonds can be traded since online share trading was introduced in the 90?s. One of the benefits of owning a trading account, is that is empowers you to partake in online share trading.

The position of the investor

A trading account reflects on the profitability position of the investor as well. It highlights the gross profit and grass sales which serve as guidelines for investors in the next financial year as it brings to light the efficiency in trading stock carried out by the investor, the stock broker, and the investment dealer. It does this by providing the necessary figures to formulate a ratio between the cost of goods sold and the gross profit and enables the investor to contrast the cost incurred of the stock sold as opposed to the profit generated.Trading Accounts are a great asset to investors as it provides a lot of information for them to invest better in the future.

Brokerage calculators: What are they? How to use them?
Brokerage Calculators: What Are They? How To Use Them?

Brokerage calculator, as the name suggests, is an advance financial tool used to calculate how much a trader would have to pay a stock broker when he or she carries out a trade in the share market.

A trader does different types of trades using an online trading account or a stock broker. These services are chargeable. This is where a brokerage calculator comes into use. It enables the trader to calculate beforehand how much fee he will have to pay.

This is useful in calculating the cost of trading, comparing the brokerage fee and advanced costs like delivery brokerage, intraday brokerage, etc. Some calculators even assist in calculation of other trading expenses like STT, State Wise Stamp Duty, Exchange transaction charges and even the point required for an online trade to break even.

How to use brokerage calculators?

Just like online trading, brokerage calculators are used only online. There is no need to download or pay to use them. There are many different calculators that calculate different trading expenses and calculators that separately calculate for Equity, Currency and Commodities.

For Equity and Currency, a trader needs to type in the buy price, sell price and quantity of shares. The trader then needs to select the share market where he or she is carrying out the trade (BSE, NSE, MCX-SX). Finally, the trader needs to feed the calculator his geographical location and submit these details after which the online calculator will display the results.

For commodities, however, instead of a share market option the trader needs to select the type of commodity he wishes to trade on.

Keeping an eye on online trading

Unless one carries out a trade on their own, there is no such thing as zero brokerage fees. Many brokerage companies will offer plans and services guaranteeing a zero brokerage trading account, but will have a hidden cost. Brokerage savings calculator helps the trader understand the savings that he or she will make over time on brokerage. It also helps to check earnings, savings and profitable zones.

BSE Index: How is the index defined?
BSE Index: How is the index defined?

The Bombay Stock Exchange (BSE) is an Indian stock exchange entity located in Mumbai. It was set up in the year 1875, much before National Stock Exchange was established. BSE is also Asia?s first stock exchange and world?s fastest stock exchange trade and 11th largest in the world.

BSE index, Sensex, is merely an indicator, which gives a basic idea when the equity shares or stocks have gone down or the stocks have gone up, depicting the performance of the stock and share market. Financial analysts to facilitate better measures to increase the market capitalisation and also stabilise the stock market performance use these indices in economic research. Indices majorly help in risk management in the global economy scenario. If the Sensex goes up, then the price of the stocks of the most of the major companies on the list of BSE have gone up. And, if the Sensex falls down, then it means the stock price of most of the major stocks on the BSE list have fallen down.

The Sensex is calculated in a three steps

1. Firstly, the market capitalisation of the 30 companies on the BSE list comprising the Sensex is first calculated by multiplying the price of their respective stocks with the number of shares issued by that particular company of the financial market.

2. Then, the obtained market capitalisation is multiplied by the free-float factor. This gives the free-float marker capitalisation. This is calculated based on the information provided by all the companies to the BSE. The value of free float is usually between 0.05 and 1.00.

3. Finally, the free float market capitalisation of the Sensex is divided by a number, which is called the Index Divisor. This is the only link to the original base period value of the index. This value provides the comparison of the index over the given period of time. For Sensex, the base value period is 1978-79.

The Sensex in the real sense reflects the performance of the Indian stock market. If the Sensex is growing, it means the Indian economy is going to grow in its near future, hence attracting more investing from different sources.

How to master risk/reward ratio?

The risk to reward ratio is a ratio investors use to compare the expected returns out of a certain investment to the amount of risk taken to get these returns. The ratio has a mathematical formula. It is calculated by dividing the risk (i.e. the amount the investor will lose in case the price moves in a negative direction) by the reward (i.e. the profit the investor can make when the position is closed. Most traders and investors aim not to have a 1:1 risk to reward ratio, as it means the potential loss over the investment will be much higher than any expected profit. A good risk to reward ratio is 1:2 which means the profit (or reward) is higher than the loss. So even if the trading suffers any loss, the trader is ensured of a break-even profit margin at least.

For better understanding, let us consider an example where a trader purchases 100 shares for ABC company for Rs.20 and places a limit of R.15 stop loss order to ensure her loss will not go beyond Rs.500. Let us assume, the trader foresees the price of ABC to reach Rs.30 in a few months. Which means, the trader is willing to go under a risk of Rs.5 for every share to make an expected return go Rs.10 for every share after closing the deal. Since the trader here is expected to make a profit double the risk, the risk to reward ratio is 1:2 on this trading. Trial and error method is best to determine the best-suited ratio for every individual trading.

Be it the share market, Indian stock market, national stock exchange, equity market or the stock trading scenario, the risk to reward ratio calculation gives the traders a rough idea about the expected consequence of the trading done, giving them a chance to work on plan B in case a loss is incurred. Permutation, combination and expert help can help new bees to get good returns on investments.

List of trading holidays in 2016

In the year of 2016, both the National Stock Exchange and the Bombay Stock Exchange have around the same set of holidays.

The month of January shut down for both NSE and BSE on the occasion of Republic Day. This was followed by a no holiday month of February for the BSE giving all investors and traders a break-free 29 days while NSE closed down for Shivaji Maharaj Jayanti on the 19th.

March 2016 hit a close down for both entities for Mahashivratri. This shall be followed by a 2 day weekend shut down on the 24th and 25th of March for Holi and Good Friday.

BSE has an off on the account of Ambedkar Jayanti and Ramanavami on April 14th and 15th, extending into a weekend further on, while NSE has three other holidays added on to its list, on 1st, 8th and 19th of April for Annual Bank Closing, Gudi Padwa and Mahavir Jayanthi respectively.

The months of May and June are free of any holidays in the year of 2016 for both the National Stock Exchange and Bombay Stock Exchange, followed by a one day off in July on the 6th for Ramzan.

The Independence Day, without a mention, calls for a shutdown for both NSE and BSE, as the country celebrates the great history. NSE has also chosen to close on the occasion of Parsi New Year on the 17th of August.

September calls for a closed down for both NSE and BSE on the occasions of Ganesh Chathurti and Bakri on 5th and 13th, respectively. The month of October has three days again for both BSE and NSE on the occasions of Dusshera, Muharram and Diwali.

November 14th is the last holiday of the year for BSE, for Gurunanak Jayanti, which is also a close down for NSE. NSE bags its last holiday in the month of December on the 12th for Id-e-Milad.

The year of 2016 is a good balance of work and holidays, for the share market, Indian stock market, equity market and stock trading, giving the investors the right amount of time for celebrations and money business.

Trading Platform: How important is it?

With the advance of technology and the use of computer based applications, it has become easy to automate trading. This is particularly seen in hyper intensive activities like intraday trading which makes the use of trading software very popular. In such a case, it is extremely vital to choose the right trading platform which has all the features, functions, and applications to suit a trader’s needs and assist them in hassle free online share trading. The solutions and features may differ from one platform to the other and hence, a trader must evaluate a platform keeping his needs in mind for successful trading.

Trading will be difficult if the chosen platform is not able to assist the traders with the requisite data and will end up affecting the overall profitability. The chosen platform must have the following basic features:

  1. Functionality within the software that allows for set up of trades based on the trading strategy. The platform should provide the trader with trading signals, technical indicators, data on patterns for trend recognition, news etc. within the trading platform.
  2. Automated function to place orders once the parameters set by the traders are met
  3. Technical Analysis Tools for continuous assessment to track trends and other market changes and developments with features to help take necessary action.
  4. Customisation to trading needs would be an important feature and it is vital for traders to test their strategies for trading on historical data with the Bombay stock exchange to assess the scope of the platform to estimate its efficiency to execute orders.
  5. Traders need to take special care to examine the available platforms with their features and versions as many of them may not have the necessary features to meet your stock trading needs.

There are several options available for online share trading. However, one needs to exactly know what goes on behind the scenes to know for sure if the automated order is going in the right market conditions at the right price in line with the right strategy. Trading anomalies may prove to be very expensive for the trader and hence, a stringent evaluation of the platform is crucial. Clarity in the trading strategy along with a robust platform will allow traders to trade efficiently and reap the rewards from using a sturdy automated platform. Hence, it becomes extremely vital to select the appropriate one that matches your needs.
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What is Day trading?

Day Trading is defined as the act of stock trading; selling and buying stocks within the same day. The objective here is to leverage capital and take advantage of marginal movements in price to make profits. A typical day trader may trade several times a day and unlike long-term investors may choose to hold positions only for a short time, sometimes even seconds or minutes and never overnight.

Intraday Trading essentially involves taking positions in the markets with a clear goal of squaring off that position before the end of trading time in the stock market. The main motive of the day trading is to capitalise on fractional movements in price within one trading day. This can be beneficial for traders because there is lowered risk exposure to potential loss arising out of factors that can affect prices of the stocks in the following days.

For online share trading, there are several investment strategies; however a day trader would look for two things in a stock: volatility and liquidity. Volatility is an indicator of the daily expected price range; the range in which the trader would like to operate whereas liquidity permits you to take a position or exit at a viable price. Identifying the type of stocks with a target price would largely depend on the investor?s trading style. Some of the commonly used days trading strategies include:

1. Scalping

This is one of the popular strategies that involve repeated and rapid buying/selling of stocks within seconds or minutes. The target price here is to achieve profitability per share with each transaction having minimum risk.

2. Momentum Traders:

This trading strategy usually involves buying/selling that displays a trending pattern or is affected by news release. The idea here is to buy stock at low prices and sell them at a higher price.

3. Daily Pivots:

This style of trading involves benefitting from a stock’s volatility. The attempt is to buy at the low of the day and sell at the day’s high price. The price target in this style is at the sign of a reversal for profitability.

There are many advantages to day trading like increased leverage and zero overnight risk because of low margins as the trades are squared off on the same day. This makes is a safe way to trade because of non-exposure to potential losses arising out of external factors.

What is Position trading?

Position Trading is a specific style of trading that wherein a stock trader takes the position for a long period of time. The time frame can range from a few months to years. These types of long-term traders are not bothered with fluctuations in the short-term because they believe that in the long term stock trading will be profitable for them.

Position Trading is taking a position with the expectation to participate in a major trend with the objective of capturing the major part of the trend that can last them for months or years. The primary advantage of this style is that it does not make heavy demands on one’s time. It requires some initial research and when that is done, the trader has to decide on how to trade and then finally enter the trade in the Bombay stock exchange. There is not much to do after that, apart from occasional monitoring because small price fluctuations are not a concern for the trader.

Position trading is quite the opposite of intraday trading where trades happen daily requiring significant time for constant monitoring. Typically, position traders make very few trades in a year in the stock market and employ the ‘buy’ and ‘hold’ strategy. The advantages of practicing this style of trading include:

  1. This style of trading is the easiest to learn and practice and it is said that most traders learn to be profitable by adopting this method of online share trading.
  2. Small mistakes are absorbed fairly easily in the movement of the market and may not impact the size of the trader’s eventual profit.
  3. Position Trading requires smaller start-up capital and hence becomes easier to be successful at generating profits in the long term.
  4. Market predictability is simpler with this approach because the trader is following the overall trends and movements of the stock market.
  5. The time commitment is significantly lower as there is no need for constant monitoring and follow-ups.
  6. In general, because of the long-term investment the trades are usually profitable.

The downside; however maybe that of locking in money for extended periods of time and this could affect liquidity. For a position trade to be successful, a trader must ensure a planned entry & exit with controlled risk.

What is value investing?

Anyone who reads the newspapers or has received a text message regarding a discount is aware of chasing a good deal where something is being sold at a lower value. This same idea is applied on a much grander scale to businesses in the world of value investing.

Take, for instance, a liquor baron who bought all the breweries during an imposed prohibition. He receives the entire business, that is, the controlling or majority of the equity shares, at a much lower rate than its actual value as there is no demand for the product. However, once the ban is lifted the value climbs and the profits pour in.

Forethought

What should you take into consideration before investing in shares?

Invest in a company not just the shares – look into the entire company profile and do not merely follow the share market and the current prices. It may seem tempting but you will not know if it is a stable investment.

Do not let emotion cloud your judgement as this entirely a factually driven process.

If a company is yet to produce sound results or even manufacture products then they pose more of a liability than a viable investment. Unless market information indicates there is going to be a massive demand it is better to reconsider investing.

Think like a value investor

In addition to the above, value investors have plenty of factors that set them apart from the everyday investor. They dive into market research much more thoroughly for starters. They have intricate knowledge of and follow the national stock exchange religiously.

Before investing in equity shares, a value investor considers the earning yield of a company which is basically the earnings gained on every single unit of currency spent on that particular stock. They also ignore ‘hot tips’ and any sort of hype. Every decision is an informed one. They look into a company’s place in the financial market and if it is reliable or offers a relatively decent margin of safety on stock price then they take it.

Finally, keep in mind that value investing requires plenty of research and most value investors thrive following years of researching within the business as well as working within businesses that they know and understand intrinsically.

Market hours: Forex Commodity & Equity

Market hours involve the time frame within which different stock market entities trade. It varies as per national regulations or individual rules as well. One might wonder what the significance of market hours are when one can trade around the clock. Any trader will tell you that it is best to trade when activity is at its peak. More specifically focus on the three largest markets New York, Tokyo and London and trade when they are open. They, however, can lie out of sync with the Indian market.

The National Indian Market

The Indian stock market follows certain hours as per local time between 9:15 and 15:30 hours on all weekdays. There is equity trading on the weekends or on any of the stock market holidays decided prior to and published yearly. This essentially indicates that shares cannot be traded, bought or sold at any point other than the mentioned timings.

There is a pre-trade session between 9:00 and 9:15 daily as well. This session focuses on the NIFTY index and only 50 stocks of these can be traded. Why this separate time frame for this one item? It is to reduce volatility within the market and the proceedings at the stock exchange after a significant piece of information has changed the landscape. For commodity trading to proceed normally this portion is set aside to resolve any issues and find the right price, all stocks are traded on the NSE and the BSE.

Forex

The foreign market does not work in the same manner as stocks and commodities do. There are no regulated timings and exchanges usually occur based on each location’s current time. This time period usually lies between 8:00 AM and 4:00 PM local time. While finesse is required everywhere when Forex trading, India is challenging as it does not line up with some global hours entirely. The Forex website lets any potential trader check what stock exchange is open live. When trading currencies, it is important to have a valid and reliable broker and plenty offer zero brokerage, Forex trading being one amongst them. This trader will alert you to market hours and the fluctuations that regularly run through the currency exchange market.

What is a Primary market?

In the financial market, new securities like financial service or products, are tailor made and released to the public regularly, catering to all income brackets. These financial securities are traded in the capital share market, which is further divided into the primary and secondary market.

The primary market is the market where investors can expect their first crack at new securities on an exchange. Governments, companies or any group for that matter, get their finances through debt or through equity shares based securities. In primary markets, investment bankers of these companies set a beginning price for a given security and then deal with its sale directly with its investors.

The money the end users obtain through the primary market is usually used for investing in company operations or expansion of business. Primary markets act like an initial public offering. This is done in brief series of steps:

  1. Firstly, the company making the offer contacts a trustworthy in-house firm to look into the legal and financial details of the offering to be made.
  2. Further on, a statement is released consisting the company’s intent behind the offering. This statement gives the company details, interests, prospects and also the specifics in regard to the offering, all of this filed with required authority. The statement is simply information and not any kind of a finalisation of exchanges.
  3. Next, the concerned governing bodies proofread the above statement released, which includes the details of the company, the offering, benefits and restriction of the issue. Once this is signed off, the offering is issued to those purchasing the securities. This final prospectus is a legally binding piece of statement for both the company and buyer.

In the primary market scenario, there is no interference of any middleman. The business takes place directly between the company and the investor. For this purpose, the investor first sends the exact amount to the respective company and once the money is received, the company provides the investor with the security certificates.

National Stock Exchange of India Limited, located in Mumbai, is the leading stock exchange in India. National Stock Exchange was set up to bring in transparency and honesty to the Indian capital market.

What is Secondary market?

A secondary market can be defined as a financial market for buying and selling a number of financial instruments (bonds, stocks, options etc.) that have been issued earlier. The trade of these instruments is carried out by other investors rather than by the issuing companies that introduced the instruments in the first place.

This share market is also known as the ‘aftermarket’ and can also vary to include those loans that are sold to investors by mortgage banks. A highly liquid and centralized secondary market is provided by exchanges such as National Stock Exchange (NSE). Liquidity of these secondary markets is an essential factor as in these markets, transfer or sale of securities takes place from one investing party to the other. Also, whenever a sale takes place, the money is transferred to the investor instead of the issuing firm.

Examples of secondary markets are stock exchanges such as NASDAQ and the New York Stock Exchange. For example, in the case of an IPO that has been newly issued, the procedure where investors directly buy the shares from the underwriting investment bank is treated as the primary market. Post this, any sale or purchase of shares will be made within investors and these shares are said to be traded in the secondary market.

The Difference Between Primary and Secondary Markets

One major difference between primary and secondary markets is that in the former, all market prices are pre-set, whereas in case of the latter, factors such as demand and supply are the major price determinants.

Now, certain investors have prior commitments to private equity shares and trade (selling and buying) of these shares constitutes the private equity secondary market. Some substantial examples of these secondary markets are SecondaryLink, SecondMarket etc. These markets mainly came into existence at the time when the Sarbanes-Oxley Act emerged and resulted in more rigid reporting and compliance standards. The private secondary markets are not accessible by everyone and are only made available to accredited investors. The trade of private company securities takes place within these markets and certain investors can also sell off their unfunded commitments.

What are Dividends?

In layman terms, a dividend is a specific sum of money which is distributed by the company to all its shareholders. This sum is a part of the earnings of the said company, and the amount is mainly set after discussions held between the board of directors. There are a number of ways to issue dividends:

  1. Stocks
  2. Cash Payment
  3. Other Property

Dividend per share (DPS) refers to the amount of money that is associated with each particular share. Talking about dividend yield, it refers to the amount associated with each share expressed as a percentage of the market price of that share. Both these terms can be easily utilised in order to quote dividend rate.

The dividend amount has to pass approval of the concerned shareholders and it can be given out in several ways. It can be dispersed as a continuous cash flow at certain time periods; or can also be given as a one-time dividend. Shareholders holding equity shares of a company may get different amount of dividend each period, which is mainly determined by the profit earned by the company. On the other hand, shareholders holding preference shares are given a fixed amount of dividend.

All the shareholders that are investing in a company are entitled to get a share of its profits in the form of a dividend. The company can keep the earnings to itself as well, in which case the money is referred to as retained earnings. It can also follow the principle of share buyback, wherein a firm uses the earned profits to buy its own shares from the share market, in order to strengthen its hold.

According to the condition of the financial market, the amount of earnings and thus, the amount of dividends can vary. Having said this, all sorts of companies do not issue dividends; specially start-ups, small firms and companies involved in the biotechnology or technology sectors. The major sectors that include companies with high dividends are healthcare, oil, pharmaceuticals, gas, banks etc. Once a company declares its dividend, it can be looked up on the website of the National Stock Exchange (NSE).

What are the premiums in Futures trading?

Premium in futures trading refers to the amount associated with the trade of a futures option; that the seller and the buyer have agreed upon. It is basically the excess amount of a future contract price over the cash market price and can be seen in online share trading as well.

All types of financial products provide the facility of futures contracts; be it precious metals or equity indexes. Deciding your stock trading options on futures includes putting options or writing call based on the suspected future of a particular product or amenity. Here, you mainly try and judge the direction of movement of your particular product of interest in the near future.

Futures Contracts

Futures contracts can greatly help you to earn a large amount of profits, provided that you buy the correct options and have a good understanding of the futures premium. This premium is mainly the overall cost incurred in purchasing a particular option of interest, and its value is usually much lower than the actual cost that would be incurred in purchasing the actual future.

If the value of a future is expected to increase in the stock market in the coming times, then you should buy a call. On the other hand, if it is expected that this value is going to fall substantially, then you must buy a put. These decisions should be taken with utmost care and accuracy. For example: if you have bought a call option and its value does not experience an increase, you are bound to lose your futures premium that was given for that particular option.

Similarly, traders from the stock exchanges such as the Bombay Stock Exchange would agree that in case you have bought a put option and the price of the option fails to fall, the premium paid for that particular premium is lost.

For traders involved in intraday trading, the best and the safest option is to buy a put so that even if there is a substantial crash of the stock, they are safely insured against it.

What are the premiums in Options trading?

In options trading, premiums, or option premiums as they are commonly called, are the prices that are required to be paid in order to get certain options. Mainly, three factors are present which are determinants of the value of this premium:

  1. Time
  2. Volatility
  3. Market price in share market

Going further, intrinsic value and time value are the two main components of an option premium.

Intrinsic value is only valid for in-the-money options and refers to the difference in the values of strike price and current trading price in stock trading.

Talking about time value, it works on the concept of time decay, which means that the value goes on declining with the onset of the expiration date and after the date has passed, the option has no value. The time value for in-the-money options refers to the difference between the price of the option and the intrinsic value. On the other hand, time value of out-of-the-money options is equal to the option price; as the intrinsic value is nil. Time value is mainly increased by the onset of a higher level of volatility during the expiration period.

Also, the underlying value of options by themselves is nil and as a result; when exchanges such as the Bombay Stock Exchange quote option prices, they are taken to be premiums.

Options can be used to formulate a large number of useful strategies even for intraday trading. They enable you to gain a substantial position in a stock without having to short-sell or buy shares. Also, they can protect you effectively from huge losses and open gateways for considerable profits; when utilised in the right manner.

Mainly, in order to successfully use options, you need to have a good understanding of the premium so that you can easily and accurately identify a good deal when it hits you. Also, this will enable you to avoid dicey transactions which may pose a high amount of risk. An in-depth study of the basics of options and their respective premiums is essential for gaining this insight.

Bear market: A brief introduction

Put in very simple terms, a Bull market is that particular financial market where prices are not constant but are continuously rising. It is mainly an amalgamation of securities and prices are mainly expected to showcase an upward trend.

Whenever someone mentions the bull market, he/she is primarily referring to the stock market. However, any tradable entity such as currency, bond, commodity etc. can be a part of a Bull market.

An Optimistic Market

In such a market, investor confidence is very high and that is the reason that people keep believing that prices will go on increasing. Such a marketplace has an environment of optimism and there are strong expectations that prices will keep rising up and the market will keep showing a good trend. Having said that, it is not at all easy to predict the nature of trends in the market.

Since it is mainly based on positive sentiment and there are no set rules, speculation plays a much greater role here as compared to other markets. A number of psychological games can also be played and manipulations run high among people who are investing in the market.

A Bull market gets its name from the nature of the animal which it is named after. A bull always takes the attacking position by pointing its horns up in the air and thus the Bull market always indicated upward trends. On the other hand, a bear puts its paws down when it faces an attacker and there is a bear market which is used to indicated downward trends in the share market.

Indicative of a Strong Economy

There is always a very good demand for securities in a Bull market. However, the supply is pretty weak and this means that a majority of the investors are willing to buy the equity shares whereas only very few number of them want to sell. Thus, understandable, the prices of shares see an upward trend and investors compete in the stock exchanges such as the National Stock Exchange.

Also, a Bull market is usually associated with a strong economy as people have a considerable amount of money to invest.

What is a Lot size?

First and foremost, let?s focus on the definition of a lot. Talking specifically about the share market, exchanges such as the National Stock Exchange and other regulatory bodies fix a particular quantity for a financial instrument and this quantity comes to be known as a lot.In the case of securities that are exchange-traded, a lot can also mean that it is the minimum possible quantity of that instrument for which trade can be carried out. If we talk about stocks in a concentrated manner, the number of stocks that can be bought or sold in one single transaction constitute one lot. Moving to options, the total number of contracts that can be accommodated in one particular derivative security make up one single lot.

Determination of Lots and Their Importance

Lots are very useful and substantial for the Indian stock market as once all financial instruments are divided into lots, it becomes extremely easy and comfortable to carry out standardization of price quotes. Thus, investors in the equity market are very well aware of the total number of units bought by them in the case of each and every contract. This also helps them completely analyse the price that is being paid by them for each and every unit. This standardization is substantial in making the trading and valuing options much more easy, swift and accurate.

For example: Equity options can have a price of some particular value which allows each lot or contract to represent rights for 80 common stock shares.If we talk specifically about a transaction involving stocks, 100 shares are taken as the standard or regular size of the lot. In case a transaction takes place for a number of shares which is less than 100, those lots are known as odd lots.

It is very important, especially in stock trading, to determine the lot size adequately and base all your transactions on this particular lot size. National exchanges are usually the ones setting the lot size, and all the investors follow these set standards for their various trading activities.

52 week highs: How to calculate them?

Talking in terms of the share market, a 52-week high indicates the highest amount of price for which a stock has been traded throughout the previous year. The current value of a stock is largely determined by analysing the 52-week high and it also helps in accurately predicting the direction in which the price of the stock would move in the near future.

What Happens When the Stock Approaches 52 Week Highs?

Whenever the price of the stock approaches near its 52-week high amount, people who are investing in that particular stock have a high level of interest in the said stock. Basically, a large number of investors follow a fixed strategy which involves buying the stock as soon as its price moves above the value of the 52-week high. They mainly do this due to the fact that if the price of a particular stock is moving above the 52-week high value in the financial market, there is a very high probability that the price will continue to move in the same direction, which can then be easily made favourable for the concerned investor.

There is one more less popular but equally effective strategy that a number of investors follow from time to time. Here, investors assume that as soon as the price of the stock acquires the value of the 52-week high, the price is going to fall and thus they end up selling their stocks as soon as possible. In order to follow this strategy and come to this solution, a large number of technical analysis is carried out to complement and add to the fundamental analysis. This ensures that the decision that has been taken is extremely accurate and there is no place for error.

