what is Stock Market?

A long  time ago, humans ran businesses with just their money. The businesses  they ran were small and they grew the businesses only with their own  profits. However, not all businesses can be built with your own money.  What if you wanted to build a new factory that costs more than a million dollars? Banks won't lend money for young companies and your friends won't have that much.

In the 15th-16th century as the Europeans started exploring Asia and Americas, the big explorers felt they needed a lot of money and their kings were not providing them anymore. The wealthy guys demanded a lot of interest. Thus, they felt they need to raise money from a bunch of common people. Thus, in 1602, the Dutch East Indian company became the first company to issue shares of its company in the Amsterdam Stock Exchange and get traded on a continuous basis.

What is a Stock? 

Stocks  in a company provide you a share of the company's future profits in  return for the capital invested. For instance, if you buy 1 stock of  Apple now, you will be assured one-billionth of  Apple's profits in the  future (as there are almost a billion such stocks that Apple has issued  now).

Listing: In  a stock market, 1000s of companies are listed and these companies  (called public companies - as they have given out their shares to common  public) pay a fee to the exchanges, along with a promise to provide all  important info to the markets. In return they get an opportunity to put  their company in the stock market's board & have the ability to get  money from people visiting the market. The first time a company's stock  appears on the stock market's board is called an IPO (Initial Public Offer).

Brokers: Conceptually,  a stock exchange is similar to eBay. These guys allow companies to  be listed and connect the buyers & sellers. Since millions of people  trade in the market and it is practically impossible for these  exchanges to deal with all the individuals, they have assigned brokers who act between the exchanges and the individuals.

DIFFERENCES BETWEEN INTRADAY TRADING AND DELIVERY TRADING. WHICH ONE’S BETTER FOR YOU?

If you invest in share markets, then you would have most likely heard of Warren Buffett, the greatest investor of all time. Some of the shares in Warren Buffett's portfolio were picked up almost 20-25 years ago. But frankly speaking, most of us are not like Warren Buffett and holding shares for years at a stretch is not everyone’s cup of tea.

For those who are not interested in long term investing or more specifically delivery trading, there is an alternative in the form of intra-day trading waiting for them. And this is a place where thousands of small investors try to make a fortune every day, by tracking minute by minute change in share prices. 

The Difference

You can trade in two different ways in share markets. You can either do intraday trading or you can opt for delivery based trading (investment). Intraday trading is typically completed within a day – this means that you have to sell the shares that you have purchased on that day before the closing of markets. Even if you don’t sell the shares by yourself, they are automatically squared off before the closing. On the other hand, in delivery based investments, you are not required to buy and sell shares within a day and you can hold them for as long as you want.

Advantages & Disadvantages

There are quite a few advantages of Intraday Trading, the biggest one being that you are allowed to buy shares without paying the full price of the shares (Paying only the margin money). The market makers allow you pay only a part of the price to hold the shares. So, you can gain more by investing less. But this means that your losses would be higher as well. 

Intraday trading also allows you to short sell the shares – selling shares even before buying them (but buying before market closes). This is one benefit that can give you profit even when the price of the share is sure to fall. 

The brokerage for intraday trading is always lower than that for delivery trading.

One of the biggest disadvantages of intraday trading is the time frame. No matter how confident you are, you have to sell the shares within a day. So, if the share loses price, you are sure to lose money too. You also do not get the benefits of long term investment like dividends, bonuses etc. in intraday trading. Another negative aspect of intraday trading is that it can become quite stressful as you need to monitor the markets continuously. And with daily profits and losses, it can take a toll on a trader’s mental well being.

Choosing between Intraday & Delivery Trading

Unfortunately, the lure of quick money sucks in investors who should ideally stay away from intraday trading. Intraday traders buy shares for just few minutes or hours whereas delivery traders might buy for months or years. 

Now if you, as an intraday trader can judge the mood of share prices at regular, small intervals, only then should you think of intraday trading. You must be good at technical analysis. There are many technical tools that also help in predicting short term share price movements. Fundamentals play smaller role in intraday trading. 

But if you think long term investing is better suited for you and you pick shares on the basis of evaluating a company’s intrinsic value, etc., then delivery based trading is what you should be looking at.

WHAT SHOULD I KNOW BEFORE INVESTING IN STOCKS?