A Sharp Eye

According to exchanges such as the National Stock Exchange; this 52-week high, when combined with the 52-week low; decides the entire breadth of the market in which trading of equity shares, stocks and other financial instruments takes place. Moreover, traders need to keep a sharp eye on the calculation of both 52-week highs and lows in order to avoid any major hassles.

52 week lows: How to calculate them?

Talking in terms of the share market, a 52-week low indicates the lowest amount of price for which a stock has been traded throughout the previous year. The current value of a stock is largely determined by analyzing the 52-week low and it also helps in accurately predicting the direction in which the price of the stock would move in the near future.

What Happens When The Price Of Stock Approaches the 52 Week Low

Whenever the price of the stock approaches near its 52-week low amount, people who are investing in that particular stock have a high level of interest in the said stock. Basically, a large number of investors follow a fixed strategy which involves selling the stock as soon as its price moves below the value of the 52-week low. They mainly do this due to the fact that if the price of a particular stock is moving below the 52-week low value in the financial market, there is a very high probability that the price will continue to move in the same direction, which can then be easily made favorable for the concerned investor.

Other Effective Strategies

There is one more less popular, but equally effective strategy that a number of investors follow from time to time. Here, investors assume that as soon as the price of the stock acquires the value of the 52-week low, the price is going to rise and thus they end up buying the stocks as soon as possible. In order to follow this strategy and come to this solution, a large number of technical analysis is carried out to complement and add to the fundamental analysis. This ensures that the decision that has been taken is extremely accurate and there is no place for error.

According to exchanges such as the National Stock Exchange; this 52-week low, when combined with the 52-week high; decides the entire breadth of the market in which trading of equity shares, stocks and other financial instruments takes place. Moreover, traders need to keep a sharp eye on the calculation of both 52-week highs and lows in order to avoid any major hassles.

How to measure volatility in the share market

Understanding the stock market is like decoding the Da Vinci code. However, once you?ve understood the basic idea you?re bound to get hooked to it just like how you would binge-watch a TV show. Going beyond the basic definition and functions of a stock market in the national stock exchange, there is a particular phenomenon known as volatility.

What is volatility?

Volatility is measured statistically as the standard deviation of the returns received. It can be calculated either as the variance or standard deviation of the dispersion of returns over a given amount of time. To make it easier, volatility is a fancy term to represent the fluctuations that can occur in the stock market but is restricted to intraday trading. One day the stock market might be up while the rest of the week the stock market might hit an all-time low. The higher the volatility, the riskier the security and investing process can get.

How do you measure it?

Calculating volatility in the Indian share market is honestly no rocket science. All you need to do is follow a simple formula or just open your Excel sheet to do the calculating for you.

Manual calculation: This method follows the concept of standard deviation and is extremely simple. The data set that you collect contains the closing prices after each time period that you can obtain from your online trading account. Then you use a simple formula where the average deviation is squared from the mean of the data set and the square root of that is taken to give rise to the standard deviation. This is evidently a very time-consuming method and, hence, you can resort to an easier method.

Excel calculation: Use the ever-useful MS Excel sheet to carry out calculations for you. While considering the measurement of volatility, there are four different types of measurements that can be done. Of the four, historical volatility is the most commonly practiced one as it compares all the price fluctuations with reference to the past fluctuations hence providing us with a clear picture.

First, enter your data into the Excel sheet and convert it to percentage returns. This is done by dividing the first price by the second price and then subtracting 1. You can copy this formula for the entire column.

Second, you calculate the standard deviation by using the simple Excel formula for your returns.Third and final step, since you?re calculating the historical volatility, multiply this standard deviation with the square root of the number of days the data was collected from. Then voila! You have your volatility calculated in a jiffy.

Market Capitalization: What is it?

In the Indian share market, every company has its own net worth. To calculate that net worth we use the term market capitalization. Market capitalisation or market cap is the total value of the company in terms of its outstanding shares by multiplying it with the current price of one share. So, for example, if a company had 35,00,000 shares, with a market price of Rs. 100, then the total net worth of the company would be 35 crores. In simple terms, the market cap is a measure of how big a company is.

The above calculation can be easily defined by a simple calculation. MC = N x P .Here, MC is the market cap, N is the company?s number of shares in the market, and P is the current price of each share in the market.

What the formula gives you

Calculating this aspect of the company is important for investors to predict the risk and return factors. If the market cap is extremely high, then there would be a lower risk and lower returns. Similarly, if the market cap is extremely low then there would be a higher risk along with higher returns. The investors then decide whether investing in such a company would be feasible or not while also taking into consideration the market scenario. The market cap, however, only measures the equity of a company. It is extremely important that a company chooses the right type of capital structure so as to have an impact on its total value. For better and specific measurements there is the enterprise value and embedded value.

Based on the amounts, the market cap is divided into three types: large-cap, mid-cap, and small-cap. The large-cap covers stocks worth 10,000 crores or more. Mid-cap covers stocks between 2 and 10 crores and the small-cap covers stocks lesser than 2 crores.

In the national stock exchange, Tata Consultancy Services is on top of the list with the highest market cap and equity shares followed by Reliance, Infosys, ITC, HDFC, and so on. However, all of this is subject to change depending on the Indian economy and financial market.

Large cap mid cap and small cap: What are they?

In the Indian share market, every company has its own net worth. To calculate that net worth we use the term market capitalization. Market capitalisation or market cap is the total value of the company in terms of its outstanding shares by multiplying it with the current price of one share. So, for example, if a company had 35,00,000 shares, with a market price of Rs. 100, then the total net worth of the company would be 35 crores. In simple terms, the market cap is a measure of how big a company is.

The above calculation can be easily defined by a simple calculation. MC = N x P .Here, MC is the market cap, N is the company?s number of shares in the market, and P is the current price of each share in the market.

What the formula gives you

Calculating this aspect of the company is important for investors to predict the risk and return factors. If the market cap is extremely high, then there would be a lower risk and lower returns. Similarly, if the market cap is extremely low then there would be a higher risk along with higher returns. The investors then decide whether investing in such a company would be feasible or not while also taking into consideration the market scenario. The market cap, however, only measures the equity of a company. It is extremely important that a company chooses the right type of capital structure so as to have an impact on its total value. For better and specific measurements there is the enterprise value and embedded value.

Based on the amounts, the market cap is divided into three types: large-cap, mid-cap, and small-cap. The large-cap covers stocks worth 10,000 crores or more. Mid-cap covers stocks between 2 and 10 crores and the small-cap covers stocks lesser than 2 crores.

In the national stock exchange, Tata Consultancy Services is on top of the list with the highest market cap and equity shares followed by Reliance, Infosys, ITC, HDFC, and so on. However, all of this is subject to change depending on the Indian economy and financial market.

Difference between large cap mid cap and small cap

Market capitalization is a measure of the value of a company by multiplying the number of stocks the company has in the share market with the present value of each stock. This produces a figure that serves as a replacement for the total worth of a company which is important for investors to consider while making investment decisions. Based on the total worth, we classify market cap into three different types: large-cap, mid-cap, and small-cap.

Large-cap:

This category of capitalization in the Indian stock market covers stock amounts of 10,000 crores or more. Currently, the big shot companies that come under the large market capitalization category are Tata Consultancy Services, Infosys, Wipro, and the likes. As you can see, the companies mentioned are well-established ones and they are the ones that investors readily seek for investment purposes. They have a strong presence in the market and are considered to be extremely safe investments. The best aspect of this type is that information is readily available in all forms of news casting services such as news channels and newspapers and is easily accessible to one and all for stock trading.

Mid-cap:

These stocks generally lie between the value of 2 and 10 crores. As compared to large-cap options, middle market capitalisation is considered to be a little riskier; however, not too risky to be completely avoided. They come in between the two extremes in all aspects and parameters including revenue, stocks, employees, etc. The idea of investing in such a company is that these companies are bound to become large-cap companies in the near future and a large profit will be accumulated in the coming years. Companies such as 3M, Bajaj, Colgate, etc. in the national stock exchange come under this category.

Small-cap:

Stocks having a value below 2 crores come under this category. They have a high-risk factor however sometimes they are a risk worth taking. Start-ups and small companies come under this category and in most cases they do not have the necessary financial support to survive a hit. However, these companies are bound to become big names in the equity market and there is growing support for such companies in the current scenario. So while investing in such companies, a careful and thorough research needs to be done before you make a major investment decision.

What are the factors that shape the market trends?

While investing or trading in a particular stock, the profit or the loss occurs because of the trend. Depending on the duration of the share market, the rise and fall of the prices are what causes a profit or loss.There are many factors that are known to shape the market trends.

The ruling government: The government plays a major role in shaping market trends especially in the case of forming policies and rules. If the government?s expenditures increase, this helps to reduce unemployment and stabilises the prices. This is known as the fiscal policy and encompasses equity shares. The government also has the upper hand in controlling interest rates that ultimately affect the growth of the country.

International relations and transactions: The transfer of funds between countries is also an important factor that can affect the economy of a country. The more amount of money that leave the country, the weaker their currency becomes. Countries that are known to export a lot of items are known to have a strong economy. This is one aspect that contributes majorly to the growth of a country.

Expectation and speculation: Though these factors might seem baseless and pointless, they are the most important factors help shape market trends. The government, businessmen, politicians, and economists come up with theories about where the economy is headed. A speculation is made in a healthy way to direct the economy towards a positive growth. This uses public opinion as well. An aspect is known as ?sentiment indicator? is used to depict in which direction the public would help mould the economy. Hence, speculation and expectation are used to predict future market rates in the national stock exchange.

The Contributor Effect: The individual contributions made by investors and market representatives also help shape the marketing trends. When investment is done based on marketing information based on government activities and policies, a contribution towards shaping market trends takes place. Even if wrong predictions are made, the financial market trends are still being shaped. Once a market trend has been established it takes time for the trend to diminish.

Supply and demand: It is important to maintain a good relationship between the supply and demand to contribute towards a steady growth in the economy. Whether it is a product, investment, or currency, the demand and supply for it can change the course of growth. When there is a low supply, prices rise and demand increases. On the other hand, where there is a high supply, prices fall and can cause a negative effect. This is why a healthy balance must occur.

Bull market trading: How to go about it?

In the financial market scenario, you have two fancy terms that represent the rise and fall of prices of commodities or securities. Here, the term bull market refers to a group of securities whose prices are rising or are bound to rise in the near future. The bull market relies completely on expectation and speculation. The investor follows his/her feelings and intelligence to depict if a product price is to rise later.

ANow that we know what a bull market is, how do we go about trading in it? There are generally four common strategies followed that pertain to intraday trading while trading in the bull market.

Buy and hold:

This is one of the simplest strategies followed in the Bombay stock exchange that is followed by passive investors. The common idea here is to buy a share and establish a position in the market by holding onto it. Now the investor keeps an eye out for any sort of status reversal that causes an end to the revered bull market.

Increasing buy and hold:

This strategy is a slightly higher version of buy and hold method and works only under the assumption that the bull market will rise in the future. This is practiced commonly by more aggressive investors and is a more complicated strategy. Here, for every ?x? increase in the share, the investor buys a set of shares and holds onto it. Hence with every increase, there is also an increase in the net worth of shares. This is maintained until the market is predicted to be topped off.

Retracement additions:

This is a riskier form of investment and reflects the true gambling nature of the stock market. Here the investor buys a stock and holds onto it in such a way that increases to a good amount. The idea is to hold onto it even after the price of the stock reduces and the investor predicts that the price is bound to rise back up after some time. Ultimately, the investor lands up with a greater profit.

Full swing trading:

This, being the riskiest form of stock trading, is practiced only by the most aggressive investors that prowl the market. Here, they invest in all-time highs or all-time lows to bring about an additional profit. They either follow their own charts or market analysts in terms of investing procedures or even follow the online share trading.

Bear market trading: How to go about it?

Have you wanted to contribute to loud discussions about the stock market but you don?t because you aren?t exactly sure what the terms mean? Not to worry. You will come across mainly two types of markets ? the bull and the bear. In order to understand this, think of the animals themselves. A bull pushes things up with its horns while a bear?s form of attack is to pull something down with its claws.

What can you associate bear trading with?

You can associate the bull with a market where the stock price of a company is increasing, and the buyer can buy shares at a lower price, and sell them at a higher price. In a bull market, the stock price of a company is falling, so the buyer can sell shares at a certain price, then buy them back at a lower price. The easiest way to do this is by contacting a broking agency, with online stock trading facilities and stock trading facilities.

Let?s look at a bear market closely. This happens during a recession or depression. Some ways to profit in these times are as follows:

Short selling is one way. If you anticipate that a share price is going to drop, you can sell your shares or someone else?s (borrowed) shares at a low price and later buy them back at a higher price. Intraday trading, where you square off your shares is a common practice here.

You can also try a put option, where you pay a premium to be able to sell your stock at a particular strike price. When the stock price falls, you can sell at a high strike price or sell your put option which will have increased in value in a bear market .

The third way is through an inverse exchange traded fund (ETF) (also called short ETFs), which shows you the inverse of an index.

A global bear market for equities could lead to a wave of money printing around the globe. When this happens, investors turn to safety havens like gold another similar commodities to kick off a bull market for that commodity. You can generally identify a bear market by looking for downward advancing/declining line or the Price Dividend Ratio on an index like the Bombay Stock Exchange

High frequency trading: What should you know

The Indian Stock Market mainly consists of two platforms, the Bombay Stock Exchange, BSE or the National Stock Exchange, NSE. While there are multiple other platforms you can use, that are just like these exchanges, the BSE, and NSE are the most popular. It is important to note that the NSE and BSE are not government owned but privately owned and government regulated by SEBI, Securities and Exchange Board of India. Companies are exclusively traded only on one platform.

You can trade in these markets in various ways:

Long term trading : Stock is held for many months to even years

Medium Term Trading : The duration of holding is few weeks to few months

Short Term Trading : You can hold stock for more than one day to a few weeks only

Day Trading : Also called intraday trading, these stocks will be automatically squared off at the end of the day, which is when the market closes for the day, if not intentionally traded by then.

Squaring off a trade means an equal number of shares from the same company have to be bought and sold within the day. (Note: They can be sold and bought or bought and sold.)

Intraday trading has changed over the years drastically. With the advent of computers and online share trading, physical interaction between buyers and sellers is minimal and the frequency of intra-day trading has increased. Previously, the buyers and sellers of the shares had to strike a deal on the exchange floor. Computers have allowed online trading that allows a decentralized exchange. This high-frequency trading causes the market to move up and down the index faster, making the stock market a very fast paced environment.High-frequency trading is an automated trading platform which utilizes powerful computers to transact a large number of orders at extremely high speeds. These computers use Algorithm trading or Quantitative trading. Technology is so advanced that it allows a round trip within 250 microseconds.

It is important to note that high-frequency trading part of stock trading is still left to professionals as amateurs do not understand the nuances of the market even though they have the facility to enter this market at any age, at home.

Trading Model: A guide to building one

A trading model is a computer generated forecasting tool for predicting stock values and trends. You can build your own model that is specific to your needs and calculations. These models are required as tracking the factors that affect your stock trading have to take into account multiple trends. Not only is this time consuming and tedious, it is also subject to human error which can prove to be hazardous. As share trading in the stock market is done by online share trading, intraday trading has become even faster. This has increased dependence on trading models to help track the trends.

1. Develop a Hypothesis

Identify the factors affecting the stock and the factor with which they are dependent. Correlations and dependencies are the basis of your model.

2. Build your database

This data collection should be extensive and from credible sources. Verify that your data is correct as your model is dependent completely on this data.

3. Make Observations and Calculate

Verify your trading rules by making observations and doing the calculations.

4. Conditions

Put in your conditions and what-if situations. Taking into account as many scenarios helps your model in succeeding

5. Practical verification or Backtesting

Verify our model with historical data first and then test it with the current market or real world.

6. Do not get attached to a failing model

If your model is not making money, do not hesitate to start new. Getting attached to a failing model is a recipe for disaster.

These steps have to be worked on and each step should be researched thoroughly. Your model has to be perfect if you are going to depend on it for your investments and money.Alerts that can reach you on your phone, while you are travelling, can also be worked into your models making you aware of the market even when you don?t have access to a computer.Good trading models can save you from major losses and make you good profits as they identify markers that humans can miss. While there are standardised models available, they may not be perfect for your financial portfolio.

Basic Futures Jargon

Futures is a financial contract. The buyer purchases an asset in advance at a predetermined rate, futures are standardised to trading on a future date but at a price set earlier. This contract makes the buyer obligated to buy and a seller to deliver the asset. However, the actual delivery of the asset is rare in real life as futures are used for price speculation of the commodity or hedging.

Hedging is basically locking down a price in advance. The price will be the prediction of the asset at the time in the future and not the current price. If a company is definitely going to buy an asset in the future, it hedges to remove the ambiguity in price due to fluctuations. This makes for easier planning, better investing, and allocation of funds. It removes the risk of a sudden hike in price. The company is said to take a long position.

A short hedge is the same deal for the seller. If the selling company is definitely selling the asset in the future, it locks down on the future price. Buyers can turn to sellers of the same particular contract, but unlike in the share market he will be actually buying the asset and then reselling it if it comes to settlement.

Price speculation, as the name suggests, is the prediction of the price of an asset in the future financial market. Speculation is important for hedging as, without the future price, hedging would not be a concept. As the futures trading depends on the future of the asset, it is called a derivative contract. Derivatives are any financial instruments that derive its value from another value. Thus, as the future price is dependent on the trends of the asset and its current or spot value, it is called a derivative.

3. Practices like forward contracts, futures and hedging are common with commodity trading. For example, the airline industry utilises fuel in large amounts on an everyday basis. It is very necessary for them to get their fuel inflow at fixed and stable prices without letting any market performance affect their inventory. Hence, airlines practice hedging, to not incur any risk for the company or the investors of the company. Without hedging, fluctuations in commodities can lead to the bankruptcy of companies that require accurate predictions to manage their expenses.

While equity shares don?t expire, futures have an expiration date. They are traded on futures exchanges and, in India, can be traded at most popular exchanges ? NSE (National Stock Exchange), BSE (Bombay Stock Exchange), MCX (Multi Commodity Exchange), MCX SX, MCX stock exchange and so on.

There are two ways to settle a futures contract ? physical delivery and cash settlement. Delivery is the carrying out of the contract and cash settlement is the paying/receiving the loss/gain related to the contract when it expires.

Basic Options Jargon

Options are contracts in which a buyer and seller set a price and trade an asset that will be delivered in the future. An option has an expiration date and on that date, the seller has to deliver the asset if the investor exercises the option of physical delivery as a settlement. However, the investor is not obligated to buy the asset at the end of the time period. This is where futures and options differ. Futures is a contract which is similar to options but both parties are obligated to carry out the settlement at the expiration date.

This future price is called strike price and it is set according to the current or spot price and the trend of the asset.

The ?Call? and ?Put?

A ?call? is the option that conveys to the owner the right to buy at the strike price and a ?put? is the option that conveys to the owner to sell at a strike price. The owner of the option may sell the option in a secondary market, privately as an over the counter deal or in an options exchange.

It is similar to the equity market where the prediction of the rise and fall of the price of an option decides the trading of that option. A long call is a strategy when a trader expects the price of the option to rise; buys the call option at a strike price that is lower than his prediction. Similarly, a long put is the strategy when the price is expected to drop and he buys a put option.

Trading Options

Options are traded mainly in exchanges and these are done online like most other stock trading. It can be traded in any of the popular exchanges like National Stock Exchange, Bombay Stock Exchange, Multi Commodity Exchange, etc. The privately traded stock is unregulated and a customized deal can be brokered between the two private parties to suit the needs of both these parties. Online options trading requires a trading account with an options brokerage. Options are traded on assets that are commodities and not equities due to the deliverance of said asset at the time of expiration.

Trading using trend lines

A trend line visually highlights market trend and serves as an online trading strategy. Trend lines are lines connecting two or more lows or two or more highs, with the lines projected out into the future. It is the most basic tool in the technical stock/forex/futures trader?s toolbox to apply on currency pairs. Trend lines are relatively easier to understand than other advanced trading techniques and can be used in combination with other tools. Traders look at these projected lines and trade on prices reacting around them.

Pullback Alerts

Trend lines have the potential to alert a trader during a pullback (move against trend direction) is over and the trend is resuming, or when a trend is accelerating or reversing (for more on trends).One such technique for trading is when a trend is up and a pullback stays above the prior swing low and moves into the area of the rising trend line, a trader should enter long or buy when the price moves back to the trending direction. This technique can be applied vice versa for when a trend is down.However, price is the ultimate indicator and price action must always be considered when using trend lines.

Price Charts

Price charts tend to produce a lot of price waves and random movements that make it tough to highlight new trends as and when they are being formulated. Hence, trend lines simplify this process of online trading by highlighting trends and quickly showing the overall direction of the price.This is favourable when looking at multiple time frames or when there are price action signals that tend to conflict each other. It allows traders to see trends and pullbacks of different sizes and aids in overall analysis. It also makes reading charts easier.

What are the different types of Options?

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date? ? as per Investopedia. As the value is derived from some other thing, an option is a derivative. It is a security like stocks with a binding contract. When the expiry date is over, the option no longer has any worth. An investor just loses the money that they paid for the option. However, an investor is not bound by law to sell or even buy the asset that is underlying, for which they have taken the option.

Here are the two types of options:

1. A call option provides the holder with the legal right to buy an asset within a certain period of time and at a certain cost.

2. A put option provides the legal right to a holder to sell an asset at a specific period in time at a specific price.

Those who purchase the options are known as the holders, and those who sell them are known as writers.

Options trading that is supported on online trading can be distinguished under:

Long-term Options ? these are options for which holding time is one or many years. Exotic Options ? Non-standard options, other than call and put (also known as the vanilla option), are termed as Exotic options.

Binary options

“A type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The holder cannot select to buy or sell the underlying asset, the option is automatically exercised. This option is traded on such platforms on the internet that are not governed by regulations. Though the binary option seems lucrative for investors, they are risky of being fraudulent as they are traded on non-regulated sites.”

Different types of Traders

Stock traders and stock investors are two separate entities. They perform different jobs using different techniques.Stock investors are entities or individuals who use their own money to trade in the stock market in anticipation of profitable returns.Whereas, stock traders are entities or individuals who participate in the trading of equity or security either for themselves or on behalf of other people.

Stock traders are generally professionals who engage in buying and selling stocks to profit from short-term price volatility with transactions that range from a few hours to few weeks. They are concerned with the following:

1. Price Patterns ? When a trader analyses the past price movement of a stock to predict future price, it is called as technical analysis.

2. Supply and demand ? A trader keeps a keen watch on all intra-day transactions to see where the stock price is headed.

3. Market Emotion ? Traders also play on the emotions of the investors by using techniques like fading.

4. Trader Support ? A specific type of traders called market makers are hired to deliver liquidity through quick trading.

There are some of typical styles of trading in equities:

Scalping ? A trader who makes many (maybe hundreds) trades in a day, and who intends to scalp a partial amount of the profit from each trade by using the bid-ask spread.

Technical Trading ? These traders are trained to observe graphs and charts intently to find the trend of the market and invest accordingly.

Fundamental Trading ? This trading is based on fundamental analysis that takes into account corporate events like anticipated or actual earnings report, acquisitions or stock splits.

Swing Trading ? The fundamental traders who stick with their positions for more than 24 hours are called swing traders. For a trader to get a reasonable profit, he needs to hold on to the stock as any change in the corporate fundamentals usually require some days to weeks.

Intra-day trading ? Any share that is bought on a day needs to be sold or squared off by 3pm on that day.

Momentum Trading ? The traders who find a stock that is continuously and significantly moving upward with a high volume. These traders being to trade on that to gain a high profit.

Moving average trading strategy

The moving average is a simple technical analysis tool that creates a continually updated average price to smoothen out price data. The trader can choose the time period for which the average is taken. Moving average trading strategies are well-known and can be customised to any time frame, suiting short-term traders as well as long term investors of share market.

A moving average (MA) is used to lower the ?noise? on a price chart. To get an idea about the price movement, you need to look at the direction of the moving average. When the MA is angled up and generally the price is moving up or it is angled down and generally the price is moving down, the price is probably in a range.

Moving averages are of various types ?

This can also act as a resistance or support. In a stock market uptrend the moving average acts like a support so that the price bounces off it to a higher level. Similarly in a downtrend it acts as a resistance so that the price hits it and drops down. Simple moving average (SMA) is calculated by taking the simple average of the last five days. Exponential moving average (EMA) is a bit complex. However, it gives weight to the recent closing prices.

Moving average length

Average lengths ranging from 10 to 200 are applied to the timeframe of any chart depending on the online trading strategy. The timeframe that is chosen plays a vital role. An MA with short timeframe will react quicker than a moving average with a long timeframe.

Crossovers are one of the main strategies of moving average.

Price crossover is when the price crosses below or above an MA to indicate a probable trend change. Intraday trading strategies also include MA.

A golden cross is a buy signal due to the trend shifting up. We find it from a chart of two moving averages, when the shorter one crosses over the longer term.

A death/dead cross is found from a similar chart when the shorter MA crosses below the longer term one, signalling a down in trend.

We need to remember that moving average is calculated on historical data and the results might be random at times.

Algorithmic trading: Myth or reality

Algorithmic trading: Myth or reality

Algorithmic trading is a very popular form of trading which is done using advanced mathematical models. There are strict rules that go into the algorithm to judge the best time to take a trade in the stock market. The algo trading method is used by big institutions that purchase and sell large blocks of shares on a daily basis.   This automated trading strategy comes with its own pros and cons. Being profitable consistently using this stock market strategy is something most traders debate on.

The pros of algorithmic trading
 

  • Algorithmic trading is a very popular strategy because the decision to buy or sell a share is purely on the basis of the complex programs and there is no human intervention when taking the trades. This keeps emotions aside.
  • Machines are capable of thinking and working faster than humans. It is able to execute and check for various parameters on different stocks at a time.
  • This makes it very efficient as no trades get missed. Online share trading with the help of machines lets traders rest while the robot takes care of executing the orders.