Investing in stocks is an interesting decision that you might take at some point of your work life. Though it sports a promising outcome, stock investment includes its own dangers which can be easily tracked and solved. But, it is to be remembered that you have full knowledge on what you are investing and how much you are putting in. Being a 19 year old, I am already excited to start investing and buying shares from companies, so I am pretty sure investing in stocks is everyone’s dream of the day. In order to actually give a nod and start the whole investing process, you need to at least keep in mind the following criteria,

1. Stocks represent actual money. Always be sure of the company that you are going to invest in. When you buy some share of stock, you are buying a small part of the firm, so it is of utmost priority that you choose the correct firm.

2. It is recommended that you choose already booming companies while purchasing shares of stock so that you have minimal guarantee that you are not going to lose your money even though the market starts falling down.

3. It is a well known fact that the best time to sell your shares is during the month of Christmas so that you make the best profits off your investments. Once you sell your shares back, you are always free to invest your extra income in another trustworthy firm of your choice.

4. Before actually buying your desired shares, you could make a background check on the company and look into its present stock rates, its per-capita, turn-over range for the year and the profits on each share of stock. Basically, you have to go through the company’s annual reports for a complete picture.

5.  Constant surveillance of the ups and downs in the daily census is considered a good habit if you are truly into investing in stock.

6. Some companies/small scale business groups that are new at the market promise you with huge profits at less investment rates. It seems a fair deal but it is quite risky that you give a green signal to such offers in the investment sector.

This particular mode of investment is a really fragile move that you need to take choosing the best of choices available. Contacting a professional stock broker before you actually sign the deal is considered to be the best option that you could choose while diving into the world of investments. It is also important that you do not discourage yourself when your first investment was not as fruitful as you expected it to be. Just say to yourself, ‘better days are just around the corner’.

EFFECTS OF MERGERS AND ACQUISITIONS ON STOCK PRICES

Stock prices of listed businesses are highly sensitive to changes in the equity market and this aspect can be attributed to economic and political factors as well as health of an organization in focus. Economic and political factors pertain to monetary & fiscal policy, exchange rates and governance while the health of an organization is gauged by the overall performance of the company (payment of dividends, mergers and acquisition, restructuring-layoffs etc).Thus, investors are always advised to adopt a holistic research approach while investing in equities.

Understanding mergers and acquisitions

“Mergers and Acquisitions” (M & A) concept is one of the key business decisions that have profound effect on stock prices. In simple terms, a merger is a process when two independent firms or entities become one i.e. process of amalgamation. Acquisition, on the other hand, can be termed as buying out of one company by another. Here, the acquirer attains full management control of the other entity. 

Stock prices get affected in two ways when an acquisition takes place, one is the price of the acquirer and other is that of the organization which is being acquired. Usually, the latter is recipient of better advantages. 

A popular example of acquisition is that of European steelmaker, Corus by TATA steel while that of a merger is when Godrej Consumer Products merged with the erstwhile Godrej Sara Lee. 

As a word of caution, all mergers & acquisition do not necessary have a positive outcome. For instance, the buyout deal between Time Warner & AOL, touted to be the most promising one looking at market capitalization of the parties involved, ended on a sour note with both entities breaking the contract (de-merger). The result was the crash in AOL stock prices.

Mergers & Acquisitions can take place for the following reasons: 

• Increase the economies of scale.
• Widen the portfolio and the demographical reach.
• Achieve domination in the market i.e. two relatively smaller companies can merge and take on the market leader.
• Tax purposes: They receive tax sops but this criterion is pretty implicit.

So how do M&A’s affect stock prices?

Here are few pointers which will provide a brief snapshot on the affects that Mergers & Acquisitions have on stock prices.

1. For an acquirer, the impact on stock prices depends on the target being acquired. Accordingly, if the market sentiment is showing positive response and believes that this M&A will lead to an optimistic outcome (growth prospects & profitability), the shares will appreciate accordingly. Conversely, a negative sentiment or a neutral attitude will either reduce the stock price or would not show much variation in the current value.

Elaborating on the example given before, when AOL announced its intention to buy Time Warner, the former’s share soared 800-fold. However, due to certain factors, the deal was broken and AOL was then estimated to be worth 3.4 billion $ (a fraction of what it used to be in its heydays). 

In a separate instance, at the time of being acquired by Google in 2011, Motorola Mobility shareholders received $40 a share in cash, an enticing 63% more than the closing price of the same share on August 12 in New York Stock Exchange. 