The cons of algorithmic trading
 

  • The algorithm is purely dependent on what you feed into the machine. It does not have its own intelligence. Thus with no capacity to naturally adapt to changes in the market, algo trading loses out to human trading.
  • The trading strategy is based purely on back tested research and hence any development in the market scenario will not cater into its programs until the algorithm is altered to adjust for those changes. Generating an algorithm is not an easy task and needs hours of work.
  • You would also need to know the computer programming language or hire someone to code the program for you. You will then have to keep a tab and make alterations from time to time for any changes.
  • This makes it a very costly and a time consuming affair. The program that is coded in the machine is based on some back tested data with the assumption that historical patterns will repeat itself in the future. This may not be true as this theory is only an assumption and not a fact.
  • Trading with algorithms is a personal choice and depends a lot on whether the trader is comfortable trading through machines.
All About The Share Market

A share market is a place where shares are issued and traded. The National stock exchange and the Bombay stock exchange are the two primary stock exchanges in India. Buying and selling shares is possible only if the shares are listed in one of the exchanges.  

Two broad categories of the share market
The share market is broadly of two categories – primary market and secondary market ·

Primary market
– Before you start share trading, the share needs to be registered in one of the exchanges. The primary market is where the company gets registered and issues shares in order to raise capital. When the company starts selling shares to traders and investors for the first time then it is called an Initial Public Offering (IPO). The company now goes public and its shares can be traded normally through stock brokers. ·

Secondary market
– Once the shares get listed, they are traded in the secondary market. When trading in the secondary market, one trader buys from another trader at the market price of the share. You will need to open an account with a brokerage firm in order to start trading in the secondary market. These brokers give you share trading calls as per their studies and frame a trading strategy to suit you in order for you to pick up the best performing shares and add them to your portfolio.

Buying shares
In order to buy shares and actively participate in the stock market, you need to open an account with a brokerage firm. You will need to open a trading as well as a demat account. The trading account gets linked to your bank account so that it is easy for you to transfer and withdraw your money. You can either buy/sell shares by placing a call to the stock broker or use the online trading platform to make your own trades.

The role of SEBI
The securities and exchange board of India (SEBI) is a regulatory body which makes sure that all transactions and trades in the share market is transparent and safe. This boosts confidence among investors. The SEBI has been in force since 1988 and has been working to regulate and also develop the stock market since then.

Best Indicators For Intraday Trading

Intraday trading is a very popular trading method where traders buy and sell shares in a day’s time without carrying the position overnight. Thus any position taken on a trading day is squared off on the same day. In the share market, one needs to be able to read the charts and indicators in order to gauge the best entry and exit price for their stocks.   Chartists or technical analysts give trading tips based on these indicators. The trading indicators are indicative of the past and the current price and also give you trading signals based on the volume traded on a particular stock. It is also important to note that a technical chart will have a host of indicators for you to use. It is important to choose the best indicators which give you a very high probability trade set up.

The best indicators for intraday trading
Relative strength index (RSI) – RSI is a simple tool that indicates when a particular share is overbought or oversold. It gives you hints that there may be a possible reversal. Those traders who take online trading tips to buy low and sell high can use this indicator on their charts to trade themselves. The RSI oscillates between a value of 0 and 100. When it touches 100 it indicates that the share may be overbought and similarly when it touches 0 it indicates that there is a likely reversal since the share may be oversold.

Average directional index (ADX)
– ADX indicates the strength of the prevailing trend of the market. It does not indicate the trend but instead indicates if the current strength is strong or getting weak, signalling a possible reversal. This indicator lets you trail your stop loss and stay with the current trend in the market or signals you to book your profits if the trend is about to die.

Moving average (MA)
– This is one of the most popular tools and also the most used technical indicator for share trading. The MA indicates the trend of the market .Most traders use two moving averages on their chart at a given time. A crossover of the moving averages indicates the trend of the stock. These technical indicators are lagging indicators and thus, one should not take a trade solely based on them. It is important to use these indicators along with the support and resistance levels on the candlestick charts in order to increase the probability of the trade.

Demat account opening procedure

Before you begin your share trading journey, you will first need to open a demat account. Demat is the short form of dematerialised account .Your stock broker or a bank will help you open this account with them in order to buy and sell shares.

Holding your shares in a demat account saves you from any worry about your shares carrying the risk of being stolen or being fake.   Opening a demat account   Online share trading with a demat account is simple and safe.

Opening a demat account is as easy as opening a bank account. You need to approach a DP who will give you an application form which you need to fill. The approved DP’s list is on the NSDl and the CSDL website. Once your account gets verified, you will receive an account number as well as a DP id number which needs to be quoted in all your future stock investing transactions.

You can see all the shares that you hold in your DP account. You can also check your transaction history here, i.e. the number of shares bought and sold in the past. Your DP account is just like a bank passbook. Demat account is today the most preferred way of keeping your shares. SEBI allows up to 500 shares to be taken in physical form, but investors opt to keep their shares electronically.

Most banks also let you open a DP account. You can also choose to open a DP account with a broker.In order to open your DP account you will need to carry some documents and your photograph. The documents may include an identity and an address proof.   An agreement will then be signed with the DP which will indicate standards and will mention the rights and the duties of both the investor and the DP.

Your DP account will then be opened and you will be given an account number.

Account opening cost and charges
  Opening a demat account will incur some costs. They are broadly categorised under opening fee, annual maintenance fee, transaction fee and custodian fee. The cost of opening and maintaining a DP account will vary from DP to DP.

A few things to remember
  You should update your bank account details of your demat account if there is a change. Nominate someone so that it is easy to transfer your shares in case of demise.

Equity brokerage calculator

What is an Equity Brokerage Calculator?

Stock brokers who facilitate traders or investors to transact in the purchase and sale of shares of stock offered by public limited companies are called Equity Stock Brokers. On the flip side, equities brokerage is the fee that is charged by such brokers in return for their services rendered which majorly comes as a remuneration in the form of a monthly fee for managing the traders’ accounts.

A Sneak Peek into Equity Trading

Equity Trading is identified as a division of traditional share trading with the inclusion of hedge funds and day trading. It is a type of trading when minimum investments tantamount to high volumes which in turn demand a high brokerage fee to be paid to the equity brokers either in the form of a commission or a monthly fee. This is paid for all the professional services rendered in the direction of effectively managing the accounts of their clientele.

The Work of an Equity Broker

Individuals who demonstrate a greater propensity to invest aggressively in public stocks avail the informed services of an equity broker. Hence it is the prerogative of an equity broker to come up with his stock recommendations for trading online after performing an in-depth market research of the dynamically changing financial market scenario. An equity broker hence works in the best interest of equity holders managing their accounts in addition to suggesting and implementing complex trading strategies that are required by the equity holder. Thus, it goes without saying that the selection of an equity broker thrusts a great deal of importance on the working knowledge of financial markets and his propensity towards risk management.

Equity Brokers Charge High Fees for Day Trading Activities

A host of private equity firms which are not attached to any investment bank earn money through a brokerage calculator for facilitating day trading. These firms which permit investors to invest in their firm’s fund can work along a prescribed investment strategy devised by the firm and more often leave the freedom of choice in the hands of the investor himself to make a profitable move. A word of caution however comes in the form of high brokerage fees attracted by day trading in contrast to trades which involve the purchase and sale of long term investments held by investors.

Alice blue brokerage calculators help you understand how much you stand to save in the indian stock market.Our web calculators are better than share calculators in excel.You can use it find out how much you will save if you subscribe to our zero-brokerage equity plan.

Financial Markets: A brief introduction

The Financial market is a platform where buyers and sellers meet and exchange trades. The financial market in India is not just restricted to the share market but it also lets traders do online trading on currencies, commodities, bonds as well as in the derivatives market.

The financial markets need to be efficient in order to function. All the markets in India, be it the commodity market, bullion market or the equities market is governed and regulated. They ensure transparency when trading stocks and shares as well as manage all the costs and fees involved in trading securities. This is important so that more retail traders participate in the market with a sense of confidence. The Indian financial market is not only one of the oldest in the world but is also one of the fastest growing and well-organized financial markets among the developing countries. The financial market in India dates back to 200 years when there was the rule of the East India Company.

The BULL and the BEAR phase
The financial markets experience a BULL as well as a BEAR phase. There are periods when the trading is heavy and there is a rise in demand for the securities. During these times the asset price rises as there is a lot of optimism in the market. However, there are lull periods too in the securities market when the prices fall as the demand decreases. This may be due to news or due to some economic factors.

Types of Financial Markets
The financial markets are broadly categorized into two types. They are the Money Market and the Capital Market. ·

Money market – The Money market is the term used to describe the market that trades on debt securities. These securities pay off in a short time interval, mostly less than a year. They are non equity instruments and includes certificates of deposit, commercial papers etc. ·

Capital markets – The Capital market is used for the market which lets you hold on to debt as well as equity shares for a very long time. The capital fund is issued as well as traded in the Capital market. They include the private sources of debt as well as the stock exchange market.

Investing in the stock market: What should you know?

Trading the stock market is not only exciting but also very lucrative. At the same time it is also very risky if not done the correct way. Most new investors and traders end up losing all their capital when they start trading the share market. This is because they do not understand that share trading is not a gamble but a profession where one needs to know the basics of proper risk management. The stock market can be fun and rewarding if you know the rules of investing in the equity market.

Invest wisely
 

Share market is volatile. One single trade can wash off your whole capital. It is thus important that you invest only what you can afford to lose. Even though the returns from the equity market are high, it is not guaranteed. It is thus important that you do not disturb your daily needs and put only the extra money in the market.

Study the market
 

The trading tips that you receive from your broker is broadly based on either of the two studies – technical and fundamental analysis. While technical analysts study charts and candlestick patterns, fundamental analysts study company reports and earnings to decide which stock to buy. It is important that you familiarise yourself with these methods so that you are able to analyse the shares yourself and take a more informed call. This will help you build up your investment portfolio wisely.

Risk management
 

You cannot control the market movement, but you can definitely control how much to lose. Proper risk management is the key to profitable investing. Always trade with a stop loss and strictly book your losses in case the market does not move in your favour. This will let you cut your losses so that you can re-invest the money into another trade. Most novice traders end up losing all their capital because of improper money management.

Diversify your portfolio
 

It is important that you build up your portfolio in such a way that you do not put all your eggs into one basket. You should diversify your portfolio and minimise risk that is associated with investing in shares. You could look to invest in different sectors and different companies so that you have a healthy portfolio.

Spot trading

Spot trading

Spot trading in the Indian stock market is when trades are taken and settled immediately. These trades need to be booked on the spot and not at some later date in the future. A number of trading strategies help you in carrying out spot trades. You can also ask your broker to provide you with trading tips in order to be able to take profitable spot trading trades. Apart from stock trading you can also do spot trading in currency and commodities.

This type of online trading is also called cash trades.

When trading commodities you are actually trading the physical commodity in the spot market at the current price in the market. The delivery price of the commodity that is quoted currently in the spot exchange platform is the same as when you pay by cash and get the commodity delivered.

The Spot Exchange

The Spot exchange gives the traders a better price and also lowers the purchase cost for the buyers. Since a large number of participants are involved, this makes it a better bargain for both the parties that are involved in the transaction. This also makes the asset very liquid. Since there is no middle man involved it thus saves on any price rise due to the same. This makes the system efficient and transparent and thus offers the best price. It is a well organised system without any manipulation.   In order be able to do spot trading you will need to open an account with a reputed brokerage firm. The firm guides you in the account opening process and lets you take trades on the spot market.

Benefits of spot trading

  • Spot trading has a lot of benefits for both the parties – the buyer as well as the seller.
  • Large no of buyers which starts a price war and thus offers the best price to both the parties. This makes the negotiation very competitive.
  • Accurate system that is not only transparent but is also regularized. Hence one does not need to worry about any illegal transactions.
  • The buyers can be assured of standard quality. The items are also stored and handled better.
  • This also opens up arbitrage opportunities.
  • The advancement in technology makes transactions faster.
Stock market strategy

Making money in the stock market does look appealing, but unfortunately the majority of traders come out of the market, broke. This is because they lack proper stock market strategy in order to profit from the trades. There are a number of trading strategies available in books and videos. However, it takes a lot of trial and error to come to a share market strategy that suits an individual’s financial needs.

Buy
low sell high

This is the first and foremost thing that your stock brokerage firm will tell you when you start trading the equity market. This may not be as simple as it sounds. The trading tips that are provided to you is given based on a lot of factors which shows a high probability of the price rising from a buy price. It is important to strategise your trading skills so that you get to spot the right price from where the stock has a high possibility of moving to the upside.

Do not buy after a rally

If a particular stock has moved up a lot, then you need to be cautious that there may be a possible reversal. It is thus important that you avoid buying stocks that are at or near their all time high.

Support and Resistance

When trading through technical charts, you should be able to spot the right Support and Resistance levels. Support is basically the area where there are maximum buyers waiting to buy a stock and thus your buy order should also be placed at that level. Resistance, on the other hand, is the level where the sellers are in majority.

Trend

Do not trade against the trend. First find out what the trend of the particular share is and then buy or sell according to the trend. It is important to know the trend of the stock because it helps you to hold on to your trade and not sell during a correction. This will ensure higher gains.

Multiple time frame

A single time frame chart does not give you the full picture of the stock. You need to take a buy or a sell decision based on multiple time frames and then judge the high probability support and resistance levels based on this analysis. These simple stock market strategies will increase the chances of success of your trades.

Things To Know About High Frequency Trading

High frequency trading, popularly known as HFT, is where powerful computers coded with complex programs execute large share trading orders at unbeatable speed. The algorithms are framed keeping in mind various markets and it executes orders as per the condition of the market. The speed of this method of trading makes it easy to execute numerous orders at a given point in time. Big institutions and stock brokerage firms use this methodology to participate in the market. The zero brokerage account or the lowest brokerage account increases the profit potential of traders.

High frequency trading thus allows traders to use an algorithm to determine a mismatch in price in a given asset which indicates a possible trading opportunity. These trades are made in a fraction of a second as soon as the algorithm shows a buy or a sell sign.

Pros of High frequency trading
·

High frequency trading increases the liquidity in the market. ·
With High frequency trading you can take advantage of the market move and buy when an asset goes far down or on the other hand sell it if it looks to be overbought. ·         High frequency trading creates an extra arbitrage in the market

Cons of
High frequency trading ·

It does not add anything to the capital market which was the basic reason behind the stock market, that is to use spare capital from investors and use it in the company.
Any flaw in the algorithm can lead to huge deviation ·
It acts against fundamental investors
Most of the High frequency trading is done by small investors who take more traders in the hope of profiting from them.

The algorithm just looks for the security to be overbought or oversold and then indicates a sell or a buy accordingly. The trades occur at an unimaginable speed and these kinds of traders do not carry on to their positions overnight.

High frequency trading has its own share of risks. It is important that the algorithm be altered from time to time to cater to any possible changes in the market conditions. It is only after numerous trials and errors that one can come up with an algorithm to generate High frequency trades which are not only efficient but also profitable.

Understanding stock market: The Basics

A stock market is a place where traders and investors get to trade in the exchange securities. It is thus a platform where the buyer of a stock meets a seller. Stock trading is done in the secondary market. Investors and traders are only allowed to do share trading on stocks that are listed in the exchange. The Bombay Stock Exchange and the National Stock Exchange are the main stock exchanges in the country. Retail investors, institutions, fund managers and banks are the major participants in the stock market. In order to start trading through the exchanges, one needs to open a brokerage account with a broker.

The brokers match the buy and the sell orders for a particular security and end the deal by offering the best price to both the buyer and the seller. It is important that you choose to trade only in liquid stocks. This will ensure that you get a better price for your order. A stock with a good amount of liquidly will quickly get a match when the participant wants to buy or sell it.   The Indian stock market is completely regulated by the Securities and Exchange Board of India (SEBI). They monitor all the trading activities and take action against any foul practices. This makes trading in the equity market very transparent and hence attracts more retail investors.

Bull market and Bear market
 

These are the two most common terms that one comes across when trading in the stock market. A Bull market means that the market is trending higher and there is a lot of optimism among investors. It could be because of news or an economic release. A Bear market, on the other hand, shows pessimism and the share prices tend to tank down because of investors offloading their positions in the market.

Short-Selling  

Short selling the market is another common trading practice in the stock market. Short selling is done when the bet on the stock is towards the downside. This means that when the price of the stock goes down, you end up making money. When you short sell, you first borrow the stock from your broker and then sell it in the market. When the price of the stock goes down you buy it back from the market and give it to your broker.

The difference in the price is your profit. When trading in the Indian stock market you are not allowed to carry any short positions overnight. You are required to square it off before the end of the trading day.

What are nifty stocks?

Nifty is a stock index which has been introduced by the National Stock Exchange of India and is a list of the 50 most liquid stocks. When you are trading Nifty, you are basically trading all the 50 stocks listed in it. The 50 most liquid and actively traded stocks in the Indian share market come under the Nifty index. Apart from just doing stock trading on individual stocks, you can also trade the Nifty and participate in all the stocks that are listed in the index. However, you cannot do it as a single stock trading but need to trade in futures when nifty trading.

The nifty share market value is calculated from the share price of all these 50 stocks. The base year to calculate the value of the index is 1995 and the base value has been set to 100. The 50 stocks that form a part of Nifty are selected from 24 sectors and thus represent the complete market.

How are stocks selected in the Nifty50 list?
 

There are a few criteria on which a particular stock gets an entry into the Nifty50 list.   ·

Liquidity
– The most liquid stocks traded on NSE are only selected to be in the Nifty50 list. Liquid stocks are highly traded and they belong to blue-chip companies. The spread of these stocks are very low and it is very easy for your orders to get filled when you trade these stocks.

Floating stocks
– The companies listed under Nifty50 should have at least 10% of their total shares in the market. These are called floating stocks and are those that can be traded on the secondary market. Stocks which are not held by associated entities and promoters are called floating stocks. ·

IPOs
– Companies that come out with an IPO can also be included in the Nifty50 list if it fulfils all the basic criteria’s of market capitalisation and floating stocks.

Replacement of stocks   Stocks can also get replaced from the Nifty50 index.

If there are changes in the corporate actions or if there is a delisting, the stock that has the largest market capitalisation and fulfils the criteria of liquidly and floating shares will be considered.

If there is a better stock in NSE as compared to the one that already forms a part of the list, then the stock may be replaced.   The Nifty index is calculated as a weighted average using the market capitalisation of the stocks that form a part of the index. The method takes care of corporate actions as well as stock splits and considers them in its calculation.

What to look for in Candlestick charts?

In order to gauge the best entry and exit price in the stock market, equity analysts analyse the market movement with the help of candlestick charts. These stock charts let them decide on the best entry and exit price for a particular stock based on a few factors. Those analysts who study candlestick charts are known as technical analysts. They believe that candlestick patterns are formed based on human emotions.

They formulate trading strategies based on this and give stock tips that can be used to make profitable buy and sell decisions. When you trade the candlestick charts it is important to remember that everything about a particular stock at a particular point in time is indicated in its price. Everything else in the chart is lagging and can be used only as a secondary tool. You will need to look for a few things when you study candlestick charts.

Where are the buyers and where are the sellers?

The candlestick chart lets us read where the buyers and the sellers are located and who is in power. If the buyer is in power then the market will be trending up. In case the sellers are in majority, the market will be in a downtrend. Candlestick charts lets you figure out the trend of the market and look for opportunities to trade with the trend.

Chart patterns

Most of the times the candles make patterns when there is a likely trend reversal. A few commonly looked at chart patterns are head and shoulders, double top and double bottom. The head and shoulder pattern will be formed in an up trending or a down trending market and can be used to take trades in the opposite direction to the current trend. The double top formation occurs in a bull market and is a reversal signal. Similarly the double bottom pattern is also a trend reversal signal and appears in a down trending market.

Candle shapes

Analysts also see the candles to decide about the trend and judge if the market is in a bull phase or a bear phase. Candles also indicate that there may be a possible trend reversal. Doji, shooting star and hammers are few of the commonly seen patterns.

Nifty Share market: An introduction

Bombay stock exchange (BSE) introduced Sensex as a stock market index. Similarly, National stock exchange (NSE) introduced Nifty as a major stock index in India. BSE has been in existence since 1875. In 1992, NSE was founded and the operations and trading started in 1994. Both the exchanges follow the same mechanism and hours for trading.

Nifty
, also known as NIFTY 50 is the share market index of National Stock Exchange (NSE), the leading stock exchange of India. It is coined from two words – National and fifty. India Index Services and Products (IISL) owns and manages Nifty. IISL is a wholly owned subsidiary of the NSE Strategic Investment Corporation Limited.   This index comprises of 50 traded stocks from different sectors of the Indian share market, on the basis of their capitalisation. These cover 22 sectors of Indian economy and provide a wide exposure to the Indian financial market that investment managers can explore. Nifty index is wider that Sensex, where the number stocks covered is only 30 actively traded stocks in BSE.

Key features of Nifty

Some of the features that distinguish Nifty from Sensex are: ·
1995 is taken as the base year ·
1000 is taken as the base value ·
It is calculated on 50 actively traded stocks of NSE ·
These 50 Nifty stocks are selected from a cross section of 22 sectors of Indian industries
The list of 50 Nifty stocks is updated regularly based on the economic condition. It is calculated based on a free float market capitalisation weighted index.

The rise and fall of the NIFTY depend on the price movement of the stocks that it contains and acts as a barometer of the capital market of India.

For an investor looking to invest in shares, Nifty 50 index is something that can be monitored to give an idea about when to buy shares and when to sell them. As Nifty covers 50 well traded shares and covering 22 different sectors of the economy, the Nifty index gives a reflective picture of how the market is behaving and also heading towards. As an investor in the stock market, Sensex and Nifty needs to be tracked regularly, more so the later.

Requirements to trade in the bullion market

Bombay stock exchange (BSE) introduced Sensex as a stock market index. Similarly, National stock exchange (NSE) introduced Nifty as a major stock index in India. BSE has been in existence since 1875. In 1992, NSE was founded and the operations and trading started in 1994. Both the exchanges follow the same mechanism and hours for trading.

Nifty
, also known as NIFTY 50 is the share market index of National Stock Exchange (NSE), the leading stock exchange of India. It is coined from two words – National and fifty. India Index Services and Products (IISL) owns and manages Nifty. IISL is a wholly owned subsidiary of the NSE Strategic Investment Corporation Limited.   This index comprises of 50 traded stocks from different sectors of the Indian share market, on the basis of their capitalisation. These cover 22 sectors of Indian economy and provide a wide exposure to the Indian financial market that investment managers can explore. Nifty index is wider that Sensex, where the number stocks covered is only 30 actively traded stocks in BSE.

Key features of Nifty

Some of the features that distinguish Nifty from Sensex are: ·
1995 is taken as the base year ·
1000 is taken as the base value ·
It is calculated on 50 actively traded stocks of NSE ·
These 50 Nifty stocks are selected from a cross section of 22 sectors of Indian industries
The list of 50 Nifty stocks is updated regularly based on the economic condition. It is calculated based on a free float market capitalisation weighted index.

The rise and fall of the NIFTY depend on the price movement of the stocks that it contains and acts as a barometer of the capital market of India.

For an investor looking to invest in shares, Nifty 50 index is something that can be monitored to give an idea about when to buy shares and when to sell them. As Nifty covers 50 well traded shares and covering 22 different sectors of the economy, the Nifty index gives a reflective picture of how the market is behaving and also heading towards. As an investor in the stock market, Sensex and Nifty needs to be tracked regularly, more so the later.

Requirements to trade in the indian mcx

Multi Commodity Exchange of India Ltd also known as Indian MCX is a state-of-the-art electronic commodity futures exchange. Established in Mumbai in the year 2003, it has become the world’s sixth largest commodity trading exchange.   All raw products or commodities are exchanged in the commodity market. The raw commodities are sold and bought in standardised contracts.   Just like stock trading, commodity trading is a form of investment. Buyers and sellers trade in commodities on exchanges either to own the products or make a profit using the variable prices in the market.

To start with commodities trading:
  ·

Open a trading account
You can open a trading account with any broker. The basic requirements to open a trading account are: ·         Bank account ·         PAN card ·         Address proof Brokers will charge around Rs.250 to Rs.500 to open the trading account.

Choose a broker
Plenty of stock brokers registered with MCX are available. You need to choose them carefully based on their reputation and after checking the various charges levied by them. The charges may include brokerage charge and transaction charge. Brokerage charges range from 0.10 to 0.25% of the contract value. Rs 6 and Rs 10 per lakh/per contract are the typical transaction charges applicable.

Minimum investment amount
This depends on the type of commodity that you will be investing in. However, a minimum of Rs.10,000/- is a good amount to start with.

Transferring money to trade
Various modes of transfer are available like net banking, cheques and demand drafts.

Basic needs for trading
An internet connection and the trading application installed on your machine is all you need to start trading in the online commodity. Brokers will give you daily tips and suggestions for trading. However, it is always advisable to do your own research and get tips from authentic sources before deciding on a particular trade. Relevant articles and spot prices on commodities are carried by financial newspapers. Many websites, some subscription based, offer tips for the commodity market.

Trading time
MCX operating hours are 10am to 11:30pm. Trading can be done anytime in this window.   Forward Markets Commission (FMC) regulates the working of the exchange. However, registration of brokers with FMC is not mandatory. FMC’s main duty is to deal with the administration of the exchange and inspect only when foul play is suspected.

Stocks vs Shares: What are the differences?

Stocks and shares are often interchangeably used. However, these terms have minor differences. In a general sense, a stock refers to the capital raised by the company whereas shares refer to a single unit of stock. When people say they own stock, they mean they are talking about their ownership of companies. A stock represents a claim on the company’s assets and earnings and a shareholder is bestowed with voting rights linked to stocks.