And in case an acquisition is made by liquidating the acquirer’s stock, it might see decrease in the pricing since the shares are floated on large scale in the public market but the same can be reduced, if the company can convince the existing share holders to buy back at the same prices.

2. For an entity being acquired, usually the share prices see an increase as the acquirer will be buying out the stocks. Also, if the deal is seen to be beneficial in long –term, there would be an increased demand for its stocks, thereby increasing the unit price.

HOW TO EVALUATE A COMPANY WHEN BUYING ITS STOCK?

Owning a company’s stocks represents ownership in the business – be it customers, employees, assets, suppliers, etc. A stock is not just a ticker trading in markets and behind every stock, there is an actual business.

So when you want to find a good stock worth investing in, it actually means trying to find out a good business that is priced at a reasonable valuation.

A company’s stock can be evaluated in many ways. Here's more on how to choose a stock:

1) Buy What You Know

Choose an industry or a company that you are familiar with. You will never give money to a stranger unless you are sure that it will be returned. Right? The same principle applies to stock investing too. Just ask yourself – “Can I really understand this business?” For example - I know nothing of the pharmaceutical business as I’m not a doctor – so I will be better off buying stocks of companies in that sector.

2) Valuation

Investment professionals often look for stocks that are "cheap" or "undervalued." And the reason for a stock being undervalued is down to the fact that investors are paying a relatively low price for each rupee the company earns. This is measured by the stock's price-to-earnings ratio, or P/E. Very roughly speaking, a P/E below about 15 is considered cheap, and a P/E above 20 is considered expensive. 

But there's more to it than just that:

Know what kind of stock you're talking about. A company that's expected to grow rapidly will be more expensive than an established company that's growing more slowly. Compare a company's P/E to other companies in the same industry to see if it's cheaper or more expensive than its peers.

Cheap isn't always good, and expensive isn't always bad. Sometimes a stock is cheap because its business is growing less or actually slowing down. And sometimes a company’s stock is expensive because it's widely expected to grow rapidly in terms of earnings in the next few years.

3) Financial Health

All public companies have to release quarterly and annual reports. Don't just focus on the most recent report. What you're really looking for is a consistent history of profitability and financial health, not just one good quarter.

Generally, stock prices increase when companies are making more money, which usually starts with growing revenue. So look for companies which have a history of consistently growing revenues.

The difference between revenue and expenses is a company's profit margin. A company that's growing revenue while controlling costs will also have expanding margins. A company earning higher margins is a much better investment than the one which earns lower margins.

Know how much debt the company has. Generally speaking, the share price of a company with more debt is likely to be more volatile because more of the company's income has to be directed towards servicing interest and debt payments.

4) Dividends

A dividend is a cash payout to stock investors. And it is not only a source of regular income, it's a sign of a company in good financial health. But remember that not every company pays a dividend. In fact, many fast-growing companies prefer to reinvest their cash rather than pay a dividend. Large, steadier companies are more likely to pay a dividend than are their smaller, more volatile counterparts.

When picking stocks, you should keep in mind that you are becoming part owner of the company. And keeping aside short term market movements, your investment will eventually depend on actual health of the business. So pick stocks of only those companies which are operating in simple, predictable, growing and high margin businesses.

ADVANTAGES AND DISADVANTAGES OF INVESTING IN COMMERCIAL REAL ESTATE

You were always interested to have income generating property in your investment portfolio to diversify your funds.

It is a wise thought but a word of caution to all those investors!

Where there is money involved with lucrative returns, there is bound to be risks occurring. Thus, before investing, take time and analyze the advantages as well as disadvantages of the proposal to make an informed decision.

There are two ways of investing in commercial real estate. One is through direct investment and the other through REITs.

Let us now analyze the benefits versus risks of each plan independently which will help you in the decision making process.

Direct ownership. An individual can come into possession of the said property by purchasing directly from the property developer or through a real estate broker/agent.

Pros.

• Regular income source in addition to the primary revenue inflows.
• It requires limited operational management and monitoring unlike other businesses.
• Useful asset which can be used for taking loans or as collateral when funds are required.
• It is one of the few assets which appreciates with time, if the market is favorable. Also, an investor can reap more than 100 % of the initial investment which many financial products in the market cannot offer.

Cons.

• Huge investments which may run into crores depending on the location.
• Properties are ridden with litigation. Hence, the buyer has to do extensive research before buying.
• Property as well as the income from the property is taxable and it is on higher side when compared to other available instruments in the market.