Stocks

As a critical method of wealth creation with widespread scope, stock options are becoming pivotal in today’s business scenario. One of the key aspects of stock is its limited liability component that doesn’t compel you to pay a company’s debts in case of bankruptcy. The only adverse impact you could experience is to lose what you have invested. Stocks can be categorised into two main groups: common stock and preferred stock. Common stocks are securities that represent ownership in a company that are often fixed. Common stockholders are towards the bottom of the ownership pillar. In the case of unforeseen events, or liquidation, common stockholders can access assets only after preferred shareholders have been compensated. It is important to note that over time, common stock, by means of capital growth, yields higher returns than any other investment. Since the risk associated with common stock is greater, the returns are higher.

On the other hand, preferred stocks are usually greater compared to common stock. With preferred stock, you can expect the dividends regularly, but not in the case of common stocks. However, unlike common stock, you do not have voting rights. At whatever price these shares trade, the price is determined on the company’s credit-worthiness and whether the shares are cumulative or not.

Shares

Shares are issued by an organization to raise capital for product development, company projects. Shares can be of different kinds. In the case of Ordinary shares, after payments are issued to preference shareholders, they participate in the remaining profit, and they have no special rights in altering profit. Deferred shares are meant for promoters of an organisation. The dividend on a deferred share is paid after profit-related payment is made to other shares. Preferred shares, as the name suggest, are preferred to others, and such shareholders have some preferential rights on other shareholders.

What are nifty calls?

While trading in the stock market you might want to buy or sell shares at an explicit price sometime in the future. Two options are available in equity trading that are in the same line – call options and put options.   “An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date” – according to Investopedia.

In a call option, the buyer gets the right to buy and in the put option the seller gets the right to sell.   Let us examine the main features of an option in slight detail:   ·         The execution of an option depends totally on buyer or seller’s wishes. No one can force the owner of the option to exercise the option. If the option is not exercised before the expiry date, the value of the option converts to zero.

Unlike in a stock where you get the ownership of a part of a company, option is not an instrument that can be related to an asset. It is just a contract where you get the right to sell or buy instruments that are being traded in the stock market. These instruments are the underlying assets of the option and the value of option is derived from these.
Whenever you buy an option, you are entitled to a strike price. You get the right to sell or buy the instrument (underlying asset) at the strike price.

Options always have an expiry date. This is unlike shares where you can hold onto the shares till the company exists. After the expiry date, the option value becomes 0 and trading ceases for them.

Nifty calls are available on Nifty. These option contracts are monitored and traded on online share trading provided they meet some regulatory criteria. The options contract is available on all shares that are generally traded in the market. The shares themselves act as the underlying asset for the option contract.   Timing is of utmost importance while buying a call option. You can buy it online from your share trading account and use the demat account.

What are nse stocks?

National Stock Exchange of India Limited (NSE), established in 1992, is the largest financial market in India. Since 1992, NSE has strived to offer the latest sophisticated technology to its customers along with the large volumes of electronic trading. This made them the leader in market technology. When transaction volume is considered, NSE ranks 3rd in the world. The main areas where NSE offers stock trading transactions are – derivative, equity and wholesale debt.   In the Indian share market, the stocks that are listed in the NSE are known as NSE stocks. All trading operations like selling and buying of shares is done through NSE.

Mainly two indices are followed in the Indian stock market. One is Sensex, maintained by Bombay Stock Exchange (BSE) and the other is Nifty, maintained by NSE. Nifty gives a wider view of the financial market as it lists 50 highly traded stocks selected from a cross section of 22 industry sectors. This acts as a barometer of the capital market of India.   Any buyer or seller can monitor the stock price and transact using the state of the art client server based application called National Exchange for Automated Trading (NEAT). Users can also get suggestions about the stock price movement on this system.   As stated earlier, NSE lists and trades in three different types of stock options. Please find the details below:

Equity ·

  • Equities
  • Indices
  • Mutual Funds
  • Exchange Traded Funds
  • Initial Public Offerings
  • Security Lending and Borrowing Scheme


Derivatives
·

  • Interest Rate Futures
  • Equity Derivatives
  • Currency Derivatives


Debt

  • Corporate Bonds

NSE offers trading, clearing and settlement services in all the above categories of stocks. Any person interested in any of the above can easily get an online broker with NSE and start transacting in stocks.   NSE has brought in transparency in the market. It gives an opportunity for qualified and eligible people to trade in their electronic system, thereby ensuring that transparency was maintained. This has helped many interested people to get involved in share trading from the comfort of their homes.

Different types of portfolios

“Risk” and “Diversification” are the two most commonly used terms in the share market. Based on these terms, every investor gets an opportunity to gauge his returns in trading. This is done by choosing the right portfolio suited to the intention of the investor. Based on the risk factor, there are 5 different types of share market portfolios.

1)    Growth Oriented Portfolio

Such portfolios combine great risk for the investor and with a high return value. The shares to buy depend on the investors’ ability to understand the risk and the investment he makes. Though its sounds risky, there is always a strategy to get the value on the principal invested. Examples are construction, real estate, bonds, commodities, etc.

2)    Income-Oriented Portfolio

When investing can yield a steady income/ dividend, such portfolios are termed as Income-oriented Portfolios. Trading accounts involved in such a system expose the shares intended for sale to low risk transactions without losing the principal investment amount, and can be a great way of getting an additional financial boost. While such portfolios have a very slow growth prospect, they happen to be the safest among the lot. Examples are the food industry, basic necessity market, etc

3)    Conservative Portfolios

Portfolios that have a mixture of a certain amount of risk with a decent market return value are known as conservative portfolios. Combining the growth prospects of growth-oriented portfolios and the low risk factor of income-oriented portfolios, conservative portfolios provide returns over a stipulated period of time with decent returns. A typical example is a mutual fund. Apart from these, there are two more types of portfolios known as Speculative portfolios and Tailored /Hybrid Portfolios.

The former has more risk than any other type of portfolio mentioned here and therefore is associated with IPOs/ shares related to industries of research and development, technology, health, take over companies, etc. The latter is a custom-made portfolio which includes all the aspects that a bond or commodity can offer including the optimised risks and reward ratio that an investor can undertake. This sums up the types of portfolios that an investor can choose from. Having analysed the above types, be it online trading or active day trading, it recommended to diversify and invest in a wide variety of stock options helps to minimise or spread the risk factor and gives you and even returns in the long run irrespective of market conditions.

How can i invest in share market

These days, a single income is not sufficient to fulfill the wishes and demands of ambitious individuals. Equity investment is considered a very lucrative form of secondary income and according to share market experts; equities are the best asset class for investing to beat inflation. However, there is a huge element of risk involved due to the fluctuations in the market. There are certain textbook rules on how to invest in the share market, and here are some of the basic steps that a beginner can follow.

Initial set-up

First and foremost, you need to setup a demat and a trading account. The purpose of the demat account is to trade shares in the electronic form, and the trading account is used by investors to trade shares. Along with this, you need to understand the basic fundamentals of online and offline trading and need to get in touch with a broker for the transactions. The brokers are the intermediaries to buy and sell shares. Besides, you would need to learn about the various types of investments too!

Monitor the market

Investors need to thoroughly monitor the share market in terms of the fluctuations, and try and study the trends so as to invest in the stocks which are expected to rise. The investors must also keep a check on the important global happenings that can affect the local markets. If at the initial stage, investors are not able to monitor their own portfolio, they can take the help of financial planners on how to invest.

Invest Surplus funds

The financial markets are very volatile and it is advisable to invest from the surplus funds which an individual can afford to lose and not invest anything beyond that. It takes some time to understand the markets, and speculate the stock trends, and hence initially investors should try and play it safe.

Avoid the herd mentality

When it comes to investment, individuals usually tend to follow their acquaintances without doing a proper check on the market. Experts say that this is the basic mistake done by investors at a nascent stage and should be avoided to make good financial decisions.

Have realistic expectations

At an early stage, investors should not expect magnanimous returns and should have a realistic approach. Investment is a long-term process and it certainly takes time to understand the nuances of the financial world.

Share market: How to create a portfolio?

Creating a portfolio for investment is an essential activity and helps an investor to strategically allocate his investment into a growing financial tree in the years to come. Considering there are 3 main investment portfolios and 2 high-risk portfolio model, the creation of a unique portfolio can be tailored to one’s needs. Following the below-mentioned criteria can essentially ensure a good start for any beginner and also for a seasoned player alike. Buy shares through online trading with your portfolio and bag the best deal out there.

1)    Allocation and Diversification The emphasis on diversification in the share market is ceaseless. People are relentlessly advised, coached and trained by experts to invest in all the major sectors since all the sectors are open for changes due to fluctuations in the economy, government policy, etc from time to time. Allocating the investment into a wide spectrum helps achieve a balanced and minimum risk-return within your stipulated period.

2)    Determine the Appropriate Asset Selection of a particular product whose market value remains steady without swaying too much over the period of your investment helps you maintain a steady or desired return.

3)    Review your portfolio Watch over your portfolio from time to time so that you can be in touch with developments in the market value and make decisions to sell shares in a timely fashion.

4)    Tailor your portfolio The risk to reward ratio with a proper strategy for money control gives you maximum coverage from any risks in your share portfolio and also gives a good return at the end. Putting a stop-loss on your investment amount avoids erratic losses and you stay safe within your tolerable risk factor.

5)    Reassess weightings periodically Keeping in mind the fluctuations of a growing economy as diverse as India, every investor must reassess the weightings of his investment and ensure the performance of the commodity or bond in question. This brings in enormous possibilities to fine-tune your investments and helps avoid taking risks that may not yield in time.

6)    Avoid speculation while reallocation Bring in the best expertise and advice while reallocating of stock or product in question in the case of poor performance, reassess and balance your investment portfolio to avoid crash landings. Investors who are involved in online trading can benefit greatly by following the above tips and can improve the outcome of an investment considerably.  

Stock selling strategies

When an investor makes an investment, he will have to eventually sell his stocks one day. ‘Holding forever and be done with it’ is not the principle of the share market. The ideal situation that an investor sells his stocks is when it meets his projected reward point. Apart from these the least desirable options for selling a stock(s) depends on the market condition which may increase the risk of the stocks so that the investor is forced to sell them.

Stock Selling Strategies

How to sell stocks entirely depends on the investor but he can take into account all the financial advice he can gather from experts and firms dealing with his portfolio. Here are a few stock selling strategies that will help you help take the correct decisions while selling the stock options you hold.

1)   
Identify the loser and the winner

If a particular stock performs at a lower value than your investment amount in the stock market, then it is a sure sign to withdraw and sell, but if the commodity in question is on a temporary low and is likely to surge upwards in the coming weeks then it can be determined by the critical value of the product. Every product has a value beyond which, if its value slumps, then a credible profit or upward surge cannot make much difference because of the time your money lies in recovery. One must gauge that critical value of the product after which one is supposed to sell the stock and purchase new options. Since every product has a different value, as a thumb rule, a downward slump by 5% – 7% is considered as a time to sell your stock options as a thumb rule. Thorough study helps in this scenario, and the history of such stock options must be studied too.

2)   
Diversification helps

Do not put all the eggs in a single basket; split your investment evenly in all sectors. That will help you remain floating and generate a decent return value on your purchased stock options. Sudden changes which may negatively impact on high-performing options can be analysed and sold for reallocation on better performing assets.

3)   
Winning Options

In stock trading, high performing stock options must be sold, ideally, once they hit the projected up trend maturity. Selling of stocks, after they hit the maturity must depend on daily analysis to identify sudden negative fluctuations if the investor chooses to continue to stay fully invested in the uptrend stock. The main idea is to divert the flow of money by selling stocks that are in the areas of poor or low performances. Adapting to the changing conditions gives a great flexibility to divert funds in uptrend ventures and options and thus help protect your investment amount with a decent return.

Things to look for in a trading platform

What do you understand by a Trading Platform?

Trading platform, in simple terms, is a software or digital platform that allows you to trade online. Depending upon the uses, there are many types of such platforms which allow you to carry out money transactions, provide trade analysis information and much more as per the requirement of the user.

Evolution of Trading

Online trading is the new way of making your presence felt in the share market. Selling and buying stocks using trading software make it easy to operate from anywhere in the world unlike the timeshare.

Essential Requirements of a Trading Platform

The notable requirements that help the product to become one of the favourites among its users, depend on the following factors:

1)    Response: The faster the speed, the quicker the execution of transactions and trading facilities. This feature comes in handy in case of escalated situations where the market is undergoing a sudden change. The effectiveness of the software application combined with the hardware plays a key feature in deciding the choice of trading platforms and its recommendations.

2)    Security: In the virtual world, your personal information is exposed in numerous areas and since the software is online when the share market is live, security is a notable aspect that plays a part in the selection of a trading platform.

3)    Automation: This is another key setting that helps provide convenience to the user. Setting values like stop-loss and other strategic options on your software give you the facility to automatically monitor changes and update you when there is a fluctuation in the event of escalation beyond the set parameters. When dealing with bulk options, trading of shares become easy with such a feature.

4)    Reliability: As is the case with any product that a consumer buys, reliability is one key feature that everyone looks for.

5)    Analytical Tools: For timely decisions, good forecast and predictions, the trading software must be capable of computing results with tools that may help calculate a bulk of data, and thus, forms a crucial part of the software in large scale trading.

6)    Interface: A user-friendly interface that helps the investor or user to perform complex calculations or present data in the most comprehensive manner is a great tool. This makes it possible for the user to move closer to his trading activities without much exertion. Apart from this, the cost of such an interface, periodical updates and tech support from the parent manufacturers has an impact on the product too, and therefore forms the additional parameters in deciding the choice of trading platforms.

What are blue chip stocks?

Etymology

The term ‘blue chip’ comes from poker where the most expensive chips are blue in colour. As the name suggests, expensive and reliable companies have blue chip stocks as a part of their public offerings. The term was coined by Oliver Gingold and was originally used to indicate high-value stock.

Blue Chip Stock

A company which had been in business for a long time, and has survived all the vagaries of the market, has millions or billions in circulation and is a leader among reliable and trustworthy products- such a company is called a blue chip company, and stocks from it are called blue chip stocks. It is one of the most trustworthy market indices or average components that an investor can buy as a safe investment. However, this doesn’t mean that company is not subjected to critical risks. Its classification depends on the changing conditions of the market.

Features of
a ‘Blue-Chip Stock’

  • In stock trading, a blue chip stock will always have the potential to generate high revenues.
  • It promises a consistent performance and revenue, and income from such stocks is assured even in dull periods of economic changes.
  • Companies with blue chip stocks have high credit ratings in bonds and in the unsecured debt markets for share trading.
  • They are more than a household name and are counted among diverse or reliable products.

What a Blue Chip Stock does not represent!  

Though blue-chip companies sell high-quality-value products and services and are known to ensure returns in the worst economic climate with reliable growth and stability, they are all susceptible to the errors in trading including online trading.

Stability in the past does not mean a stable future and it applies to so-called blue chip stocks too. Since consumer and economic trends largely influence the stable operations of a company, they may encounter difficulties due to bad decisions and poor management. When measuring profit, the reputation of a company and its wide international recognition does not amount to anything if they fail to deliver. Hence, a wise investor must be aware of market fluctuations, and must take timely decisions to gain the most from his investment.   The best blue chip companies in India include Wipro, Tata Steel, Tata Motors, Tata Consultancy Services (TCS), State Bank of India (SBI), Oil and Natural Gas Corporation (ONGC), Reliance Communications, Reliance industries, Mahindra & Mahindra, Bharti Airtel, BPCL, HPCL, ICICI Bank and many more.   While Blue Chip Stock investment is a great option for any investor who is looking for a long term investment with a regular dividend output, he must make the right decisions pertaining to the profit or dividends earned from time to time to enjoy a safe and risk-free output.

Nifty futures or Nifty options: Which is better for long term investment?

Which is better for long term investment  

Investments which have a horizon of one year or more, are considered long-term investments. Long-term investments aim to secure an additional income stream for a company or help it achieve an important goal. The process by which traders and individual investors buy and sell securities over an electronic network, typically through a brokerage firm is called online share trading. Let us look at the type of investment trading options and their profitability.

Nifty Futures:

Dependant on the benchmark of NSE, the S&P Nifty index, Nifty futures can be defined as a financial instrument through which future contracts can be made. They are used in a market where trading takes place on the basis of the underlying index CNX  NIFTY and S&P .  The Nifty index is NSE‘s benchmark stock market index for the Indian equity market. The NIFTY 50 Index is the largest financial product in India. It comprises of exchange-traded futures and options, exchange-traded funds, and other index funds.

Nifty Options:

Nifty Options are contracts traded on different exchanges around the world like stocks. A Nifty option is thus a contract that equips the buyer with the right to transact on an underlying asset at a predetermined price on or before a predetermined date without binding him or her to an obligation to do so.

Future V/S Options:

1. Whether you choose to trade in Nifty options or futures, your profits/loss will depend on your view. If you are absolutely certain about a direction, futures will bring more profits.

2. As of now the lot size in Nifty futures is 50, and the lot size in Nifty options is also 50.  If the  lot size changes, it will change for both futures and options – and will always remain same for both.

3. Futures move very fast. In fact, they move from point to point with Nifty. Options movement is slow and it depends on the strike price of the option. Therefore, options are a very valuable tool if you know the risk you are willing to take.

4. Buying or selling futures involves unlimited risk. If the underlying moves in the opposite direction, you can suffer unlimited losses. Buying options is a limited risk. The premium you pay is the risk you have taken in option.

Why is it important to set a risk/reward ratio?

Every venture in the share market entails a certain amount of risk that comes with any return. However with changing market conditions investors who tend to make or lose money are affected by this risk factor. It can take you off your predetermined financial goal and tempt you make erratic bets. To avoid that and take a calculated risk, it is always good to have a risk to reward ratio.

What is a risk to reward ratio?

A ratio used by investors to estimate the expected returns of investment to the amount of risk undertaken known as a Risk Reward ratio. This ratio is calculated mathematically by dividing the amount an investor stands to lose if the price of a share moves in a negative direction by the amount of profit he is expected to make, in a closed trade. It also improves trade probabilities and helps to maintain a healthy share market risk management which forms an important part of profitable trading.   As a general thumb rule, the profit value for every trade must be at least three times bigger than the risk value.

This rule helps ensure an ample amount of margin for fair trade and lucrative returns. Money management is thus made easier, and the investor is prevented from taking risks beyond his capacity. The ratio gives a clear picture of a calculated move and direction even before investing even for online trading.   This approach makes it easy for a realistic reward scenario based on calculated steps and gives you a comfortable margin to win while maintaining a tolerable risk factor.

Another important element that helps to set a good ratio of reward- to- risk factor is implementing a stop-loss limit. This option gives the trader the directive to sell stocks in case of a negative spiral of price. This risk to reward ratio acts as a directional factor for the trade to progress, while the limit order acts as an autoimmune to prevent loss in share trading.   This ratio helps to encourage trading even for people who are not regular players in the share market. Long term investors can profit from this association of this mathematical calculation and invest in mutual funds and other instruments for good return value.

Day traders and intra-day traders are at the top players and deal with risk on the highest level. For them this particular ratio helps to participate in rapidly changing market conditions, looking for quickly developing profit opportunities within tolerable limits. Thus risk reward ratio is quite an essential part of strategic planning for investors.

How to make the best entry in the market

Identified as a speculative market, the stock market is not only a place where one can indulge in buying and selling of stocks and shares, it is also a platform whose success is determined by several factors. All these factors become significant when it concerns making a perfect entry to invest in the stock market. With every investor moving towards making a considerable profit through his investments in the stock market, it is imperative for a newbie or a stock trading beginner to pay heed to the following factors which will contribute towards the favourable timing of stepping into the market for the very first time.

1.   
Decide on the Stock Market

After having decided to invest in stocks, the first important step to come up with a stock market through which the investor chooses to trade. With different stock exchanges trading in stocks of listed companies, there are several others which are patronized exclusively for their services connected with online trading. With a number of different rules governing the working of these stock exchanges, it is hence an important move to associate oneself with a particular stock exchange.

2.   
Zeroing in on a stock broker

Entry into a stock market is also governed by a decision to connect with a broker who will act as a liaison in all your share trades. Information on various brokers listed on the stock exchange thus comes handy in identifying a particular broker attached to the chosen stock exchange. The choice between a conventional broker and a decision to trade online is, of course, a matter of personal discretion.

3.   
Type of Stocks

The next important decision is to arrive at a conclusion regarding the type of stocks that will be traded along with the manner in which share trading will take place in the future. These two factors go a long way in chalking out a strategy based on which the first time investor will go about making his first stock market investment, all in an attempt to gain from his first move. While it is best to avoid knee jerk movements involving an abrupt buying and selling of stocks, it is important to time an entry as part of a well-informed move to sustain one’s presence in the stock market.

4.   
Poised for the long haul

While investments in stocks involve hard earned monies, it is important to play keeping the future in mind. For all those investors who are inclined towards long-term investment, the best time to enter the stock market is when blue chip companies are doing well. Investing in such companies will not only guarantee long-term benefits but will also enable the investor to take pride in his first entry through profits.

How to manage your trades

It is important for every investor to be mindful of the various ways in which he can manage his trades in an attempt to offset stock market losses. An effective management of trades thrusts a great deal of importance on rectifying mistakes made during the course of stock trading to eventually improve trading results. The following pointers will be helpful in throwing some light on the tenets of management of trades for the investors to benefit from.

1.   
A Key to Success

Trades are all those that concern with the buying and selling of stocks through a trading platform. Notwithstanding the fact that knowledge of a trading strategy is of paramount importance, it is also the need of the hour to manage trades once they are live on the share market. With a well-thought after strategy of managing trades in place, it will be of utmost use to an investor to benefit from a price action trade setup helping him recover quickly reversing a faulty move.

2.    Rectification of Errors

The human element of emotions most of the times has a disparaging effect on the effective management of trades. Investors make an entry into the stock market backing their decision to their current profitable position in which they are in. It can also be the case when they move stop losses away from their entry in anticipation of a favourable turn of events concerning price reversals. Not backed by logic or time-based calculations, such emotional faults leave investors to experience the wrath of faulty decisions for a long period of time.

3.   
Concepts of Averaging In and Averaging Out

Basically speaking of adding to positions and working through multiple or partial positions, the intention of adding or trading with the existing stocks should be clearly defined at the time of entry. “Averaging In” is a situation allowing the investor to make the most of his open profit paving the way for the next trade. Adding a stock to the position of the investor in this context comes as a risk-free proposition. “Averaging Out”, also referred to as “scaling out”, is predominantly a strategy looked upon as a bad concept which permits the investor to exit out of a position by simply reducing the position size just when the clarion is sounded for a positive change.

4.   
Extracting the Best From All Trades

Logic and consistency in the management of trades spell success to every investor who has eyes on earning profits from every trade he chooses to enter. Thrusting a great deal of importance on accepting the harsh realities of stock trading, it makes it imperative for every investor to keep his emotions under check while advocating the dominance of subjective thinking.    

How to spot where big institutions enter the market?

Stock research based on fundamental analysis as well as technical analysis tries to find out one basic thing – where do institutions buy in the market? Properly timing the market is the key to making money in the share market. Knowing the stock trends as well as figuring out the turning points in the market will help you take a low risk and high probability trade which also has a huge profit potential. Stock news, as well as the balance sheet analysis, will help you figure out the trend as well as the future prospects of the stock. However, you need to know technical analysis to find out where the institutions are buying the stock.

Institutions buy at low risk

Institutions buy at the low of the turning points. You need to catch that low so that you can maximize the trading profit and minimise the  loss. This low in the market is the support level of the stock.

Institutions look for high-profit margin

Institutions do not chase price. Instead, they buy at the support level so that they have the opportunity to make huge profits It is important to spot the areas where the supply and the demand are the most out of balance. This is the support area where the price of a stock turns to move to the upside. Knowing how and where to place the support levels will help you find out where institutions enter the market. You can spot the buying level of institutions on the chart by looking for areas where there was a big rally in price. Once the price comes back to that area, it is a good opportunity to enter the market. However, you should be careful to never buy stocks once it has already rallied a lot. This is what novices do who try to catch a stock which has already made a huge rally.Learning how to read charts will let you find out the key support and resistance levels on the chart. These levels should be plotted and a trade taken on these levels using proper stop loss management techniques. Stop loss is a must because it prevents you from losing your capital on a single trade. It helps you to get out of a loss-making trade fast to enter into another high probability trade.

How to spot where big institutions exit the market

Fear and greed are the two emotions that make traders take wrong trading decisions. Where fear makes the trader book his profits in the share market fast, greed makes him hold on to the trade even after reaching the target.   When a trader fears and books a trade fast, he misses out the chance to make more money in the trending market. When he gets greedy and holds on to his position for very long, he loses out when the stock trends start to reverse. Fundamental analysis and technical analysis are the basic analysis that stock research analysts do to get the best entry and exit points in the market. Stock news, as well as the end of trend trading, needs to be spotted in order to book profits immediately.

Where do institutions exit the market?

Big institutions like banks and brokerage firms enter the market at low-risk levels and exit at the maximum profit. As retail traders, you need to know the areas where the big institutions exit the market. Institutions exit the market after a huge rally and just before the price is about to reverse. In order to find out where the exit points of institutions are, you need to spot the high probability resistance levels near your price. Resistance levels are levels where the demand and supply are not in balance and the supply takes over demand leading to a major price drop. This is the area where institutions start selling off their shares.

You need to spot these levels on your chart. Knowing how to read technical charts will help you find out the high probability technical levels. The higher the time frame, the higher is the probability of the exit level. All you need to do is to see for a reversal signal and offload your stocks at that price. Resistance levels can also be used to place a short trade in the market. You should however, keep a stop loss above the level in order to protect your capital in case your analysis goes wrong. Keeping aware of the news of the company that you have invested in as well as the technicals of the company will increase the probability of your trades and let you keep fear and greed aside when you look to book profits on your trades.

How to start trading in the stock market?

How to start trading in the stock market?

You have always wanted to invest in the stock market but could not muster up the courage to venture into this unknown and slightly risky field. Now you have mustered up the courage to at least find out about this field. As a stock market beginner, let us find out the stock market basics before you start to stock trading.

Get a Demat Account

In today’s world, the shares are held in an electronic form in demat (dematerialized) accounts. National Securities Depository Ltd and the Central Depository Services Ltd are the only two depositories in India who can hold the depositor’s certificates in electronic form. They, in turn, have over hundred agents called Depository participants.  You need to approach a Depository participant to create an online trading account so that the electronic forms of your share certificates are held just like a bank account.

Get a PAN

Permanent Account Number (PAN)  is a requirement from the Income Tax department. You need to get a PAN in order in trade in shares.

Get a UIN
(if required)

The Unique Identification Number (UIN) is required by SEBI if you want to invest in shares where a single investment is above Rs 1 Lakh.

Find a broker
In order to trade in stocks, you need to get a broker. People like you and me cannot directly go to Securities and Exchange Board of India (SEBI) and start trading. We need to choose a broker who is registered with SEBI. There are many online share trading brokers available in India through which you can trade in the share market. Brokers will help you to buy and sell shares.   Now, you are ready to trade in stocks. There are certain methods for the same:

Market order
: When you are ready to buy or sell shares at the market rate, then it is called market order. This gets executed immediately at the current market price.

Limit
order: Unlike market order, you need to mention the buying or selling price. As soon as the stock price comes to that price, your order will get executed.

Stop-loss share trading
: To reduce losses, stop loss and trigger price are used. You can specify the amount that you are ready to lose. For intra-day trading this is important.

How to trade a basing stock| AliceBlueOnline.com ™

How to trade a basing stock?

In stock trading, basing of a stock or security is said to happen when it shows a little upward movement or downward movement in its price pattern, thus resulting in a flat line or sideways signature. Often in technical analysis, the term basing is used to describe the period wherein a stock or security is consolidating after witnessing rapid growth or a steep decline in the share market. Such stocks or securities usually have the supply and demand in equal amounts. In the case of certain stocks, the base can last for a really long time before the reversal of trend can be seen.

Importance of base

Traders often face the question of what stocks to buy or what stocks to sell. In such a situation, figuring out a pattern such as a basing pattern can be very important. A base is very crucial to the upward trend of a stock price in the stock market. A strong base pattern indicates a solid foundation upon which the stocks can launch big. Such a base pattern occurs when the price of the trading stocks fall after which it consolidates over a period of time which can run into weeks or months.

Take action at the basing stage

Once it is evident that a stock is basing, it is advisable to create a list of stocks which are likely to breakout of the trend and trend upwards and also set a price level for the same. Another key point to remember is to avoid buying the stocks when they are in the base and do so only when they break out.

Stocks that trade sideways thereby exhibiting a base pattern and break out of that pattern are good options to buy after the breakout has taken place as it gives the trader a minimal or lower risk option, more so because the it is likely that such a stock will continue with the trend.

Expert technical analysts suggest that the longer the base of the stock, the better. Also, when the stock prices are basing, those stocks are good for trading. When there is a breakout from the basing pattern, a new bull market begins. Just like in every other case, it is vital to study the market and trade wisely.

How to trade against the trend using technical charts?

There are many advantages while you are trading with the trend, but at times trading against the trend could also turn out to be profitable. To know more about this, we must first understand what the term trend means in the context of stock trading.

What is a trend?

Simply put, a trend is the direction in which a stock or the market is heading / developing. In the technical analysis of stocks, traders often refer to the technical charts to understand the current trend and help them with their trade. A technical chart will show you the trend of a stock price as a series of high and low movements.

Analyzing the trend

Performing a technical analysis of the stock prices with the help of charts will allow the traders to observe the market trend and plays a key role in their decision making. Rarely do the prices move in a straight line in a particular direction and more often than not they fluctuate between high and low values. Traders have to be flexible in trend trading and to trade against the trend, which will allow them to think outside the box.

One way of trading against the trend is to do it against an immediate trend and simultaneously keeping it in line with the broader trend. By doing so, traders will be able to realize the full potential of the market at minimal risk.Based on stock research, traders decide to go against the trend when the prices dip and end up cheaper than what it was earlier. By investing in such stocks, the traders make more profit when the trend reverses and they are able to sell the stocks for much higher value than the initial price for which they were bought. However, trading against the trend doesn’t work always. Traders should observe and the study the market keenly with the help of technical charts to make the all important decision of trading against the trend. Another key point to note is, some traders tend to wait too long for the prices to go higher so that they can act upon the stocks that were bought for a cheaper price. Waiting for too long might end up doing more harm than good.

How to trade agricultural commodity in india

How to trade agricultural commodity in India

Organized agriculture commodity trading in India dates back to 1875 with the establishment of Bombay Cotton Trade Association and after being discontinued in 1960’s due to wars and famines, agriculture commodity trading was re-introduced in 2002. Commodity trading in India is facilitated by three nationwide multi-commodity exchanges namely Multi Commodities Exchange, National Commodities and Derivative Exchange and National Multi Commodity Exchange.

Trading in agro commodities

There is no restriction for trading in agricultural commodities and anyone fulfilling necessary prerequisites can trade on the exchange. Agro commodity trading provides a good opportunity to the retail as well as corporate investors looking for investments beyond the traditional stock and shares and diversifies their portfolios.   In order to be able to trade on the exchange, an investor needs to open a trading account which requires investor details such as a Bank account, Demat Account with NSDL, PAN No., agreements with the brokers and KYC to be furnished. The regulatory authority to control and protect the interests of investors investing in the commodities market in India is the Forward Markets Commission which is equivalent of SEBI which protects the interests of investors in share and securities. The minimum investment amount required to kick start trading is as low as INR 5,000 making agro commodity trading an easy and affordable investment option. The prices and lot size vary depending on the exchange they are being traded on and the lot sizes can be quoted in Kg’s, quintals or tons and the trade settlements can be made either in physical form by taking delivery or by remitting cash.

The Indian MCX

Indian MCX is the biggest exchange in the country in terms of total turnover and trades majorly in bullion and mineral commodities in addition to plantations and other agro based commodities. NCDEX on the other hand predominantly deals in trading agro based commodities. There is a total of 25 agro based products classified under categories of spices, pulses, fibre, cereals etc. Online commodity trading can reap good benefits for investors who can analyze the demand-supply equation well and take informed decisions, as well as, farmers who can see the future prices of the commodities and decide the most beneficial market to sell in.

How to trade breakout trades?

Trading in break out trades

Application of well-designed tried and tested trading strategies plays a very important role in determining the profitability of an investment. Good trading tips backed by mature share trading strategies more often than not result in handsome returns for the investors. Breakout trading is one such strategy that an investor could utilize to exploit the stock trends to maximize returns.

What are breakouts?

According to Investopedia, Break out may be defined as “a price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility.” Break out point is a situation where a stock facing resistance at a certain level of price breaks the resistance and moves higher. Once the resistance level is broken, the stock usually moves upwards before finding another resistance level. There are some key pointers that an investor must keep in mind while trying to make the most of the breakout trades:

1.    Identify the right stocks: A close watch on the trading trends of stocks will help the investor determine resistance levels of the stock. A stock that has built a strong resistance level is likely to perform better once it breaks out.

2.    Patience pays off: Identifying the right stock is just the first step in stock trading. It is no guarantee that a good stock will breakout immediately. It is important to have patience, follow the movement of the stock and on the day it breaks the resistance, wait for the stock price to stabilize and then make your move.

3.    Stop loss and exit: It is no guarantee that a stock will always earn you profits and as important it is to know when to book profits and exit, it is equally important to understand how to determine the level of stop loss and exit. Investors can analyze the previous resistance levels of the stock and use it as a point to cut off trade and restrict losses.

4.    Understand if the breakout has failed: If the stock retests a previous resistance level and breaks back through it, it is an indication that the breakout has not withstood and has failed. It is advisable to book loss at this point instead of risking further price drop. Breakout trading is a good way to earn profits and limit losses. Post breakout, there is a tendency for the stock to experience higher volatility resulting in swift reactions in the market. It is important to follow the above-mentioned tips to execute breakout trades in a profitable manner with limited risk.

How to trade charts without indicators?

Most new traders will have a number of trading indicators plotted on their candlestick charts. From moving averages to Stochastics to Bollinger bands, they try to analyse their trade with the help of these stock indicators.  On the other side, when you meet a professional technical trader, he may have just a few or sometimes absolutely no technical indicators plotted on his stock charts.   Technical indicators are lagging and they can never be used to analyse a trade. They can be used as an additional confirmation of a support or a resistance level only. Also at times, two or more technical indicators on the same chart start giving conflicting information.   In your share trades, it is important that you know how to read the price of the stock and take trades without any technical indicators. Trading tips based only on technical indicators are very low probability trades.

Trend of the stock

Knowing the trend of a stock is very important in order to place a trade. There are many technical indicators that are used to spot the trend of the stock. However, the basic rule of identifying a trend is that if the price of the stock is making a higher high and a higher low then it is in an uptrend. Similarly, if the price of the stock is making a lower high and a lower low, then it is in a downtrend.

Support/resistance

Support and resistance are horizontal levels which give you the high probability buying and selling zones. They are the levels where there was the maximum imbalance in the supply and demand in the past leading to a major price movement. In order to find out the support and résistance levels, check for major rallies or drops and take  a trade when price pullbacks to those levels.

Multiple time frame

There may be a number of support and resistance levels on a particular time frame chart of a stock. But not all of them will work out. You should thus look at a higher time frame chart and slowly come down to a lower time frame chart looking for areas of high probability support and resistance levels.
These above steps are the key principles of taking a trade. They are based only on the price action of the stock and let you take high probability trades without the use of any technical indicators.
How to trade india vix?

Before you know how to trade in India VIX, it is important to know what exactly VIX is. VIX is basically a trademark on the Chicago board options exchange (CBOE).It is a volatility index. With the rise in options trading in India, the national stock exchange introduced trading in India VIX.

India VIX

The India VIX basically tells you the volatility index based on the index option price of the nifty. The VIX is calculated by using the best bid and ask price of the out of the money present and the near month nifty option contract.VIX thus measures the market sentiment of the yearly volatility in the stock market. It indicates the market sentiment for over 30 years. The India VIX is positively correlated to the expected volatility. However, the India VIX is negatively correlated to the nifty50 index price. You can formulate a number of trading strategies using the India VIX prices.

How to trade India VIX

India VIX is similar to the nifty index and thus, you need to engage in futures trading on it. With the introduction of the India VIX futures, you can hedge your position by hedging the volatility risk in the portfolio. In case you hold a few stocks in your portfolio and are afraid that the market may go down, you can buy the India VIX to hedge your position. If the India VIX is at the top of 14-year range then you can short them. You can buy the India VIX futures around the election time if you expect the volatility to increase.

Trading India VIX

India VIX is not a trending series but it oscillates between 13 and 35. Thus, indicators like moving averages do not work on them. Oscillators can be used to trade the India VIX. The Bollinger band is a popular oscillator that is used to trade the India VIX futures.


India VIX vs options

The options price increases when the volatility increases and decreases when the volatility decreases. This is in a hypothetical situation when every other factor of the option remains the same. Other factors like time value, theta as well the stock price come into play when trading options in the real world.
The India VIX is a big boost to a trader who just wants to trade volatility.
How to trade using pivot points

Stock trading using pivot points is a very common practice among traders. They act as a support and resistance level.   Pivot points are horizontal support and resistance lines and the prices at which they are placed are calculated as per the price data of the previous period. There are many brokerage firms that give you trading tipsbased only on  pivot points. It is a very popular trading strategy followed by almost all chartists.

Pivot points are important because they give you levels to enter and exit the market. They are strong levels because they are used by most institutions as well as banks to enter and exit the market.   Most online trading platforms will plot the pivot points automatically on the charts. The most commonly used pivot points are those that are plotted on the daily and the weekly charts. Along with trading indicators, they let you take buy and sell positions in the market.

How to trade using pivot points

Pivot point levels can be used as both a support and a resistance level. Suppose if a level is a strong resistance level, but if the price breaks out from that level, it now because a major support level. The more the number of pivot lines at a price, the higher is its probability to act as a support or a resistance level.   If the stock trades at a price below the main pivot points, then the sentiment of the market on the stock is weak. If the price traders above the main pivot points, then the sentiment of the market is very strong.   Also, if a weekly pivot and a daily pivot coincide, then this is a high probability level and the chances of it working out are very high.

The types of pivot points

The pivot points are calculated around the main pivot point and the daily pivot. The main pivot point is first calculated and then the remaining pivots are calculated based on the calculation of the main pivot point.   The pivot points that are formed above the daily are the resistance pivots. Those that are formed below the daily pivots are the support lines. Mid pivot points are calculated between the pivot points.   The calculation of the pivot points is done by referring to the price of the previous period. The closing price of the previous period is used to calculate the pivot levels.

How to trade when you see two levels very close to each other?

How to Trade the 52 Week High and Low    

The Definition of
52 Week High/Low  

A 52 week high and low corresponds to the highest and lowest price that a stock has witnessed and was traded during the last trading year. Identified as an important tool in the stock market, a close look at these corresponding figures when the stock traded at its maximum and minimum prices comes across as an important determinant to arrive at the current value of the stock. An additional feature comes across in the form of being able to predict the futuristic movement in prices of the stock in question.

The Rationale behind the Magical Number

52 is the magical number of every trader, offering a number of stock trading tips, the price range of 52 weeks demonstrating a 52 week high and a 52 week low is a noteworthy tool for investors to make a well-informed move regarding a particular stock in question. When the 52 week price range is revealed, investors will then make the next move as the price comes close to either the high price or the lowest price. This is a trading strategy which is popularly used by stock traders to buy the stock when the current price exceeds the earlier recorded 52 week high. In reverse, the investor will then try to sell the same stock when the price dips below the earlier 52 week low.   And to speak of the significance of this magical figure, it can be linked to a situation when the price comes out of the influence of the 52 week range; be it high or low that a favourable trend can emerge. This favourable trend will, in turn, provide an impetus for the stock to move in a positive direction.

Another Strategy Concerning 52 Week Range

Enabling traders and investors to keep a watchful eye on the 52 week range, there is another plan of action which prompts investors to sell a particular stock when the price reaches a 52 week high presuming that the price will dip. Conversely, a trader will tend to be bullish buying the stock when the price reaches a 52 week low, assuming that the stock price will further increase. It is for this purpose, traders go about making profitable decisions based on such technical analysis which is fundamental to earn volumes of profit in the share market.

How to use bollinder bands

Technical analysis makes a lot of use of the Bollinger bands. These bands are used in stock market research to take a trade. The indicator was developed by John Bollinger. It helps to measure the volatility in the share market.When trading online, you can plot this indicator on your chart. The Bollinger band tells you when the market is quiet and when it is having a lot of activity. When the market shows no movement, the Bollinger band tends to contract. On the other hand, when there is a lot of activity in the market, they start to expand. You can look for stock patterns along with the Bollinger band indicator to spot good trading opportunities in the market.

How to use Bollinger bands

Bollinger bands are used by technical traders to spot a bounce in the trade. It consists of an upper band, a lower band and an average band which runs in the middle. Price has a tendency to return to the middle of the band. The Bollinger bands are also used as support and resistance levels. The higher the time frame, the better the Bollinger band indicator works on them. Many traders have developed successful strategies to trade based on the Bollinger band indicator. The strategy works best when the market tends to range and only move sideways.There are certain very clear indicators that the Bollinger band indicator gives. When it starts to squeeze it indicates that there is going to be a breakout soon. If the candle breaks the upper or the lower band of the Bollinger band, then it will start moving towards the middle band. The strategies using the Bollinger bands are designed to catch a move immediately in the market. These kinds of setups are not rare particularly in some smaller time frame charts.

Be Aware Of

However, care needs to be taken when using the Bollinger band indicator. The indicator in itself is not enough to help you trade. They are only a confirmatory tool and are a lagging indicator. You will need to first identify high probability support and resistance levels on your chart. If you see the Bollinger band also giving you a trade signal on those zones, then it increases the probability of your trades. Proper risk management and stop loss management is the key to a profitable trading portfolio. It is thus important to have a stop loss in place before entering a trade.

How to Use Delta to trade options

“An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date”. In simpler terms a buyer can purchase an option (say to buy an asset) from the holder of the underlying asset (seller) by paying a fraction of the total investment amount up front. The buyer then has the right to exercise his option but not the obligation to do so. If the buyer decides not to exercise the option, he will be at a loss of 100% amount used to pay for the options upfront. An investor interested in options trading has the support of four risk measuring tools to evaluate the degree of responsiveness and possible exposure of options as a result of changes in variables such as time factor, market volatility, change in the price of the underlying asset etc. A thorough stock research is essential to understand the effect of these variables on options in order to make an informed decision on investment in options. Delta is one of the four risk measuring tools along with Gamma, Theta, and Vega that help in the technical analysis of the options.

Delta as a tool to trade options

Delta is a measure of the relative degree of exposure of option to changes in the price of the underlying asset. Delta is a theoretical estimate of the change in the return from an option for every unit change in the value of the underlying asset. Delta values range from 1 to -1 depending on whether the option is to call or put and out of the money or at the money.

Primary use of Delta

The primary use of Delta is to help investors in online trading to determine the possible fluctuation in options value as a result of change in the price of underlying asset which helps forecast the money that one could make or lose by buying/exercising a particular option Delta can also be used to set a cut off target for your trades and realize the profits or restrict the losses from the options. Delta is not constant and keeps changing with changes in the market. Delta is usually higher for options nearing expiration period and a constant check on Delta movements can help options traders determine the plan of action and maximize profits.

How to use gamma to trade options

“Gamma is the rate of change for Delta with respect to the underlying asset price, i.e., gamma value indicates the theoretical movement of the delta value as the price of the underlying security moves” Yet another important risk measuring tool which helps in technical analysis for options trading, Gamma is the degree of change in Delta as a result of a change in the price of the underlying asset.

Trading the Indian stock market

While Delta itself shows the impact of the change in underlying asset price on the option, Gamma shows the shows the movement of Delta itself given the change in the value of the underlying asset. Gamma is an important stock trading analytical tool and determinant in analyzing the possible impacts of price changes of the underlying assets on an option for an option buyer or seller. Gamma is a positive number irrespective of the fact whether you are buying calls or puts and ranges from 0 to a maximum of 1 as Delta itself will never cross

1. Gamma can be negative when you are writing options. Gamma can be used to analyze Delta effects and subsequent stock price changes and its impact on the options held by the investor.   Gamma works better and becomes more critical in the usage of spreads and the application of more complex strategies. The relationship between Gamma and Delta becomes important on using multiple open positions to speculate on the movement of the price of the underlying security. Gamma not only has a direct relationship with Delta but there is also co-relation between Gamma and Theta. Usually, a high Gamma is accompanied by a high Theta and higher the Gamma, higher the exponential profits, provided that the underlying security or asset moves in a positive direction. However, such options come with high theta value where the time value caused decay is at a faster rate.

Greek indicators

It is imperative for anybody looking to make profits out of online trading in options market to have a thorough understanding of all the ‘Greek’ indicators in order to extract the maximum out of what options have to offer. A good study of these risk indicators can help investors make informed trading decisions.

How to use index futures to to predict the future

The index futures traded in the Indian market is known as the Nifty. The Indian stock market opens at 9.15 am and closes at 03.30 pm. The nifty futures in the world market are, however, traded the full day. It is traded in the different markets in the world.CNX Nifty, as it is called, is a powerful indication for stock prediction.   You can keep a track of the CNX Nifty before the stock market opens. This can give you a hint as to where the stock market may open, whether it will gap up, gap down or open flat. Before stock trading, brokers normally make it a habit of looking at the CNX Nifty in order to judge the opening of the market.   If you trade with the stock charts and do online trading, then you can guess the market open with the CNX nifty value and then make a quick support or a resistance level in a smaller time frame chart for a quick trade in the morning market.

Difference between the value of nifty and the value of nifty futures

There is some difference between the value of nifty and the value of nifty futures. An adjustment is made to compare like with like. This is called a fair value.   The fair value of the index is calculated as: FV = S * [1 + (I – D)] Where FV stands for the fair value, S stands for the current price of the index, I stands for the current rate of interest to buy the nifty components and D stands for the current dividend rate on the nifty components.

Index futures to predict the open in the market
 

The index futures give a very clear hint of what is happening to the CNX nifty in the world market and how the market should open today. This lets you take a quick entry and exit position in the market as well as book profits in case you have been carrying forward a trade from the previous day.   The index futures may not be the sole criteria to trade on the market future but however it acts as a very reliable hint in order to take trades during the morning bell. However, during the rest of the day, you need to technically analyse the Nifty in order to take intraday trading calls in Nifty futures.

How To Use Index Futures To Predict The Future

The index futures traded in the Indian market is known as the Nifty. The Indian stock market opens at 9.15 am and closes at 03.30 pm. The nifty futures in the world market are, however, traded the full day. It is traded in the different markets in the world.CNX Nifty, as it is called, is a powerful indication for stock prediction.   You can keep a track of the CNX Nifty before the stock market opens. This can give you a hint as to where the stock market may open, whether it will gap up, gap down or open flat. Before stock trading, brokers normally make it a habit of looking at the CNX Nifty in order to judge the opening of the market.   If you trade with the stock charts and do online trading, then you can guess the market open with the CNX nifty value and then make a quick support or a resistance level in a smaller time frame chart for a quick trade in the morning market.

Difference between the value of nifty and the value of nifty futures

There is some difference between the value of nifty and the value of nifty futures. An adjustment is made to compare like with like. This is called a fair value.   The fair value of the index is calculated as: FV = S * [1 + (I – D)] Where FV stands for the fair value, S stands for the current price of the index, I stands for the current rate of interest to buy the nifty components and D stands for the current dividend rate on the nifty components.

Index futures to predict the open in the market
 

The index futures give a very clear hint of what is happening to the CNX nifty in the world market and how the market should open today. This lets you take a quick entry and exit position in the market as well as book profits in case you have been carrying forward a trade from the previous day.   The index futures may not be the sole criteria to trade on the market future but however it acts as a very reliable hint in order to take trades during the morning bell. However, during the rest of the day, you need to technically analyse the Nifty in order to take intraday trading calls in Nifty futures.

How to use rho to trade options

Using Rho to trade options

Amongst the other ‘Greeks’ namely Delta, Gamma, Theta and Vega, the mathematical risk measurement tools that assist option traders to perform stock research and make investment decisions, one Greek that stands differentiated is the Rho. While others Greeks deal with the sensitivity of the options with respect to changes in the price of the underlying asset and time decay, Rho is a measure of the sensitivity of options to change in interest rates.

Definition of Rho

Investopedia defines Rho as “the rate at which the price of a derivative changes relative to a change in the risk-free rate of interest. Rho measures the sensitivity of an option or options portfolio to a change in interest rate”.

Significance of Rho

While the other Greeks assist in necessary technical analysis for stock trading almost on a regular basis, Rho is not a measurement tool that would be required to be studied on a regular basis. Rho will come into play only when interest rates are changing too frequently or at the time of an interest rate change. In most matured economies, it is seen that interest rates are changes only periodically and not too often, making Rho a relatively less important measurement tool for option traders. Having said this, it would be incorrect to undermine the importance of Rho to an option trader.

Since more often than not option buyers borrow money from the market to invest in options, it is important to understand the relative effect of change in interest rates vis-à-vis the change in the price of holding the option as the same will have a direct impact on the cost of the options and play a role in determining the opportunity cost of holding the options as against the risk-free interest that could be earned on the money invested in options.

Relevance of Rho

The use of Rho would be more relevant in the case of long-term options than short-term options for the chances of interest rates changing is higher in the long run. The Rho for long term options will naturally be more sensitive and an option trader must not neglect the probable impact of interest rate changes on the investment as a whole.While Rho may not be the most important risk measurement Greek, it certainly sets the tone for an investor to make informed decisions and not lose out on profit earning opportunities.

How-to trade the 52 week high and low

How to use Theta to trade options

“An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.” In simpler terms, a buyer can purchase an option (say to buy an asset) from the holder of the underlying asset (seller) by paying a fraction of the total investment amount up front. The buyer then has the right to exercise his option but not the obligation to do so. If the buyer decides not to exercise the option, he will be at a loss of 100% amount used to pay for the options upfront. While trading in options can be speculative in nature, not having a scientific approach can be more risky than rewarding. Doing good stock research is essential to ensure derivation of maximum benefits out of options trading. An investor interested in options trading has mathematical concepts like Theta, Delta, Gamma, Vega, etc., available to assist in deciding the right time to buy and exercise an option.

Using Theta to trade options

Theta value or time decay, popularly known as the “silent killer” for an option buyer, signifies the reduction in value of the option held by the buyer as the option nears its expiration day. It means that as an option nears its expiration day, its time-value (also known as extrinsic value) keeps reducing until the option is rendered useless after the date of expiration thereby inflicting a loss of potential returns for the option buyer with every passing day. On the other hand, Theta is a favourable position for the seller who benefits from delay in buyers exercise of the option. Theta value of the option determines the rate at which an option will decrease in value with each passing day and the value of theta for options is always negative, i.e., the time value of an option will always decrease with passing time and the value drops drastically as the expiration day draws closer. Hence, the general strategy should be to buy options with a longer lead period to expiration to reduce the effect of time decay and minimize the Theta loss on options.

Trading platforms

An investor can use online trading platforms to analyze and invest in stock trading options. Ample understanding of Theta can work in the favour of any investor and help minimize the time inflicted loss on options.

Importance of time value in option trading

To define time value of money “Time value of money is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.” Simply said, money in hand today is considered much more valuable than money in hand in the future, for the same can be invested now to get bigger returns in the future.

Options trading

While trading in options, the buyer of the option invests a certain amount of money upfront with a view to cash in on the investment at a later stage until when he can wait and watch the performance of the underlying asset and decide whether to exercise the option or let it expire by letting go of the money invested initially. The scope of earning profits from options trading comes bundled with what is known as “silent killer” for the option buyer, the decaying time value of the option. Represented by the ‘theta’, time decay of an option signifies the reduction in value of the option as it nears its expiration period.