The property market is subject to fluctuations. Hence, the income generated may vary with the current estimated value.

REITs. If you do not have the required capital or risk appetite (as property prices are prone to fluctuations) to directly invest in commercial real estate, do not fret. Invest through REITs!

REITs or “Real Estate Investment Trust” is an enterprise that owns or finances income producing properties and by buying their shares, one can become a part owner but without the risk or huge expense involved. REIT’s invest in income generating properties and the revenue from the same is distributed to individual share holders as returns or dividends. Usually, REITs specialize in only one category be it office spaces, warehouses, shopping malls, residential units etc.

REIT’s investment pattern in property is of three types: -

1. Equity REIT’s: The concerned enterprise fully owns the revenue generating property. One distinct difference between Equity REITs and real estate entity is that the former should purchase and develop its properties principally to drive income but the latter can sell it and is not liable for continual engagement with the owners.

2. Mortgage REITs: These enterprises extend loans to real estate firms or property management group, directly or indirectly. The returns churned out from the same are passed onto its individual shareholders.

3. Hybrid REITs: As the nomenclature goes, it is a combination of both – Equity and Mortgage. The percentage in each category depends on the risk appetite of the enterprise.

Pros:

• Regular income source in addition to primary revenue inflows.
• The investor enjoys the flexibility to be part owner of desired real estate project without massive investments i.e. investors may not be able to afford direct investment into lucrative and up market properties.
• Investment in direct property cannot be easily liquidated, if required. This is not the case if investment in property is done through REITs. In case of the latter, if funds are required on a short notice, shares can be traded and required amount realized.
• Minimal or no requirement of operational management.
• Transparency and flexibility are among the most critical benefits that an investor receives in REITs. Transparency is possible since the investment happens through trading of shares in an open market which is regulated by a government body. Flexibility is offered in terms of buying and selling the shares.

Cons:

• Since the returns are market linked, there is always bound to be risk on the level of proceeds.
• If the said enterprise is declared bankrupt or forecloses, the entire risk of losing the money will be the responsibility of the investor.

TAKE SMALL STEPS TODAY

We are all aware of the artistic genius that was Michelangelo and his most beautiful piece of work: the Sistine chapel in Rome.

Before you think there’s no link of him to money, let me assure you there isn't; but for this beautiful quote of his that cannot emphasise more the value of time.

I've often heard friends /clients say " I'll start saving once I get married, I'll start saving once I'm 30, I'll start saving once the sun rises from the west " etc.. The excuses are many.

The only thing that one is hence losing is time.

Let me explain it in a crude manner :

1. Monthly savings: let's say I think 3000 is too small an amount to save every month and I shall wait once I have a lakh or so to start saving. In a perfectly sensible scenario I would start saving 3000 rs a month which translates to 36,000 annually and with a small interest component could mean a saving of 40,000 a year. Yes, for a large part of people 3000 rupees means one weekend exp/ or one trip to a High street fashion store. The perfect Time to start monthly savings is now ! This has nothing to do with age / timing etc. the perfect time to start is today, no amount is too small!

2. Cost of insurance: the cost of a term insurance for a perfectly healthy male of 27 for a sum assured of 1cr is around 13,000 ( offline insurance ) , while this person chooses to wait and takes an insurance at 31 once he has fixed that date for his life to change the cost of the same insurance is around 20,000 rupees. In the scenario that he got a high BP/ diabetes (yes, these days you get at even such an early age) in this period of 4 years he will be rated up on the policy and his premium increased.

It is imperative to start saving when you are young so as to insure yourself from all future risks. It Is a very simple and logical way to progress and I've tried to put it very simply . It is small changes that we do in time that make sure we are well protected .

India Expects Economy to Grow 5.5% This Year

India’s government Friday projected stronger economic growth this year as investments gradually pick up, but cautioned that a weak rise in revenue is weighing on efforts to improve finances.

The south Asian economy would expand 5.5% in the year through March, the finance ministry said in a report placed in Parliament Friday.

The projected growth rate is at the lower end of the 5.4% to 5.9% band forecast during the federal budget in July and reflects a modest recovery from the below-5% expansion in the past two years.

However, the government acknowledged that it faces serious challenges in improving its finances, which have been pressured by high spending and slowing tax revenue.

“Adhering to the fiscal deficit target of 4.1% of gross domestic product in 2014-15 is a major challenge,” the ministry said. “A pickup in economic activity in the second half of the year is critical to prevent a slippage.”