Analysis of trends

For the buyer of an option, technical analysis of stock price changes and movement trends is important to determine the time for which an option should be held and what is the right time to exercise the option based on the fact that at what point will the intrinsic value of option be the maximum. The time decay rate is higher for options nearing expiration period and options with long expiration period are usually purchased to minimize the theta factor of the option. Although trading in options is not only about valuing the time decay and assessing its impact on the options but there are several other risk factors and pricing dimensions such as Delta, Gamma, Vega etc., which need to be studied closely for making fruitful option trading decisions. Having said that, understanding and analyzing time value of money is a good place to start for decision making while deciding to trade in options. One can take stock tips from expert analysts or analyze the time value impact on options by using the various tools available to facilitate online trading of options.

Price history of crude oil futures

The prices of crude futures have been very volatile in the past like the prices of some other commodities. Commodity trading in crude will see price swings in both directions; this may be because of a shortage of crude or oversupply of the commodity. When you do crude oil trading, you need to be aware that the price cycle of the commodity is not for a short term. The cycle may extend to days or even years. Changes in the demand of the commodity, the supply from OPEC and non-supply from OPEC play a key role in deciding the trend and hence the price of crude oil. Geopolitical events, as well as supply and demand for the commodity, have seen a lot of price volatility in the past.   You can trade crude futures online in the Indian commodity exchange. Trading online makes the process very transparent as well as convenient.

History of crude

In the most parts of the twentieth century, the price of crude was very heavily regulated. Production of price control kept it under strict regulation. In the United States, after the World War II, the crude prices were controlled by the government. However, if the price had not been controlled, the crude prices would have been much higher. It was quoted at $28.52 per barrel under regulation however the world average price was $30.54 per barrel. The OPEC kept the crude prices in the $22-$28 price range till March 2000.The real prices of crude only could exceed $30 per barrel in the case of any unrest or war. However, when it had limited spare capacity, it abandoned the price band in the year 2005.

Long term view of crude

The industries in the upstream of the crude industry should be able to profit below $25 half of the time. The increase in the interest rate of oil futures and OPEC regulations will always play a key role in impacting crude oil future prices. Crude is a very popularly traded commodity in the Indian commodity exchange. It is traded only in futures and thus trading with a stop loss is a must to avoid losing all your capital. Knowing the price history of crude and the events that impact the price of crude can let you take a much-informed trading decision when trading the crude futures.

Pros and cons of taking a trade when price just enters a support/resistance level| AliceBlueOnline.com ™

Pros and Cons of Taking a Trade When Price Enters a Support/Resistance Level  

Newbies who are taking baby steps to stabilize their position in the business of share trading are required to pay heed to two most important concepts of technical analysis; namely, support and resistance. These two attributes which are beyond the comprehension of a share market beginner come with many complexities that will enable him to plan his entry/exit when a particular stock enters the support or resistance level. Both of these concepts of support and resistance levels identified as fundamental trading tips handhold seasoned investors to decide on their entry/exit moves

Definitions
Support Level:

Also called as support, this refers to a price level when investors plan their entry into the stock market. Identified as a price below which the stock does not intend to drop, this price is based on the past performance of a particular stock in question. This situation, in turn, leads to two instances; one is the confirmation and the second is the eradication. Confirmation is manifested in the form of investors choosing that stock, causing it to rise and eradication occurs when the price transcends the support level, prompting the market to look for a new level.

Resistance Level:

Just the opposite of the support level, a resistance level is mainly linked to auctions. It is a point of meeting when the buyers congregate with sellers, with the convergence taking place at the ceiling in contrast to the floor. Again two instances are bound to happen. If the volume brings in more sellers, the price tends to jump off the ceiling; manifesting the resistance level. In contrast, if the additional volumes excite more buyers to come in, a significant drop in the resistance level is witnessed, prompting the share prices to rise over the ceiling. This is a favourable turn of events when the resistance level is negated to become a new support level for the stock.

Reading the Support Level on Chart

Share prices subject to frequent fluctuations demand the attention of investors at all times. Helping investors make their move, it is important for them to read the support level on the chart which can spell an opportunity for them to make a good buy when the prices are poised to rise higher.

Reading the Resistance Level on Chart

In contrast, when the price enters the resistance level, the market is conspicuous of traders battling with a pressure to sell, when the price of the stock is poised to dip further, going by its past performance.   Hence, these two concepts are important for every investor to base his entry and exit moves in the share market when these determinants go a long way in representing the direction of the price of the stock, whether it will rise or fall.    

Pros and cons of taking a trade when price just enters a support/resistance level

Pros and Cons of Taking a Trade When Price Is In the Support/Resistance Level  

Having understood the importance of support and resistance levels as two major determinants in technical analysis, it is now time to look into the scenario when the price of the trade is in the support or resistance level since long.

Importance of Identifying Support and Resistance Levels  

The analysis of support and resistance levels becomes an important segment of marking price trends of share prices. Playing a significant role in enabling investors to make profitable trading decisions, these components also have a part to play to come up with a reversal trend. If the stock has been in the resistance level for long during many instances without being altered, it comes as an indication to an investor to rake in profits when the security moves in the direction of this point without surpassing it.

Trending Styles  

Support and resistance levels demonstrate the propensity of the market to engage in buying the stock (as regards the support level) or to sell volumes of the stock (as in the case with resistance level). It is when these trend lines are interrupted and broken that a shift in the stock’s movement takes place along with the emergence of new levels of support and resistance. It comes as a wise move to read these two levels on the chart as part of a trading strategy. Demonstrating the same trend to continue, it is when the share prices fluctuate between these two high and low levels that are to be understood. Another feature that is unique to these two levels is that even if there is an alteration in the share price beyond either the support or resistance level, it does not guarantee a reversal trend.

Trading Tips

Share trading thrusts a great deal of importance on the two points of support and resistance. And once the price is stationed between these two points, it is best to avoid making investments at these points. This is a cautious move in line with the common and proven situation that the area around these two points is extremely volatile.  Another word of advice to bullish investors is to refrain from placing stock orders at the support level. In contrast, it is advisable to place an order at a price which is above the support level, however in close proximity to the support level. On the contrary, if investors are looking towards placing stops or short selling, it is best to set up a trade price that is on par or below the support level.

Pros and cons of taking a trade when price is leaving the support/resistance level

Trading When the Price Leaves the Support Resistance Level  

Support and resistance (S R) levels come as significant supply and demand determinants playing in the share trading market. While a support level is the opposite of a resistance, there are bound to be several situations when the levels are reversed; support level dons the hat of a resistance level and vice versa. To see these two levels in conjunction with the economic factors of supply and demand enables investors to plan their next move when the share prices leave the S R level.

The Swapping of S R Levels

In line with the volatility in stock prices, there is a high degree of volatility demonstrated by trading tips like support and resistance amongst many others. Conventionally, these levels essentially demonstrate the possibility of buying and selling opportunities for investors to gain from their respective moves.

The concepts of Supply and Demand

It is important to understand the manner in which the price arrived at the supply and demand (SD) level to eventually determine the manner in which the share prices will now leave it. If this scenario is attached to the economic factors of supply and demand, it would come up with a situation which stems from a decline in price from a particular level.   Once the SR rebounds, the price then begins to indicate that is now the time to drop further surpassing all the obstacles that stand in way between the price and the target. Since the SR level is all set to wipe out obstacles, one can handle the flip between support and resistance in the following ways:

1.    As part of a trading strategy, it is advisable to take the trade with a hope that there is no effect on the SR level.

2.    It pays to be patient to wait for the SR level to stabilize and be tested for the information to be helpful in future

3.    Last but not the lease, it is best to ignore trading such a stock.

However, with each investor having different views about the flip between support and resistance levels, it is important for every investor to understand that the dynamics of SR levels. Most of the times coming in the way of profits in the stock market, these levels allowing ignorant investors make an early entry thereby amassing unwarranted losses. It is for this reason that a keen analysis of SR level is important to prevent the level from standing in the way of reaping profits when driven by the supply and demand levels of stock market transactions.

Relation between the bank nifty and the nifty charts

Bank nifty and nifty charts are always seen together to take intraday as well as positional trades in the stock market. When you do share trading with the help of technical analysis, you need to consider both the charts to be able to spot high probability trading ideas.   Bank nifty is an index which represents 12 of the large capitalised banking stocks trading on the national stock exchange. Nifty is an index which represents 50 most liquid and large cap stocks from the NSE. Whereas bank nifty only has banking stocks listed under it, nifty has stocks from various sectors like banks, automobiles, Pharma etc. listed under it.

Relation between bank nifty and nifty

Bank nifty and the nifty charts are correlated .The bank nifty has shown a correlation of as much as 0.88 with the nifty. This high level of correlation shows that the trend of nifty and the bank nifty will be the same all the time.Traders use this data to analyse both the charts. At the time if one of the charts is not very clear then they can switch to the other chart to see the trend and the movement of the index.

The bank nifty has a beta of 1.2. Beta measures the volatility of any stock or index. This value is compared to the nifty. A beta value of 1.2 means that the bank nifty will always move ahead of the nifty .In case you get a clearer signal by following the bank nifty index, you can use it to trade nifty. Since the beta of bank nifty is higher than nifty, most traders trade the bank nifty because it gives a much faster movement than the nifty.   Thus, you should always make it a practice to start your trading day by analysing both the bank nifty and the nifty charts. It acts as a confirmation tool to your trades. Care should be taken since these values of the relationship between bank nifty and nifty are not permanent and they may change over time. It is important to keep yourself updated on the correlation as well as the beta values of the bank nifty as compared to that of nifty to be able to take a better trading call.

Steps to avoid insider trading

Insider trading is merely the selling or buying of shares of a publicly owned company by individuals, who have access to the said company’s confidential information. Often the insiders are the company’s owners, business partners, directors or officers who know the company inside out.   Insider trading could be legal or illegal. When the beneficial parties engage in share trading using only the public information, then it is treated as legal. However, if non-public information is used to engage in stock trading then it is treated as illegal. Those who are working within the organization are the best placed to give stock tips that may be  beneficial for them.

How to prevent or avoid Insider Trading

You can gather as much information possible, but at times you might end up being innocently involved in insider trading. Some tips that can help you to avoid such a situation is given below:
1. Double check your broker’s stock tips
Instead of taking your broker’s word as final, you need to do some research on your own to confirm that your broker is showing you the correct path. A simple search on the net can verify the information.
2. Take care in questioning potential insiders
In case you happen to know someone working for the company that you are planning to invest in, please exercise restraint while asking questions. Avoid circumstances in which  they accidentally disclose company information that is confidential.
3. Ask the proper authorities
For online trading to ensure that the stocks in your portfolio were not a result of insider trading, you can report it to relevant authorities like SEC. This gives an impression that you had no malicious intentions while trading for the shares concerned.
4. Allow yourself to be audited
Many people are scared of being audited. However, auditors are knowledgeable and experienced people to verify the information and confirm that your portfolio is clear of any insider trading.
5. Enforce insider trading policies
Personally, you might be clean. However, there is a possibility that one of your team members is not. It is better to create policies regarding dealing with information. It is your responsibility to ensure that everyone involved in your trading understands and adheres to them.

Suggested timeframes for intraday traders

Intraday trading or day trading is when traders take a position in the share market and square it off the very same day. In this kind of a share trading strategy, traders look for quick in and out movement in the market. The national stock exchange allows stock trading in intraday. You can buy as well as go short in the market and then close your positions before the market gets over.

Making quick decisions

Your broker will give you a number of stock tips to trade intraday positions each day. To trade intraday, you need to take trading decisions fast and execute your orders with great speed. At the same time, you need to also keep your emotions aside and not overtrade the market.   When you do an intraday trading, you cannot trade with only a single time frame chart. Technical analysts look at a combination of charts of the same stock in order to take trading decisions. Each chart is a different time frame and gives the complete picture of the stock trend and movement.   When trading intraday, the most common time frames used by traders are the 5 mins, 15 mins, and the 60 mins chart.

Important factors

Every trading decision needs to be made on a few important factors. They are the trend of the stock as well as the major support and resistance levels to enter and exit the stock.   Trading with the trend not only lets you profit fast but also does not hit stop losses often. In order to spot the trend of the market, you need to make use of the 60 min chart when trading intraday. This is the biggest time frame that you are using for a day trade and the dominant trend of the stock can be analysed from this time frame.   Next is the support and resistance levels .Support and resistance levels are major areas where there was a lot of imbalance between demand and supply leading to a huge rally or a drop in price. These are high probability trading zones. The 15 min time frame chart is used to find out the major support and resistance levels in order to enter and exit the trade.The use of the 5 min chart is to adjust the levels to make it a bit smaller so that you do not have a big stop loss. These three timeframes together let you make high probability intraday trades in the stock market.

Suggested timeframes for long term positional traders

Position trading is when traders hold on to their open stock positions for weeks or for months together. The Indian share market allows position trading in equities. However, trades are not allowed to short the market in stocks and shares and carry forward the position overnight. In order to short the market and carry forward the position, they will have to trade in the futures market.   When you do online trading in the share market, you need to apply trading strategies in order to take positions in the stocks.   If you are a positional trader, then you will have to analyse the stock from a long-term perspective. Apart from the financial aspects of the company, technical analysis also helps you to a great deal to take long term investment positions in stocks.

The basics of long-term positional trades

The two basic things that traders look at when taking a trade are the trend of the stock and the high probability support and resistance levels.   The trend of the stock basically tells us whether the stock is bullish, bearish or neutral. We need to take a trade along with the trend in order to profit from the market. Traders do take counter trend trades, but they are very risky and may stop you out often. It is only after years of experience that you should take trades against the trend.   The support and resistance levels tell you where to enter and exit the market. You need to buy into the stock where it has the highest probability of going up. The support and resistance levels are formed where there is the maximum imbalance between supply and demand. When price retests that level, it gives you a buying opportunity in the market.  

Using multiple time frames

If you are a positional trader, then you will need to use multiple time frames to help with your trading.60 mins chart, Daily chart, and Weekly chart are the most commonly used timeframe charts to take a positional trade. You need to spot the trend of the stock on the weekly chart. This is your dominant trend of the stock and you need to take your trades according to this trend. The daily chart lets you look out for high-quality support and resistance levels. In the 60 min chart, you can fine tune those levels so that you have a less risk on the trade.

Suggested timeframes for swing traders

Swing trading is the term used for one of the trading strategies that stock traders use in the market. In this strategy, they have open positions in the stock market for a few days only. They square off their positions in a few days time. Thus swing trading lies in between intraday trading and positional trading.   When you do share trading in the stock market, you trade on stock tips from your broker. He analyses the swing trades for you and helps you take high probability positions in the share market.  

Benefits
of swing trading

The benefit that swing traders have is that they do not need to sit in front of their trading monitor the whole day. All they need to do is to just take out sometime during the trading hours and analyse their trades.   Since swing trades do not last for more than a few days, the capital is not tied up in the market for a very long time.   The Indian share market allows swing trading in stocks and shares. However, in case you wish to short a stock and carry forward the position for a few days, you will have to trade in stock futures.  

How to engage in swing trading

In order to do a swing trade, you will basically need to analyse the market on two broad areas, namely the trend of the market and the high probability support and resistance levels.   The trend of the market tells you whether you need to be a buyer or a seller in the stock. The stocks are said to be bullish in an uptrend, bearish in a downtrend and neutral in a sideways trend. In the case of a swing trade, a daily chart is used to analyse the dominant trend of the stock. You will thus need to analyse the trend on the daily chart and trade according to the trend.   The support and resistance levels are the next thing that you need to look out for before taking a swing trade. These are areas where there was the maximum imbalance between demand and supply leading to a quick rise or fall in the share price. You will need to look at the 60 min chart to spot high probability support and resistance levels.   The last time frame that you need to see in your swing trades is the 15 mins chart. The 15mins chart lets you narrow down the support and resistance levels so that you have less risk on your trades.  You will need to use these three time frames in order to take a swing trade on a stock.

The basics of cotton futures trading

The cotton futures are well standardised and are exchange traded contracts. Trading in the cotton commodity is similar to trading in any other agricultural or non-agricultural commodity. When two parties trade a futures contract, then the buyer agrees to take the delivery of the commodity from the seller. The quantity, price and time of delivery is decided in advance. If you wondering about how to buy cotton futures, you will first need to open a commodity trading account with a registered brokerage firm. You can then start trading in the cotton futures listed in the commodity exchanges in India. The cotton futures price changes when there is an imbalance of supply and demand. In order to trade these agricultural commodities, you need to know the seasonal trend of the commodity as well the impact of any news on it.

Basics of cotton futures trading

The consumer as well as the producer of cotton will trade in cotton futures to manage the risk. Those who produce cotton employ a short hedge which lets them lock a selling price for the cotton that they produce. The consumers of cotton take a long hedge in cotton futures to secure the purchase price of the cotton commodity which they need for their business. Speculators also trade in cotton futures to profit from the price risk that hedgers try to avoid. They buy when they are optimistic on cotton and sell when they think that the price of cotton may go down. In order to trade in cotton futures, you will first need to open an account with a registered commodity brokerage firm. Cotton is only traded in futures; thus, ensure that you trade only under expert guidance. Seasonal effects, as well as the impact of news, need to be studied to take a trade in cotton futures.

Technical charts

Apart from the fundamental aspects of this agricultural commodity, you should also find out the supply and resistance levels of the commodity by using technical charts. You may look to use trading indicators like RSI and moving averages to increase the probability of your trades. Trading in cotton futures is less volatile and hence less risky than in trading in stocks. However, you need to take care to do proper money management in order to profit and protect your capital when trading the cotton futures.

The fundamentals of futures: how to trade in futures

Kotak Securities defines a futures contract as “an agreement between two parties – a buyer and a seller – wherein the former agrees to purchase from the latter, a fixed number of shares or an index at a specific time in the future for a pre-determined price.” When the actual transaction is executed, all the details are agreed between the two parties. The futures contracts can be freely traded on share market exchanges as the general criteria like contract sizes and expiry dates are standardized. Futures trading is done anonymously as typically buyers will not know who the seller is and vice versa. Further, the stock exchange guarantees every such futures contract.   Futures contracts are made out on diverse types of assets – stocks, indices, currency pairs, commodities and many more.   Investing in futures and options is a risky business. Futures trading is not for everyone and the person entering this stock trading needs to have adept knowledge about how the market and the contracts work. Once you decide to enter this market fully aware of the risks involved, please find the three ways in which such trade can be done.

Do it yourself

You can decide to take the plunge fully by trading in your own account. You can do the necessary research, maintain margins, manage funds and order trades. This mode has the maximum risk and a lot of time needs to be devoted to finding out about the workings of the market. However, when the gains come, the satisfaction is totally yours.

Open a managed account

Similar to an equity account used for stock market, you can open a managed account where the power is with your broker to trade on your behalf. The broker being a professional will be able to take informed decisions. However, it is your responsibility for taking any contract call and losses incurred.

Join a community pool

Offering the least risk in the futures market, you can select a group of commodities that you can invest in by joining a community pool. In this pool funds are combined and trading happens as one. This needs to be managed by an experienced broker as overall risks associated with futures market still exist.

The importance of Greeks in option trading

Using the Greeks in options trading Introduction to Options trading

Investopedia defines an option as “ a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date”. The option holder has to decide whether to exercise the option or let it expire. The holder of the option can decide to wait until the expiry date of the option or exercise it before the expiry itself. Option trading can be rewarding and less risky if backed by thorough technical analysis and research. There are tools available which help option trader’s measure risks and reward co-relation for options.

Greeks, an option traders best friend

A trader needs to analyze factors like market volatility, time value of money, future outlook of the industry, impact of the world economy on share trading and Indian stock market, prospects of the underlying assets etc. amongst many other market trends. Mathematical tools famously known as ‘the Greeks’ provide the option trader a way to measure the impact of various quantifiable factors on the price of the underlying asset and help evaluate their options position and make necessary decisions.

Types of Greeks and their relevance:

Delta, Gamma, Vega and Theta and Rho are the five prominent risk indicators which are collectively known as Greeks. Each of the Greek is an important indicator of sensitivity of the option value to change in price of the underlying asset.

Understanding the Greeks
1.    Delta: One of the most important measurement methods, Delta helps in analyzing the relationship between the sensitivity of an Options price in terms change in the price of underlying asset. Delta allows a trader to calculate the profit or loss that will be reaped in the case of every single movement in the value of the underlying stock.
2.    Gamma: Another important measurement method, Gamma is the measure of the degree of change in Delta as a result of a change in the price of the underlying asset.
3.    Vega: The relation between options sensitivity to changes in implied volatility is determined by Vega. It is a measure of the effect of IV change on options prices.
4.    Theta: Theta is the measure of time decay of an option. It shows the rate of reduction in the value of options as it nears its expiration period.
5.    Rho: Rho measures the sensitivity of options price to change in interest rates. Understanding and analyzing the Greeks is indispensable for an options trader looking to make profits.

A good analysis of the Greeks will certainly help option traders in taking profitable decisions.

The infamous stock market crash of 1929

October 29, 1929. A day that terrorised the Wall Street. A day that will forever be remembered as the Black Tuesday. The New York Stock Exchange witnessed a devastating crash and sent the country into a financial tizzy.

Events leading up to the day

It was more than a decade since the end of World War I. New technologies such as automobiles, radios, telephones grew rapidly. Families were able to buy goods in installments. A vast majority of the people, the rich and the middle class alike, invested in stocks and shares. People were investing in the share market with borrowed funds. Between the year 1924-1929, the DJIA (Dow Jones Industrial Average – stock market index) increased fourfold. The first signal of the catastrophic crash was on September 3rd  in 1929, when the market peaked. Production of steel went down, many banks failed but nobody seemed to pay attention. Over the course of the next few days, the stock prices began to go down. The lower the price went, the faster they nosedived. And on October 29th, the prices of the stock plummeted. Nobody knew what hit them, but the caution had set in. The market opened to more disarray the very next day. Prices of the stocks went down even further. Such was the chaos of stock trading, that more than 13 million shares were traded.

Black Monday and Black Tuesday

October 28th, Black Monday. The day opened up to renewed chaos as  prices went downhill. Large amounts of shares were traded. So much so that there wasn’t enough time to record a majority of them. On Tuesday, havoc took over. The din of traders screaming drowned the opening bell of the day. Phone lines were choked. People were losing huge amounts of money in a flash, their life savings wiped away in an instant. Margins were called. Rumors spread. Fistfights ensued. And at 3 P.M, the market was closed. An astonishing 15 million stocks were traded. Over the weeks, the prices went down further and on November 13th, they bottomed out. This eventually led to the great depression. Employees were sacked, unemployment rose steeply sending the economy of the country into a tailspin, from which it would never recover until 1954.

The reasons for the trend in steel trading (downward and upward trend)

If you are trading in commodities, then you may have observed that steel trading is very interesting due to the swings that this commodity offers to traders. Steel prices tend to go both upwards and downwards and there are many factors that come into play when you do trend trading in steel. Commodity trading is very rewarding because it offers a huge potential and also because it is less risky that the stock market.

Reasons for the upward trend in steel prices

There are a number of factors due to which the price of steel moves upwards.
·        Genuine steel companies have won the battle against unfairly traded steel products and with government duties; there is now a lot of transparency and a positive outlook for this industry.
·         Inventory restocking is also one of the major reasons for the uptrend in steel. Many companies did not stock their inventories and now the inventory levels have reached such a level that steel needs to be restocked again. This has led to a rise in demand for steel and thus the uptrend in the commodity.
·         With more and more urbanization in the country and people moving from villages to cities, the rise in demand for steel is only growing. This is also a major reason for the steel up move.
·         Raw material prices impact the steel pricing. With the increase in scrap steel and iron ore prices, this made it very easy for steel mills to raise their spot offers without facing any resistance.
·         Other industries that depend on steel have seen a lot of stability and their productions have grown .This led to a rise in the demand for steel.
·         China is the biggest steel manufacturer. The Chinese steel prices have risen sharply and China, being not only the largest producer but also the largest exporter of steel, the prices were impacted everywhere.

Reasons for the downtrend in the steel trading

The reasons for a downtrend in steel trading can be due to these reasons.
·         Slowdown in consumption due to an economic trouble in the country has a major impact on the prices of steel.
·         Reduce price of the raw materials leads to a downtrend in steel.

Trading in steel offers a huge potential. However, you should be aware of the fundamental factors that affect the price of steel in order to increase the chance of success on your steel trades.

The reasons for the uptrend in trading of spices

When trading in spices, you need to be aware of the factors that cause an uptrend or a downtrend in this commodity. You can trade the spices on the Indian mcx or ncdex exchange when you open a commodity trading account with a broker. Trend trading in spices is very popular as it lets you make huge profits with a very less risk of getting stopped out on your trades.

Fundamental Factors

The trend in spices can be mixed, both up and down. The rise in demand in the domestic as well the international market is the main reason for an uptrend in spices. The export demand is the major factor that plays a key role in deciding the trend of the spice. A rise in demand in the international market is the reason for an uptrend in spices.   The other factor that you need to keep in mind is the weather. Climatic conditions affect the production of spices, and thus, impact the trends of the spices. Like other commodities, trading in spices too works on the basic principle of supply and demand. The lack of demand in spices causes volatility in the price of spices. It is thus important that you keep yourself aware of the news and events in the market to make a profit when trading spices. Trading with the trend is the best way to profit from the market. When the spice market is in an uptrend you should always look to go long on the futures market and stay with the trade until you see a sign of reversal. However, even if you follow the trend and trade, a stop loss is a must on each trade. It not only protects your capital, but lets you get out of a loss-making trade with a small loss.

Spice futures

With an option to trade on a number of spices in the Indian commodity market, you need to first find out the spices that are following an uptrend. It is only after expert analysis and a lot of fundamental and technical research on the spice, should you put your money into buying the spice futures.

How to use theta to trade options

“An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.” In simpler terms, a buyer can purchase an option (say to buy an asset) from the holder of the underlying asset (seller) by paying a fraction of the total investment amount up front. The buyer then has the right to exercise his option but not the obligation to do so. If the buyer decides not to exercise the option, he will be at a loss of 100% amount used to pay for the options upfront. While trading in options can be speculative in nature, not having a scientific approach can be more risky than rewarding. Doing good stock research is essential to ensure derivation of maximum benefits out of options trading. An investor interested in options trading has mathematical concepts like Theta, Delta, Gamma, Vega, etc., available to assist in deciding the right time to buy and exercise an option.