Indian executives and economists have been optimistic that India’s economy will recover this year from its worst slowdown in decades as the country’s new government hastens long-delayed policy changes to boost business and restore investor confidence.

Prime Minister Narendra Modi’s government has taken a number of steps such as to allow greater foreign investments and cut bureaucratic red tape, which have helped initiate an early recovery. But the lack of bold policy moves has disappointed analysts, prompting many to temper their optimism.

Data issued late November showed growth in gross domestic product slowed to 5.3% in the three months ended Sept. 30, from 5.7% in the previous quarter, stoking concerns that the recovery may already be losing steam.

Indian industry has been pressuring the central bank to lower interest rates for supporting the recovery. The government too has been supportive of its demand, even though the Reserve Bank of India has so far refused to give in to the pressure.

On Friday, the government raised the pitch for rate cuts, saying that the RBI’s interest rate policy appears to be “historically tight” given the sharp decline in inflation.

If the RBI continues with its current policy, real interest rates will reach levels last seen a decade ago when asset prices were surging and the economy was overheating, it added.

Top trading ideas

In State Bank of India (SBI) there is a trade, it is up around one percent so we should see it 

expiry somewhere over here only. So, we are suggesting a ratio trade where you buy 310 Call and sell two 320 Calls. You are investing close to around Re 1 or 0.50 paisa, that is our loss.

If SBI remains any value less than Rs 330 that is the maximum value you can lose. In fact if SBI goes any value between Rs 310 and 330 you will make profit and Rs 320 is where you will make maximum profit of around Rs 9.50.

If you look at metals, Hindalco Industries has been quite outperforming compared to Tata Steel or Steel Authority of India Limited (SAIL). After this at least short covering rally that we are seeing, it should remain anywhere between around Rs 150 on the lower side to Rs 165 on the upper side.

So, we are suggesting just from this expiry series perspective, sell 140 strike Puts of Hindalco. What is happening is because of the movements that we had in the last few days, implied volatilities are quite high at around 47 percent, hence even the 140 Put is available at close to around 0.45 paisa.

India remains attractive investment destination: Survey

India remains one of the most preferred investment destinations for global investors while domestic companies expect stable economic conditions in the near term, says a survey.

Leading consultancy EY said that Indian businesses expect stable economic conditions in the near term, both on the global and domestic front. Such a scenario augurs well for the country's M&A landscape, it added.

The findings are part of EY's recent Capital Confidence Barometer report, which is based on a survey of more than1,500 executives worldwide.

"India continues to retain its attraction for global investors and remains amongst the top three preferred destinations for investment," EY said today.

According to the report, political stability, positive credit outlook and upbeat expectations on corporate earnings are contributing to a positive outlook for the country's transactions environment.

About 56 per cent of Indian respondents felt that domestic economy was improved while 42 percent expecting the economy to remain stable.

"The government's focus on reforms to attract enhanced private investment, accelerate GDP growth rate and reduce fiscal deficit, have contributed to creating a positive environment for M&A," Amit Khandelwal, National Director and Partner (Transaction Advisory Services) said.

Technical tools used to predict stock market trends

Day trading in stocks is risky, more so if you are untrained. However, if you have an eye for spotting market trends, you can make a neat pile in quick intra-day deals. There was a time not long ago when trading was a simple game of buying and selling stocks based on one's conviction. Now, technical analysis- a science of predicting future prices from historical price data-has given investors new tools. "Technical analysis increases the probability of your call being right," says Abhijit Paul, assistant vice president, technicals, BRICS Securities. But, we reiterate what we mentioned in our report, "The Kick of Quick Bucks," in the October 2011 issue, though day trading looks easy, nobody can take the right call every time and there will be days when one loses money, at times a lot of it.

How it works

Technical analysis is done on the basis of historical price movement plotted on a two-dimensional chart. One reason it has become popular is that anybody can look at the chart and see how prices have moved.

For example, in the chart, Easy Reading, you can see open, high, low and closing prices of the Bombay Stock Exchange Sensex on July 7, 2011.

How to pick a stock

Good volume and volatility are a must to gain from trading. While volume should ideally be at least 500,000 shares, the stock should have a high beta, or volatility. This means if the index rises 1%, the stock should rise by more than 1%. Those who don't understand the concept should see to it that the difference between intra-day high and intra-day low prices of a stock is at least Rs 10.

Identifying the right stock and fixing a stop-loss level is a must, says Paul. One must stick to the stop-loss. Generally, stop-loss is fixed at 1.5-2%, which means the stock is sold if it falls 1.5-2% below the purchase price. Big traders generally fix stop-loss at about one-third of the expected profit. For example, if they expect a stock to rise 10% in three days, they set a stop-loss at a point the price falls by 3%.

Once you zero in on the stock, look at its volumes and price trends. Generally, higher volumes with higher price rise indicate an uptrend, but it should not be considered a thumb rule. "Volume is misread by a lot of people," says John Barrett, an instructor at Online Trading Academy, which teaches stock trading. Big volumes and large moves sometimes throw up big tops and bottoms, says Barrett. This means if both volumes and prices are increasing, it may be the last leg of the rally.

Stock Trends

Identifying trends is important. But how do you spot a trend? It's difficult, as the market never moves in a straight line. A stock will never fall continuously on a given day and rise on another. "Generally, higher highs and higher lows indicate an uptrend, whereas lower highs and lower lows mean a downtrend," says Shrikant Chouhan, senior vice president, technical research, Kotak Securities.

"Look at the trend. Look at news related to the stock," says Chouhan. For example, if the rupee is falling against the US dollar, it's common knowledge that technology companies will gain.

Analysts and market experts take the help of various parameters to confirm if a stock is a trade pick. The most used are available in any technical analysis software. These include 200-day moving average, relative strength index, moving average convergence divergence, or MACD, Fibonacci retracement and candle stick price chart. The terms may sound daunting, but software available nowadays makes technical analysis easy.

Moving Averages

One of the widely used tools is the 200-day moving average. You simply have to plot the 200-day moving average on the price chart. When the price of the stock rises above the moving average line, it's a buy signal, and when the price falls below the moving average line, it is a sell signal. One can also look the 50-day moving average or the 10-day moving average. Trading is a game of probability. So, you have to arrive at your own methods to decide which parameters suit you the best. In the graph, Moving Averages, you can see the Sensex movement compared to the 200-day moving average of the Sensex. The brown line is the moving average line. In February, the line went above the price bars and the Sensex started falling. When the 200-day moving average fell below the price bars in April, the markets started going up. In thegraphic, the Sensex is below the moving average, indicating bearishness. But this is just one parameter.

Relative Strength Index (RSI)

RSI compares the magnitude of recent gains to recent losses to see if an asset is oversold or overbought. RSI is plotted on a scale of 0-100. Generally, if it is above 70, the stock is considered overbought and so one can look to sell it. Similarly, an RSI of less than 30 indicates the stock is oversold and can be bought. In the chart, Relative Strength Index, you can see that RSI was near 20 in October 2011, signaling that L&T's shares were oversold. It reversed from 20 and the stock moved up.

Moving average convergence divergence (MACD)

This is a very important tool used by technical experts. You just have to select the MACD and plot it on a chart. The MACD comprises two lines, fast and slow. The fast line is the difference between the 26-day exponential moving average and the 12 day-exponential moving average. The slow line, also called the signal line, is the nine-day moving average. So, the blue line in the chart, MACD, is the fast line and the brown line is the slow line. With technology, these calculations are automated and a graph gets plotted at the click on the mouse.

When the fast line crosses above the slow line, it's a buy signal, and when the slow line crosses the fast line, it's a sell signal. The chart shows that the MACD is the best way to predict the movement of a stock.

Fibonacci Retracement

Fibonacci retracement is based on the assumption that the markets retrace by a few predictable percentages, the best known of which are 38.2%, 50% and 61.8%. So, when the market retraces 38%, it will generate either a sell or a buy call depending on the trend.

You have to plot Fibonacci retracement from the peak price. The software will give the above mentioned retracement levels. When the price reaches the 38.2% level and bounces, it means the price of the stock at which the chart plots the 38.2% retracement is the support level and you can buy. However, if the price falls below the 38.2% level, you may look at the price at 50% retracement level as your next support. The chart, Fibonacci Retracement, shows how the 38.2% retracement is working well for the Ranbaxy stock.

Support and Resistance 

You may hear or read technical experts recommending support and resistance levels. But plotting support and resistance and finding it yourself is a simple job. As you know, prices move in a zig-zag fashion and form lows and highs. A support is plotted at the daily low price and resistance at the daily high price. For example, in the given chart, Chouhan says he sees support of 4,700 for the Nifty and if the index falls below this, it may fall further to 4,300. He has plotted resistance at 5,177 levels. Take a look at how he managed to get support and resistance for the Nifty from the October 7 graph, Support and Resistance.