Using Theta to trade options

Theta value or time decay, popularly known as the “silent killer” for an option buyer, signifies the reduction in value of the option held by the buyer as the option nears its expiration day. It means that as an option nears its expiration day, its time-value (also known as extrinsic value) keeps reducing until the option is rendered useless after the date of expiration thereby inflicting a loss of potential returns for the option buyer with every passing day. On the other hand, Theta is a favourable position for the seller who benefits from delay in buyers exercise of the option. Theta value of the option determines the rate at which an option will decrease in value with each passing day and the value of theta for options is always negative, i.e., the time value of an option will always decrease with passing time and the value drops drastically as the expiration day draws closer. Hence, the general strategy should be to buy options with a longer lead period to expiration to reduce the effect of time decay and minimize the Theta loss on options.

Trading platforms

An investor can use online trading platforms to analyze and invest in stock trading options. Ample understanding of Theta can work in the favour of any investor and help minimize the time inflicted loss on options.

Tips to trade stocks in india

With the first organized stock exchange established in 1875, stock trading in India has become an integral and important part of the economy with the National Stock Exchange clocking a daily turnover of close to 3 lakh crore rupees. While companies use stock exchange to mobilize public money to fund their projects, investors see the stock exchange as a place to invest money and earn a good return on their investments. It, therefore, becomes imperative for  investors to analyze and thoroughly research the stocks before taking a call to invest or not. Following are few essential tips to be kept in mind before investing, while holding investment and when deciding to withdraw the investment.

1.    Select a good share broker: To be able to trade in Indian stock market, it is a must to have a trading account. There are many brokerage houses that open trading accounts and provide brokerage services in return for brokerage commission. Brokerage costs can cut into the profits earned and hence, an investor should always analyze the commission rates on offer and ensure that there are no hidden charges that come along with the promise of lowest brokerage costs.

2.    Analysis is a must: There are a lot of stock tips that float around based on speculation and baseless predictions. It is necessary for an investor not to get carried away by these murmurs and accept a trading tip only after thorough research and study of the stock.

3.    Patience is the key:  The stock market is not for those who expect their returns to multiply overnight. An investor must look for stocks which offer stability and good growth prospects and hold the stock till it ripens. To panic is not an option in the stock market; patience is the key to earning returns on investment.

4.    Know your risk appetite and to stop loss: Restricting your losses is as important as encashing on  gains. Setting a stop loss restricts losses in case of stock prices crash, saving the investor from unprecedented losses.

5.    Diversification of portfolio: An investor must strike a balance between high beta and low beta stocks and have a mix of stocks from different industries and different size of companies so that the overall investment can be hedged to minimize potential losses. Investing in the stock market could be risky but sound research and calculated risk-taking can earn investors good returns on their investments.

Types of equity products

In equity trading investment banks use equity derivatives for the transactions they conduct every day. However, individual investors use them rarely as they are a tough nut to crack. Equity derivatives are a specific type of financial derivative that derives its worth from stock indexes and stocks. Some of the types of equities are discussed below:
Options When an investor gets to perform share trading in the stock market at a specific price, that is also known as the strike price, then that contract is known as an option. Here the investor is not actually obliged to make a purchase or a sale.
Warrants Warrants are quite like options, wherein the investor is granted the right but is not obliged to buy a stock or an underlying asset at a particular date in future. Warrants are not issued by investors as in options. Instead, companies issue warrants to those who hold company bonds and preferred stocks.
Futures When a contract is made between two entities in which one investor (the buyer) buys a basic security at a specific price and date in future, it is called as futures. An obligation rather than a right is created in futures similar to options. When the futures contract reaches the specific date, the buyer needs to buy the stock. The buyer and the seller have to buy and sell the stock and cannot let the contract expire. Exchange is the place which does the trading for futures.
Forwards Just like futures, forwards create an obligation between two entities to exchange a stock on a certain day at a specific price. In forwards contract money and stocks are traded only on the settlement day. Futures contracts generally create a sequence of cash flows as they are settled daily. Trading of forwards is done over the counter (OTC).
Convertible Bonds When the bond holder can transform the bond into shares of the same company, it is treated as convertible bonds. Like normal bonds, there is a maturity date and a coupon for this bond. In addition, the exchange price and conversion rate are also features of this. In the equity market, bond provisions feature of these bonds and that it can be used in a convertible arbitrage strategy make it safer than the normal shares.

Types of stock brokers and their role in the stock market

Investing in the stock market has become very common nowadays with many people taking an interest in stock trading. It requires sound knowledge of the stock market to participate in it and make profits. Individuals need to spend a good amount of time to study and understand the market, which many of the people who want to invest do not do due to other work commitments. This is where a Stock Broker plays an important role.

You might be wondering who a stock broker is?

Stock brokers are trading professionals who buy and sell stocks, shares and securities on behalf of clients over the counter or through a stock exchange. Such stock brokers are often associated with a stock brokerage firm and they charge a commission or fee from the client for stock broking and managing their stocks. Such stock brokers have first-hand knowledge of the Indian stock market and keep tabs on the varying trends and patterns of different stocks and shares involved.

There are essentially two types of stock brokers:
•       Full-Service Broker : A full-service broker, like the name suggests, offers a wide variety of stock and share trading services to the clients including researching on different stocks and shares and offering advice on potential profit making stocks. Their roles include researching the stock market in which the client wants to invest in, study the trend and analyse the different patterns and offer recommendations on which stock the client can invest it and therefore make a profit out of it. Apart from offering advice, they also use their expertise in buying and selling different stocks and shares and stay up to date on the developments taking place in the stock market. Since full-service brokers end up doing much of the work for their clients, their brokerage fee or commission is very high
•       Discount Broker : As opposed to the full-service broker, a discount broker specializes only in executing buying and selling orders for their clients. They carry out the trade by charging a brokerage fee much less than what is paid for their full-service counterparts. Such discount brokers do not provide any advice on the investment nor do they offer any recommendations to their clients.

What are equity derivatives

In stock market terms, derivatives are financial assets whose price is derived from underlying assets such as bonds, stocks etc. Equity Derivatives are a type of derivative whose value is derived, at least partly, from underlying equity securities including stocks, stock indexes. Some of the different types of equity derivatives used in equity trading are :
Options : Options allows investors to buy/sell shares of a stock at a particular set price, called as the strike price. The contract of option can be exercised to make a purchase (call) or sell (put). However, there is no obligation for the investor to make the trade. A contract of an option specifies the type of option (call / put), the total number of shares, strike price, the expiry date of the contract. The option’s price, known as Premium, depends on the expiry date, the strike price, and the stock’s volatility. Options are used by investors to hedge risk in the equity market.
Futures : A contract between two parties, where the buyer agrees to buy and the seller agrees to sell the underlying equities at a contract price on a pre-specified date in the future. Purchasing a futures derivative ties the trader to an obligation, wherein the buyer must and should purchase shares of the stock on the date as per the futures contract. The seller is also obligated to sell on the specified future date.
Warrants : Grants rights to the holder to buy the underlying stock at a specified date in the future but there is no obligation tied to it. These are issued by companies and not investors. Warrants are offered to those who hold stocks and bonds of a company. Investors can exercise warrants to call or put (buy or sell) shares at a particular price, which is much higher than what it was when the warrant got issued.
Swaps : An agreement between two parties to exchange cash flows, one of which comes from an equity index, whereas the other is tied to the another index or stock’s return. Swaps are usually used to avoid transaction costs that are associated with the buying or selling of stocks and provides the investor with a cash flow that is similar to the returns of any other stock.

What are the best technical analysis trading software available in the market

The number of people investing in the stock market and participating in online trading has increased rapidly over the past few years. With the advent of technology, the need for stock market software to automate the operations has become necessary in order to help the clients manage their stocks and share trading. Such a trading software is used to perform the technical analysis of the stock market and also automates functionalities like charting, alerts, indicators and a wide range of stock research and analysis functions. Some of the most popular technical analysis trading software available and operating on the Indian stock market are :

  • Zerodha Pi : A next-gen trading software equipped with advanced charting functionalities, technical indicators and drawing tools. Comes with 50,000 candles of historical data for back testing purposes and applying strategies. Offers in-depth market view and floating index stickers. Its bridge technology allows users to automate with 3rd party platforms such as Meta Trader, Ninja Trader,  Ami Broker etc.
  • Investar : An integrated investment tool that offers Fundamental and technical analysis along with Portfolio management for Indian Stock Market including NSE, NSE F&O, BSE, MCX, NCDEX. End Of Day (EOD) data support is available for all along with a choice of 5 minutes and 1 minute data for both NSE and NSE F&O. Also equipped with Automatic Buy / Sell signal charts and Pop-up scan alerts.
  • AmiBroker: Comes with features such as Backtesting, Optimization, and Walk-Forward testing. Provides powerful charting and other functionalities such as composite indicators, alerts based on formulas, multiple data feeds, and portfolio manager.
  • TradeTiger : Offers a single platform that supports multiple stock exchanges such as NSE, BSE, MCX, NCDEX, NSE F&O. Provides live streaming quotes and advanced charting functionalities along with End Of Day charting feature. User defined alerts and tools to gauge the stock market.
  • TradersCockpit : Equipped with powerful charting tool for technical analysis, and innovative cloud-based analysis tools, options for BackTesting and Optimization.

Most of these trading software offer training and webinars for the users to get a grip on the various features. Some of the popular trading software that operate on international stock markets include MetaStock Trader, eSignal, NinjaTrader and so on.

Why are market rumours created?

The transmission of unverified market information through various means such as word of mouth, media and so on can have a significant impact on the share market. The market can also be very quick to react to such stock rumours.

What impact do rumours have on the market?

Rumourmongers transmit such market or investment news without worrying about the veracity of the piece of information. In such cases, the rumours have the potential to drive up the prices of the stocks. However, there may be a case where the reverse can also happen, wherein the rumours can also send the prices of the stocks plunging. There are many instances where investment news has had an impact on the stock prices, so much so that many companies have gone bankrupt.

Buy on rumour, sell on news

News and rumours can have either a positive influence or negative influence on the stock price. And as such, this news is anticipated and the expectations are priced in accordingly. If and when these expectations are confirmed with the actual news, the stock price may drop temporarily.
·         In stock trading, many traders buy on a rumour, which means to say, that they treat the forecasts of technical analysts as if the event has already taken place as they predicted. In doing so, the price bar of the stock is built up just like the forecast news is supposed to do.
·         Sell on news refers to the selling of the stocks once the actual investment news is out. It is highly impossible for a product or a company to live up to the expectation set by rumours, so, on the announcement of the news, the stocks are sold off.

At times, the rumours that are being spread around could also be the dissemination of confidential non-public information. Such an act is called insider trading, wherein the trader with the possession of such non-public information attempts to buy or sell stocks in order to make a profit or avoid a loss. In online trading, rumours often pay off for short term traders and are a risky business when it comes to evaluating and assessing the forecasts and buying or selling once the news is out.

Why do stock brokers not give a support resistance price but a support resistance level?

Who are stockbrokers?  

A stockbroker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stock for both retail and institutional clients through a stock exchange in return for a fee. (Source – Wikipedia)

What are support and resistance concepts?


These are vital concepts in stock trading (offline or online trading). A support level refers to a level where the price of a stock remains constant till its price falls. The level basically provides a kind of support to the stock price. The price of a stock is more likely to decrease at this point than increase. So, once the price of the stock starts decreasing, it continues to decline till it reaches the next support level.   A resistance level is opposite of support level. It is the level where the price remains constant as it rises. The level provides a kind of resistance to the stock price. The price of the stock is more likely to rise at this point than decrease. Once the price of the stock starts increasing, it continues to do so till it has reached the next resistance level.   Support and resistance have an impact on the share market trends. If an existing trend line reaches a resistance level, it will face a dynamic shift. If a trend line is tested more often, it becomes more valid. For example, if the stock price of a particular stock has reached a support level of $40 in 4 different instances over a period of time, then the price of that stock is expected to find support level at $40 in the future also.

Why only support and resistance levels are provided?

In most cases it if difficult to provide an exact price of a stock where it will find support or resistance, it is easier to provide a level as the market is always subjected to volatility.

For example, when most people decide to trade, they usually have a number they would like to trade at. The trader might buy the stock when it hits $20 whereas, the current price of the stock will be $23. There will be many other traders who are waiting for the same price drop. Hence, when the price drops to $20, the volume of the shares increases and it achieves a support level of $20.

How much should you invest in the stock market

The prospect of making big bucks through the Indian stock market is a lucrative one and in spite of all the hemming and hawing, the bug is sure to bite you sooner or later. So, it is better to be prepared for the inevitable rather than try to fight it. You can do this by educating yourself about the ways of the stock market, researching the stocks you shortlist and limiting the amount of money you invest.

  • The Age Factor: Yes, it’s true. Your age is important in determining the kind of risk you can afford to take in the stock market . Experts opine that the younger one is, the more risk one can take.
  • What Do You Earn? Your salary or the livelihood you earn will play a major role here. The 10 percent of income rule is applicable to retirement savings and can be used for the stock market too.
  • Surplus Funds: Any surplus funds you have such as an unexpected windfall or money obtained as gifts, that will not make a dent on your financial situation should you lose it in the market, can be used for investment purposes.
  • Indirect Investing : You can invest upto 50 percent of your savings in the stock market indirectly through mutual funds. This carries a much reduced risk of loss compared to direct investing. It is ideal if you do not want the hassle of direct stock market dealings or intraday trading , but want a significant return on investment.

You can utilize online tools and apps to calculate the amount needed for your living and what you can save and invest. If direct commodity trading is not your cup of tea, go for related stocks since commodity prices have a multiplier effect on these. Brokerage houses and financial establishments that offer stock trading facilities will also have a minimum amount stipulated before you can start operations. This can be a good place to start if you are not sure about how to invest in the stock market.

Short selling margin buying

Margin buying and short selling are concepts used by experienced traders involved with the Indian stock market.Both these are exploited to their full potential mostly in intraday trading though the contract period varies especially in derivatives trading and the like. Since both these carry a great deal of risks, it is important to fully research and understand the stocks you shortlist before proceeding.

What is short selling?

Simply put, short selling is a means of profiting from a declining stock. The short seller disposes off the stock at the current market price and buys it back later when the price falls. Since such a seller will not own the stock at the time, they will borrow this from someone who owns it. The short seller will then buy back the stock at the lower price and return it to close the loan. This is categorized under margin trading, which involves an agreement with the broker.

Benefits of short selling

The primary reasons why someone would opt for short selling is to either make some easy money or as a means of protecting one’s investment portfolio. Quick profits made this way can help offset any losses incurred in thestock market in the recent past.

Margin buying and its benefits

A margin account is required when short selling is on the cards because it allows you to buy and sell greater volumes in equity or commodity trading than would be possible on your own. If you have a margin trading account, your broker will lend you the remainder of the money while the stock you bought makes for the collateral on this loan. Benefits of margin buying include:

  • Significant boost in earnings
  • Cash burden is very less
  • Increased purchasing power

Just as the potential for profit increases, so does the risk for loss. Loss when trading with a cash account is limited to the amount you have invested. With a margin account, your risk extends to the amount loaned to you.

Short selling and margin buying are crucial to the smooth functioning of the stock market. They provide the liquidity necessary to sustain the market.

Strategies to trade successfully

Irrespective of the objective of your trading or what size your trading account is, strategies are essential to increase the odds at succeeding in the Indian stock market. Though each one is important, the collective effect can get you started on that success path in trading. We enlist some of those strategies, in no particular order.

Use a trading plan

This plan is a written set of rules that decide the trader’s entry, exit and money management criteria. Technology allows you to test the feasibility of the plan before even you open a trading account and invest actual money. It is important that once you’ve found a viable one, you should stick to it. Trading outside of plan is considered as poor trading. Moreover, it reduces the expectations from your plan.

Treat trading like a business

Trading comes with expenses, losses, taxes and uncertainty. Unlike a job, there are no regular pay
checks. Trading involves stress and risk. When you treat it like a business, your focus will be on maximizing potential earning grounded on research-based strategies.

Keep learning

As a trader, you need to learn every day. Keep yourself updated on a variety of things that impact the ever-changing market. Understanding the past and current markets by using resources like online trading sites will prepare you to call the shots with much more ease, if not prepare you for the future.Risk only what you can afford to lose Trade only if you have enough money after satisfying important obligations like clearing the credits taken on your house or saving for your child’s college fund. You need to be able to wait until you can spare enough to invest and thus expose it to the risk of loss.

Always use a stop loss

A “stop loss” is a pre-defined amount of risk that you are willing to accept for any given trade. You could set it as a currency amount or as a percentage of your trade. By enforcing this, you will be minimizing your exposure during trading.

Range trading

Following the spread of high and low prices traded is very useful in indicating entry and exit points for trades. Hence, this takes you closer to making accurate calls.

Minimize on brokerage

Holding out investments or long-term stock holding comes with the added advantage of even zero brokerage charges at any given time since you do not trade often.

Contrarian trading

Here you buy assets that are performing poorly and then sell when they perform well. Here, one has to be sure to pick only the ones that otherwise do well, but have an “undeserved” drop in price.

Despite good intent, unsuccessful trading or poor adherence to planning may happen at times. But it does not mean that it is the end of trading. No matter what strategies you adopt, knowing when and where to stop will help you make necessary changes before continuing. This approach will also help you invest and trade smartly.

What should you know before investing in the share market?

So, you have decided to invest through the Indian stock market. It is better to be well-informed before taking the plunge. It is your money after all. Here are a few of the absolute basics.

  • What to buyThe key here is to put your money in a good business. It should hold the potential for growth and reliable management amongst others. There are some firms and brokerages available to advise you on just this and help you transact at zero brokerage charges.
  • When to buyThe price change is one of the factors that drive selling and buying of share. For example, a company may offer its shares at a low price during its IPO. But as it continues to grow, over time, its stock price also undergoes a change. So, you would have to wait for a reasonable price in the market to buy it. As they say, sometimes timing is everything.
  • Study upIt involves not only following the performance of the companies that interest you but also keeping an eye for changers and their impact on the market. Watch the news. It includes not only the price changes but also the reasons behind them, offering valuable insight. You could also learn about other commodities through mcx live.
  • The need to diversifyYou could diversify across different sectors or asset classes like bonds and cash instead of a 100% investment in stocks through online trading. While the percentage you invest in any of these is for you to decide, such a broad portfolio will surely reduce the risk of losing it all at once.
  • Evaluate your risksSince the risk is that you will lose out on the principal amount. Assessing financials help you gauge the money you can “spare” for investing in the market. Also, be sure to decide whether you can hold out the money for a long term or looking for to invest for a short term.
  • Volatility is short-termYour investments can rise of fall sharply in a short span of time. Long term investors would usually hold out and ignore such fluctuations. While others may prefer to trade and thus may do with Min losses or enjoy the profit at that time.

On a parting note, whatever be the situation you don’t be greedy. If you can cash out any of your investment and still be happy with the returns, you should probably take it. Unless you have the data to back your decision to hold out, sell it when the time is right. Understand that guaranteed money in stock trading is always better than potential earnings.

Algorithmic Trading Strategies

An algorithm is a set of instructions aimed at carrying out a specific task or purpose. In algorithmic trading, computers use such instructions to place trades and rake in profits at speeds and frequencies, which are must faster than that possible by humans. The factors that are considered when coming up with such algorithms include timing, price, and quantity. The advantage of algo trading is that it makes markets liquid and ensures trading is systematic. Here are some examples of algorithmic trading strategies that can be formulated after appropriate stock market research.

Trend Following Strategies

These are the easiest and simplest strategies, which involve following trends in moving averages, channel breakouts, and price level movements. There is no need for predictive analysis.

Arbitrage Strategies

Price differential trading where a dual listed stock is bought at a lower price while simultaneously selling it at a higher price in another market is termed arbitrage or risk-free profit.

Mathematical Model Strategies

Various mathematical models provide for trading on a combination of options and its underlying security.

Trading Range Strategy

This involves identifying a price range and the algorithm places trade orders whenever the price goes above or below the defined range.

Percentage of Volume Strategy In algorithms of this type, partial orders are placed till the entire order is fulfilled. The partial orders are placed as per the volumes traded in the market as well as participation ratios.

Time Weighted Average Price (TWAP)

What happens here is that a large order is broken up into pieces and released as smaller chunks into the market at regular intervals. The aim is to ensure the order is executed as close to the average price as possible between the start and end times.

Benefits of using algorithmic trading software are that trades are executed at the best possible prices, transaction costs are reduced, and there is no scope for manual errors while placing the trades. It can also conduct simultaneous automated checks on different market conditions. The requirements for algorithmic trading include appropriate stock market analysis software, technical analysis software, price feeds, Forex rate feeds, order placing and back-testing capability.

Forex Trading Strategy

Trading in Forex requires adherence to certain strategies in order to ensure that you make substantial profits. A single strategy may not prove effective to maximize profits, but a combination of different strategies can yield the results you are looking for. Currency trading strategies can be broadly classified into two—hedging and speculating.

  • Hedging: This is a means of protecting from losses caused by fluctuations in currencies. Trading in currency pairs can help avoid this.
  • Speculating: Here, predictions are made about which way a particular currency will move in relation to another currency.
    Other Strategies: Arbitrage trade is another type of strategy where the trader simultaneously buys and sells the same currency at slightly different prices hoping to make a profit on the difference.
  • Creating a Forex trading strategy is not easy, but by keeping a few things in mind, you can come up with one that works for you.

While drawing up a strategy for Forex trading, you must determine the reasoning for the trade, decide on the pairs of currency to be traded, and outline your trade objective. Remember to

Market data are often graphically depicted in Nifty charts through two ways, the OHLC chart or the candlestick chart type, the latter being more popular among day traders in the stock exchange. Both these charts show the same market data. The data consists of high, low, opening and closing prices for a particular time frame.

OHLC charts

The open-high-low-close chart (or the OHLC chart) typically shows movements in the price of a financial instrument like a stock over time.

  • Sort out for Forex advice – not all tips are good
  • Test and tweak your strategy – there is always room for improvement
  • Set stop losses – a winning streak does not last, so better to cut your losses
  • Look up to the future – don’t focus just on short-term targets

Money management, documentation, and analysis of results will follow. Studying the market is important to get a good understanding of the scenario. Tools such as forex trading software and Forex charts help chart out the various Forex indicators. Once a strategy is arrived at, it can also be used for purposes of online forex trading in India.

When trading with your strategies in place, keep track of all the trades that you make and study them later to ensure that any mistakes that might have been made are not repeated. Learning to read Forex trading signals assumes importance here. Keep in mind that losses are a part of the game especially when there is so much volatility in the currency market.

Futures Trading Strategies
Trading in Futures becomes simple with these strategies

Options and futures hold the promise of numerous opportunities in trading. These can be used in a combination or individually. If you know the bare basics of the working of these assets and are wondering how to trade in futures , look no further. Here, we shall explore the key strategies employed and understand the underlying reasoning.

Let’s get strategic

Generally, options and futures contracts try to forecast what the value of an asset will be on specified date in future. These values commonly correspond to an index or commodity. The various strategies employed by investors to make the rise and fall in the prices of these assets work for their advantage commonly include going short, going long and spreads.

Going short on investments

Here, the investor enters into a contract and thereby agrees to sell and deliver an underlying asset like oil futures at a fixed price. Here is a quick glance:

Agrees to sell and deliver an asset at a fixed price.
This is done through a contract for a future date.
By selling high now, the investor can repurchase the same when the prices fall at a later date.
By doing so, the person is looking to earn a profit owing to falling prices of that particular asset.Going long on investmentsHere, the investor enters into a contract and thereby agrees to buy and receive the delivery of an underlying asset like commodity futures at a fixed price. Here is a quick glance:

Agrees to buy and receive the delivery of an asset at a fixed price.
This is done through a contract for a future date.
By buying low now, the investor can sell the same when the prices rise at a later date.
By doing so, the person is looking to earn a profit owing to rising prices of that particular asset.Spreading investmentsHere, the investor takes advantage of two individual contracts with price differences for the same commodity. It is considered as one of the most conservative and safe forms of trading. Further, the different types include

Calendar spread: Here, two futures of the same type are bought and sold simultaneously. However, they differ in delivery dates.
Inter market spread: Here, the investor goes long in one market and short in a different market. Also, the contracts will fall in the same month.
Inter-exchange spread: This could be any spread wherein each position is created in two different exchanges like the NSE and the BSE.
Though these generic strategies are not extremely comprehensive, they can surely get you started on the path to futures and options trading. Successful investing is almost always backed by strong strategies. It is important to create strategies carefully and base them on thorough research of the market. However, it is also extremely crucial to strictly adhere to them, if one wishes to earn profits.

Intraday Trading Strategy
Intraday trading strategies to increase your profits

Intraday trading is when an investor chooses to take positions in the market that are meant to be squared off that very day. Such an investor is likely to carry out several trades every day in an attempt to capitalize on price movements. The advantages of intraday trading are that it involves absolutely no overnight risk, provides increased leverage on trade capital, and can help profit irrespective of the direction of market movement.

This type of trading can be quite challenging, but effective use of certain strategies can help you maximize profits with ease. Here are some examples.

Ensure Access to Fast Trading Terminals

Most brokers offer clients access to the fast trading terminals like NSE NOW. Speed and accuracy are crucial in intraday trading, which is possible on these terminals. A matter of minutes can spell the difference between profit and loss when it comes to day trading.

Live Data Tracking

Keeping updated on the prices of stocks you have invested in or following up on intraday tips is an essential component of intraday trading techniques High-quality intraday data is available through various sources and is worth paying an access fee for.

Think Small

Choose a limited number of stocks to trade in and do not try to get your fingers in too many pies simultaneously. No more than 10 stocks in a day should be where you draw the line. Following too many stocks can cause you to lose focus and lead to incurring losses and this is not the best indicator for intraday trading.

Slow and Steady

Once you come up with a good formula that suits your style of intraday trading, stick to it for a while. Initial losses are often overcome in a matter of weeks but patience is essential to ensure you do not jump from one formula to another due to a few minor setbacks.

Just remember not to put too much money at stake in intraday trading, especially when you are a novice. Fix a limit for each trade and come up with your own set of intraday trading rules. Do not be tempted to put too much in a single basket to ensure you stay in play for a long time.

Nifty Trading Strategies
Learn how to trade effectively in the nifty trading index

The National Stock Exchange of India (NSE) is the country’s foremost stock exchange and is located in Mumbai. It has a market capitalization amounting to over $1.65 trillion. This places it in 12th position among the world’s largest stock exchanges. Trading in the equities segment transpires five days a week except on certain holidays. The various products traded on the Nifty Index include asset management companies, index funds, world indices, unit linked products, and derivatives. Here are some strategies that can be used when trading on the NSE.

Index Trading

Index futures can be traded as a means of decreasing the risk to one’s portfolio. Diversifying one’s investment into different companies spread over different industries can help in this. Index trading is again made up of various strategies such as hedging strategies, speculative strategies, and arbitrage strategies.

Options Trading

Options are derivatives and can be of two types call and put. The prices are set through agreements between buyers and sellers. The capital required is less because all an investor needs to do is put up the Nifty margin specified. Also, unlike stocks, you do not have to hold on to it until it appreciates and can instead bet on the directional movement of a stock to make a profit.Nifty option trading tips are available a dime a dozen through various resources.

Swing Trading

This is when an investor takes advantage of short-lived price swings in stocks with strong momentum over a period of days or weeks. This is a great combination of investing and day trading which can help build up on those short term gains.

Day Trading

This is a challenging activity and might not be for everyone. A fast trading terminal and back testing are essential to success in this segment. Trading in a limited number of stocks can help minimize risks and maximize profits. As the term indicates, positions cannot be held overnight when undertaking day trading

Tools such as the Nifty chart can prove helpful in ensuring hassle-free trading when looking to rack up some short term gains. As the ultimate aim of all these strategies is making a profit, knowing when to get out is important.

Options Trading Strategies
A guide to the different strategies for Options trading

An option can be described as “a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date.” It is a derivative, which means it gets its value from an underlying asset. Stock options get their value from stocks while index options derive from the index or equity. Options have expiration dates unlike stocks and there are no fixed numbers. There are two types of options call and put.

You are sure to have wondered at some point about how to trade options. There are quite a few options trading strategies which, if used in the right manner, can prove quite effective. Here are a few:

  • Long Call Option: This is used when an investor is feeling bullish about the market and expect the price of a certain stock or index to go up.
  • Short Call Option: In direct contrast to the long call option, this is used when an investor is bearish and feels that the stock or index price is about to decline.
  • Long Put Option: This is favoured when an investor is bearish but expects the stock or index to rise.
  • Short Put Option: It is used when the investor is bullish but expects the stock or index to fall.
  • Short Straddle: This strategy can be used when the investor feels the stock is not very volatile and tries to earn the option premium on two contracts.
  • Long Straddle: This is used when it is believed that the stock is very volatile but the direction of the move is unpredictable.

A variation is binary options trading wherein traders place their bets based on whether or not they believe that a particular underlying asset will rise above a certain price at a certain time.

These strategies can be used individually or in various combinations to reap the most benefits. However, be sure to exit your trades at the right time and not have regrets later on. Be wary when choosing to act on any stock options tips which are not from trusted sources. Tools such as option calculator are easily available online to aid you.

Stock Market Research
Learn why it is important to research the stock market before investing

Investing in stocks today is very different from what it was a few years back. The amount of stock data and details usually makes the investment decisions seem difficult for an investor. To make informed investment decisions, the investors must be aware of the functioning of the stock market by doing adequate research and analysis of the stock market.

Stock analysis is done by either a technical analyst or a fundamental analyst. While the technical analyst studies the stock market chart patterns, the fundamental analyst reads the financial report and P/E ratios to advise on a position on the stocks.

Nifty charts are widely used to understand the overall trend of the Indian market. Nifty is the benchmark index of India and most traders prefer to trade on this index because of the liquidity it offers.

Technical traders study the Japanese candlestick patterns and plot the support and resistance levels on the chart. They also find out the trend of the market to be able to advise on a long or a short position on the stock.

Apart from this, there are a number of forex indicators that help you in confirming the trade. Relative strength index, Stochastics, Bollinger bands and MACD are a few among them. Most of the trading softwares offered by reputed brokerage firms give access to these tools.

Research analysts use the technical charts to advise on a future trading position on the basis of the history of the stock. They look for patterns on the chart like double top, double bottom and head and shoulders, which indicate a reversal in the stock trend.

Markets are very volatile and there are a number of factors that you need to consider before investing your hard earned money in stocks. It is important that you get proper advice and follow the stock market research provided by experts to take a trade.

It is also important that every trader judiciously follows the stop loss that is given by the analysts. Stop loss is used when the market does not move in your desired direction and instead starts making a loss on your trade.

The Stop loss lets you protect your capital and it is thus mandatory that you use them. Most novice traders do not understand the importance of stop losses and end up making huge losses or sometimes even losing their whole invested capital in the stock market.

Stock Trading Strategies

Use these strategies to maximize your gains while stock trading

For any active trader, earning profits on an investment through assets like stocks is the ultimate goal. Successful investors and brokers alike will vouch for the need to use time-tested strategies or even create news ones to make the best of the market changes. These, however, need to be based on a thorough stock market study.

Go strategic

Novice or professional, day trader or otherwise, along with a good understanding of the basics of stock market India, employing a strategy to base your trades upon is of immense importance. Effective strategies are the ones that are based on in-depth stock market research Here is a peek into some strategies that are frequently employed by market players to make the changes work to their advantage.

  • Breakouts are a way to take advantage of the changing trend of a stock price. Here, an investor looks for stocks moving up or down. The person then forecasts whether the price will break its previous high or low. Thus, recognizing the trend and selling or purchasing the stocks based on previous highs or lows increases the profit margins of the trader.
    Retracement involves identifying a stock whose price is rising or falling. Usually, even with such a change, there is a time duration in which the price of the stock moves opposite to the trend. Here, investors make the best of that small change. However, this needs to be exercised with caution and base trades on the correct identification of the underlying reasons for a change. Even so, this can prove to be dicey.
  • Reversals are usually employed by those who are technically inclined and base their trades on mathematical factors. When there are no clear indicators in the market, this method allows one to base trades on historical market data and certain statistical constants. Using these, the investor tries to forecast the most likely area of activity and bases the trade on it.
  • Momentumbased trades are not based on accurate knowledge of potential changes. The do focus on new trends and wide stock price movements. Here, one needs to be well-informed about the world and the factors that affect various industries. Some examples are events across the globe or changes in import regulations in a specific country. Thus, the investor is better placed to take advantage of the reactions to such events.
  • For stock trading in India, understanding the highs and lows, changing prices and the underlying drivers of change can prove to be extremely challenging for novices in the trade. But, technology has made it possible to track these changes and watch stock market through graphs and other advanced tools that are easily accessible.
Swing Trading Strategies
A basic guide to the severeal Swing Trading strategies

Traders are broadly categorised into two categories – day traders and swing traders. While day traders do not carry on to their open positions for more than a day, swing traders hold on to their trades for days and sometimes even for weeks or months.

Those who day trade enjoy a peaceful night’s sleep as they are not concerned about any unexpected news or economic announcement that may happen during the non-market hours. Swing traders, on the other hand, need to be aware of these to be able to figure out the impact of the news on the stocks in their account.

The advantage of swing trading is that swing traders can bag in much higher profits than the day traders. This is because they hold onto their positions for long and wait till the trend reverses. They are also able to take advantage of the gap up and gap down opening that happens during the pre-market session.

There are a number of swing trading techniques. One needs to be able to identify the support and resistance levels to be able to take a swing trade. They should also be able to identify the trend of the market. These two techniques together can help traders take a profitable trade.

While using swing trading forex , you can also make use of the swing trading indicators. These indicators along with the support and resistance levels can give you an added confirmation to take the trade.

  • Moving Average: MA is a very popular indicator, which lets you gauge the trend of the market. It is also a very widely used indicator by many traders.
  • Relative Strength Index: RSI is another popular tool, which indicates if the market is overbought or oversold. This can be used as a hint for a possible reversal in trend.

There are a number of swing trading softwares that you can subscribe to in order to have access to these indicators. It is, however, important to know that these indicators are lagging and cannot be used blindly to take a trading position.

Trading the market needs a lot of knowledge and in-depth analysis. It is thus recommended that you put your hard earned money into the market only on the advice of an expert. The markets are so volatile that any wrong trade may even wash away your whole capital overnight.

Swing Trading
Swing Trading: What is it?

Swing trading is a style of trading that aims to generate profit from price changes or swings of a stock within one or several days. Swing traders are not usually interested in the intrinsic value of the shares, rather they focus on the price trends of the shares that are determined by technical analysis of stock market charts, which help them identify the stocks that have some price momentum going on. This style of trading is usually preferred by at-home traders and day traders because of the ease to exploit short-term stock movement.

Swing trading being similar to day trading is a speculative based trading that relies heavily on the market trend and technical analysis for a successful trading. The basic swing trading methods followed are.

  • Bullish trading
  • Bearish trading
  • Fading trading

Bullish trading makes use of the uptrend of the market. Stocks usually move in a zigzag pattern. When several of these zigzag patterns are strung together the chart appears to be moving higher with some degree of predictability. This is the uptrend of a stock.

Traders look out for the initial movement upward as the major part of the trend followed by a counter trend. Traders enter the swing trade when the stock has resumed the original uptrend and exit the market when they find the profit target.

Bearish trading makes use of the downtrend of the market. The zigzag movement of the stocks in the downtrend also has the same high and low rules like bullish trading and the same rules can be followed to make gains in the downtrend.

Fading trading is the style of trading against the trend. Also known as counter trading, traders enter the market when the share swings are lower and make the exit before the counter trend ends and the stock resumes the main trend again.

Algorithm trading is a kind of trading using complex algorithm and formulas by a high-speed computer. This type of trading is usually done by investment banks, mutual funds, pension funds and other investor-driven buy-side institutional traders as it is useful in dividing large trades into numerous smaller trades allowing them to manage market risks and impact.

5 Common Active Trading Strategies

Every trader follows his own trading strategy. The strategy is well tested and suits his style as well as his risk taking appetite. Online share trading lets traders speculate the stock price movement and then place a buy or a sell order on the trading platform .Internal and external factors play a major role in deciding the trend of the Indian stock market. Long term traders buy and hold on to their stocks for a number of days or even months. Short term traders book their profit/loss within a day or in a few days. Traders who actively trade in the financial market adapt themselves to the market movement and use the trading strategies to maximise their profits.

Day Trading

Day trading, also known as intraday trading, is where the trader takes a trade and gets out of his position before the market ends. He is out of his position during the market hours and does not carry any overnight positions. This is one of the most active trading strategies. Day trading is mostly done by professional traders. Even though the gains from a day trade may be limited and the trader may not be able to catch a large movement in a trending stock, it does not carry with it any risk of events which may affect the stock price after the market hours.

Positional Trading

Positional traders hold on to their positions for days or even months. They usually catch the start of a trend and hold on to the stock till the trend breaks. The advantage of this kind of trading strategy is that the trader can bag in huge profits if the price moves in his direction. He is also able to capture the gains from gap up openings that occur during the pre market hours. The flip side of this trading strategy is that the trader will always be worried about any unexpected news or any global event that may happen during the non market hours.

Swing Trading

Once this is done, transfer money from your bank account to your trading account. After your account is opened, you will be given a login id and a password which will enable you to operate your account and carry out your trades. The institution you open your trading account with is likely to provide you with tips and analysis reports on stock prices and movement of stocks in the share market.

Tips To Remember

Traders who follow the Swing trading strategy use a lot of Fundamental analysis to decide on which stock to purchase and how long to hold it. Fundamental analysis is a broad study of market movement which takes into consideration a number of factors to arrive at the buy and sell price of a stock.

Scalping Strategy

This is a very active trading strategy which is normally followed by traders who look to capture small price movements in a stock. They try to capture the spread that causes price gaps. These spreads are caused due to speculation. The Scalping strategy is followed by aggressive traders who believe that catching even small price movements can give huge returns if done in a systematic and well planned way.

Fading Strategy

In this strategy, traders short the stock after it moves up rapidly. They do this under the assumption that the stocks are overbought and that those buyers who may have taken the stock early would start booking profits. This strategy is very risky but at the same time it is also very rewarding. A trader?s psychology plays a very important role in deciding the form of trading strategy that he chooses. There are traders who follow one or more of the above strategies to maximise their profits in the stock market. You can open a zero brokerage trading account with a brokerage firm to start trading in the Indian Stock Market .

Risk Management Techniques for Active Traders
Risk Management Techniques for Active Traders

Risk management is the key to successful trading. It is proper risk management that differentiates a profitable trader from a consistently loss making trader. Professional traders study proper risk management techniques and also follow them judiciously.If you are planning to start investing in the stock market, then it is important that you know the proper risk management techniques in order to make huge profits and cut your losses immediately.

Position size

Before jumping into a trade, it is important that you properly position the size of the trade .Once you decide on the risk that you will be able to bear, calculate the number of shares to buy by dividing the capital with the risk, also known as the stop loss. Round it off to the nearest whole number which is the number of shares that you should buy.

Stop loss

Stop losses are kept to cut your losses in case the trade does not go in your direction. Stock prices are very volatile .Without proper stop losses you will end up losing your whole capital in a single trade. It is because of this reason that stop losses are a must on each and every trade.

Diversify

Active traders do not invest their whole capital in a single stock. They diversify their portfolio .This is important since you may not end up making profit on each and every trade. If you spread your capital you will have a few loses and a few wins and thus your chances of profiting from the market will increase. Share prices tend to fluctuate due to a number of reasons. Diversification saves you from any sudden loss that may happen overnight in a single stock.

Let profits run

Fear and greed are the two psychological aspects that differentiate a professional trader from an amateur one. Professional traders let their profits run and at the same time cut their losses as soon as possible. Without proper risk management, trading in the stock market is a pure gamble. It is proper risk management that makes you profitable in the long run.

Candle stick charts: Methods and Patterns

The Japanese candlestick chart represents the Indian stock market data for a particular financial instrument for a given time period. Here, the opening and closing prices of the financial instrument defines a rectangle that lies within this range for a time unit.

  • Each candlestick has a wick. The top of the wick represents the highest traded price, while the bottom of the wick represents the lowest traded price.
  • The rectangular region in between represents the opening and closing trades.
  • Filled candlesticks indicate selling pressure where the open is more than the close.
  • Hollow candlesticks indicate Buying Pressure where the open is less than the close.
  • Long filled candlesticks indicate that the price increased considerably from open to close thus predicting buying pressure.
  • Long hollow candlesticks indicate that the price dropped considerably from open to close, thus predicting strong selling pressure.
  • In online share trading, digitally displayed candlestick charts come in various colours indicating higher closing and lower closing.
  • Day traders prefer this because these charts show the short term price movements, which are indicated by the expansion and contraction of the candlestick’s body. They consider this to be a more effective tool for market watch than other charts.
Candlestick Patterns

Candlestick charts build patterns that can predict the price direction in the financial market. More depth is added to the prediction with proper colour coding and this tool is extensively used by traders for formulating their intraday trading strategies. Some of the popular patterns are given below:

  • 1. Three-line strike carves out 3 filled candles inside a downtrend followed by a bar that opens lower than the 3rd bar but closes above the high of the first bar. This is treated as a reversal pattern.
  • 2. After a prominent top in the uptrend, two black gapping patterns appear with a gap showing lower lows, which indicate that the decline will continue further.
  • 3. Starting at the high of an uptrend, when three filled bars show lows that close near intra bar lows, it is known as the three black crows. It is predicted that the decline will continue to further lows.
  • 4. The evening star also predicts that the decline will continue. The pattern here is a tall hollow bar, followed by a higher small filled bar and ending with a filled bar.
Long Call Strategy
Long call strategy

A call option gives the holder a right to buy an underlying asset at a certain price (called the strike price), for a certain amount of time, in the share market and stock market fields. If the stock bought does not meet the strike price before its expiration date, the call option expires and becomes nil. Investors buy call options with a hope of a rise or sell depending on how it fairs.

The Strategy

Buying calls give the investor the ability to control the stock without actually owning it. Long calls have a good profit margin, as holders make their money when the stock goes up. The stock price has to increase above the given stock price and the premium at expiration. A good increase will benefit the holder. Long call strategy can fail if the stock price, at the time of expiration, is less the strike price plus the premium. The maximum risk a holder will go under is equal to the premium paid for the call.

Investors, who prefer investing for long call options, buy the underlying stock with an expectation of appreciation during the term of the call option. If before expiration, the price hits a good value, the investor will be able to sell the bought call at a profit. The Bombay Stock Exchange also gives its investor such call options. A long call strategy option is the simplest way to benefit out of the market if the holder believes a rise in the price, which is a common trend amongst the first timers. The risk is limited in the long call strategy option. The only enemy of the long call is time decay. Losing time means losing the value of the option bought.

Opportunities for Profits

Intraday trading strategies is a trick mastered by traders for day trading. These traders take part in the drastically changing market conditions and they are constantly looking for opportunities to make profit. Many of the traders also employ analysts to help them out with monitoring the market and ensure a profit.

Short Call Strategy
Short Call Strategy

A call option in share market or stock market is an agreement made that gives the investor the right to purchase a stock, commodity or a bond at a certain given price within a certain given period. Profit is made on a call option when the price of the asset bought increases above the price paid for it, also called the strike price. Such an option limits the value of risk to an amount equal to the strike price.

What is a Short Call Strategy?

A short call option is a type of a strategy regarding the above mentioned call option, which allows its holder to purchase a security / stock at a certain price during a certain time period in the future. If the holder of the option thinks that the price of the stock will fall between now and the date of expiration, the holder can sell short not only the stock but also the call option in itself.

When an investor decides towards investing for a short call option, the stock’s price must fall down in order to make profit out of the strategy. And the price should fall down at least to the price of the call option. Greater the fall, greater the profit made. However, if the investor’s strategy fails and the stock price rises, the strategy shall incur a loss for the investor. And as there is no stated limit to the increase in price, the losses can be unlimited too. The Bombay Stock Exchange too gives its investor such call options.

Short call option does not hold time decay as an enemy like in the case of long call option. Profits can be made from the fall in price of the underlying stock, horizontal fluctuations or even by a small rise. Short call option requires less capital investment and allows earning one’s interest as you trade.

Intraday trading strategies also give its holder the right to buy or sell a stock or security, but within that given day only. A lot of profits can be made with small price fluctuations during intraday trading. Day trading can be risky for the new players in this particular industry.

Long Put Strategy
Long Put Strategy

A long put option is a put option strategy in the stock market or share market, which is bought as an uncertain play if the price of an underlying index or equity falls down. In a long put trade option, a put option is bought through an open exchange with a hope that the price of the underlying stock will fall, hence increasing the value of options, which are long held in a portfolio. These options can be either be sold before its expiration (at a profit or loss) or held until expiration, at the time the investor must buy the stock at the market price at that time and then sell the stock at a stated price.

An Alternative for the Investor

The long put strategy acts as an alternative to the investor for selling a stock short, later on buying it back at a profit in case the price of the stock falls. In long put option, the investor is heading for a drastic fall in the stock price during the life of the option. This strategy goes well when it comes to long-term predictions for the particular underlying stock. According to this strategy, profit is made of the put option is the stock price falls down. An investor of such a put option has an option of making a profit without actually risking a huge capital, as a short put option might have to do. If the forecast is done right, the long put strategy option can give good returns.

In case there is a loss incurred, the maximum loss is also limited. In case, the stock price rises above the strike price, the holder continues to hold the position and the loss is the amount paid for the put in the first place. And, in case a profit is incurred i.e. the stock becomes worthless, then the holder has two options to choose from – simple give away the put for its value or hold the put to only sell its underlying stock at its strike price and buy an equivalent amount of share from the market, by merely investing nothing for it. The Bombay Stock Exchange gives such put options to its investors.

Intraday trading strategies also give its holder the right to buy or sell a stock or security but within that given day only. A large amount of profits can be made with small price fluctuations during intraday trading. Day trading can be a bit tricky for new players.

What is Scalping

The prices of stocks and securities change several times in the day. The change is visible when an order is placed and this gives an opportunity for traders to make a profit from movements in price. Scalping is a specific type of day trading in the stock market with short term gains as its primary motive.

Scalping is a trading style that focuses on making profits on small changes in price. For example, a trade has been entered in the Bombay Stock Exchange and once it becomes profitable it is sold immediately to benefit from the upward difference in price. The Scalper’s intraday trading strategies include moving in and out of the share market several times in a day. This is because these traders are extremely active in the hope of reaping a small profit on each trade which eventually adds up to a substantial gain towards the end of the day.

Scalping is based on the following premises:

Limited Exposure ensures limited risk : When the exposure is brief, it diminishes the probability of the effects of an adverse event on the trade

Smaller moves bring gain : For a big price change to happen, a massive imbalance of demand and supply is needed. However, it is far easier for a 1 rupee movement to occur than a 10 rupee price change.

A small movement in price is more frequent than large ones: Small changes in price always happen even in a relatively quiet share market and this movement can benefit the scalper.

There are three types of Scalping strategies and they include:

The first style of scalping is “Market Making”. The strategy employed here is that the scalper tries to gain by simultaneously by making an offer and a bid for a particular stock. This type of trading can only succeed on primarily immobile shares that are traded in large volumes without major changes in price. The profit in this type of trading is so little that any movement which is against the trader’s position will warrant in a loss.

The second style is done when a large number of shares are purchased are sold for profit on a very tiny movement in price. This approach requires a very liquid stock for easy entry and exit.

The third type is very close to the traditional style of trading. The trader enters the amount of shares and closes the position on the first exit signal generated.

This method of investing can be profitable for traders because short market exposure and frequent small changes in price can result in a substantial gain.

How to Set a Stop-Loss

A market movement in price is very unpredictable and using a ‘Stop loss’ is one of the most widely used strategies to prevent losses. A ‘stop loss’ is an order the trader issues to automatically exit a position when a particular stock has reached a certain price in the national stock exchange. As soon as the stop loss price is reached, the stop loss order gets converted to a market order. This method is designed to mitigate losses and manage risks effectively.

Stop loss are critical for several reasons but essentially to limit losses because of the unpredictability of the future and unknown prices which makes each trade risky. Hence, stop loss is to overcome emotional responses to a loss as well as the unreliability of other indicators. Technical Analysts in the share market have created multiple stop loss principles that can be used by traders to minimise their risks. All of them are closely related to money, time or indicators and each of the concepts is either a self-adjusting one or a fixed trading rule.

Traders can choose a ‘stop loss’ method that works best for them:

The 2 Percent stop Loss : This method states that a stop loss has to be initiated when the equity shares reach 2% of the initial share price.

Trailing Stops : This type of stop loss uses a dynamic process that typically trails the price. The stop is raised as the trade makes a profit and the trader is expected to maintain the losses that can be tolerated at a constant amount or on a percentage basis. This style calls for entering the stop loss on a daily basis and keeping the stop updated to prevent losses.

Indicator based stops : This style of stop loss is dependent on the indicators and price action used and these stops can be self-adjusting or fixed. Some commonly used one are:
Previous 3 day rules : It advocates exiting positions if the price crosses the lowest low of the previous 3 days.

Moving Average Stop Loss : When investing you can use a different indicator that is not part of your sell/buy range and adopts the moving average to set a stop loss.

Average Range Stop : This is applied just above the maximum normal range limits taking the daily high-low range and expanding it by a constant percent of this range.

Time and Calendar Stops : When a particular trade is going nowhere, it is sensible to exit the trade and invest in a stock with movement.

A stop loss is a simple tool to use in the financial markets and can be used to lock in profits or mitigate excessive losses and works like an insurance policy.

Trending Market Trading Strategies

Markets typically have the tendency to trade or trend, which is how they move up, go sideways or go down. A trending stock market is one in which prices move strongly and particularly in one direction; either upwards or downwards. Another characteristic of the trending market is the steady move to higher lows and new highs. Similarly, in a down trending scenario, the market price is inclined towards lower highs and lower lows. Hence, the trend traders seek to segregate and extract profitability from following trends.

There are several ways to follow trends and one single indicator may not be enough to generate profits as online share trading involves many other factors as well. However, certain indicators remain popular among traders as they have stood the test of time. Here are some strategies and general guidelines that can be used to build a personal approach for trend trading:

Moving Averages

This creates a smooth price data by generating a flowing single line representing the average price of the stock over a period of time. The timeframe determines the choice of the moving average a trader decides to adopt when trading on the Bombay stock exchange. For long term trend followers and other investors are following a 50day, 100 day or a 200 day simple moving averages are most sought after.

Moving Average Convergence Divergence (MACD)

This displays the relationship between two moving averages of prices and is a trend following momentum indicator. MACD is primarily used for trend trading and share traders commonly use three methods to understand MACD. They include: 1). Crossovers 2) Divergence 3) Dramatic Rise

Relative Strength Index (RSI)

This is a technical indicator which captures momentum and does a comparison of the magnitude of ‘recent gains’ to ‘recent losses’ with an aim to capture the over bought and over sold conditions of trades in the stock market. It measures the magnitude and velocity of directional movements in price.

On Balance Volume (OBV)

Volume is a big indicator and hence, a valuable one. The OBV looks compiles the volume information into a signal ‘one line indicator. Typically, volume confirms trends and a rise in price should follow a rise in OBV and similarly a fall in price should follow a fall in OBV.

Non-trending Market Trading Strategies

Traders make a profit from catching prevailing significant trends and they can lose capital if they are on the wrong side of trends or miss spotting them. However, it is said that markets display trends approximately about 35% of the time and for the rest 65% of the time it is trend-less. The market typically consolidates before major market trends and for traders to remain profitable they must know how to exploit market conditions and not lose money when the market does not show any significant trend and becomes trend-less. Traders need to develop skills in the stock market to:

1. Identify non-trends in markets to avoid loss and retain their capital

2. Identify and exploit the trendless market to their advantage

3. Trade in options or scalping for profit consolidation and while waiting for the next trend to emerge

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