How To Avoid A Bad Stock

In stock market, you need to identify the good and the bad stock. You should be able to know how to avoid a bad stock. When you trade stocks you need to understand and also undertake some very important decisions based on how you are going to trade with your money in the Indian stock market. You should know the tips and tricks to invest in the stock market.

How It Works?

When you wish to go for stock trading, you should be able to know how it works. Normally stocks are traded for money. You should remember that the price of the stocks fluctuates throughout the day and so it is always advisable to buy stocks at a certain price in the morning and then you can sell it for higher price when the business closes. You never know when you are going to earn huge income or incur huge losses in your investments in the stock market. So, it is very important to understand the different functions of the stock market. You should be able to get all the information and also how different concepts of the stock market like NSE, BSE…etc functions in the economy. Unless you know all the functioning of the stock market, you would not be able to make good income from the investments that you have made in the stock market. So try to grasp as much knowledge as you can if you really want to make a mark in the stock market. You should be able to know the advantages as well as disadvantages of investing in the stock market.

Some Important Advice For You

Now let us look at some of the important advice that you need to follow in order to be successful in the stock market. The most important thing you should know is that you should never chase sudden move stocks. It is very important that you buy stocks before movement. There are many people who usually buy lots of stocks and this is the main reason why stock prices go up. You should always suspect of rapid shifts in price. It is a very habit for investors who tend to look for rapid movement and then jump on the bandwagon. So do not buy late. There are some greedy investors who set themselves up for a major and huge downfall. So it is very important that you remain patient when it comes to choosing your stocks. It is always better to stick to a patient stock investing plan.

The worst mistakes that many investors make while investing in the stock market is that they go by the advice of their friends and at the end of the day they are left with nothing as they lose all their money in the stock investment. It is very important that you make a good study of the market before you are willing to invest your hard earned money in the stock market. You should never be careless and go by the advice of your ignorant friends. Remember that a small mistake can make you go bankrupt.

Read Books Or Go Online

You should read different books on stock market or you can also research through the Internet. In this case, you can get some share tips and also be able to know the current market scenario. There are some websites where it provides you with online instructions on how to trade your stocks. There are also some investors that go for day trading. They think that this type of trading gives more profit but on the other hand there are some investors who do not wish to go for this type of trading as they think this to be very risky. Then you would also find some people that prefer mutual funds to stocks. They go for mutual funds as they find that investing in mutual funds is less risky than investing in the stock market. When it comes to reading books there are many books in the market where you will find a good listing of the stocks. So make sure you get subscribed to a newsletter where you can get all the latest news and happenings of the stock market.

So, it is very important that you understand how to avoid a bad stockso that you can save your money from investing in the wrong stocks. Make sure you get a good stock market consultant who would be able to help you in differentiating the good stocks from the bad ones. So do not worry at all if you have a good consultant. They are the one who would help you in choosing the best stocks in the market and also help you to choose the right stock for you depending on your requirement and budget.

Mutual fund VS Stock market

There are many people who have got the misconception that mutual fund and stock market are the same. So there is a big confusion between the two. So, we will discuss mutual fund vs stock market. But before discussing the two terms, you should know that the risk involved in the Indian stock market is much higher than the risk that is involved in the mutual fund.

What are mutual funds?
Mutual funds are not guaranteed by any government agency. The investor invests in the mutual fund and the money is then invested in stocks, securities, bonds…etc. There are people who invest in the mutual fund rather than stock market as they think that mutual funds are less risky.  There are many mutual funds that are available which can give you good returns in a short span of time. So it is you who need to choose which mutual funds you wish to go for.

Go for good research
When it comes to investment in mutual funds, it is better if you can make a bit research of the fund. You can invest in a mutual fund with a short sum of money. You can also choose how frequent you can make the premium. You can do it monthly or yearly as well. Whatever amount you opt for, you should always choose the amount that is affordable for you. You should never choose a premium that is too high. There are people who do not study the market when they invest their money in the mutual fund. They go by the advice of their ignorant friends and simply invest their money in the funds. At the end of the day, they find themselves bankrupt or less return. You should always check the performance of the mutual fund that you are going to invest your money.

Stock market
When it comes to stock market, it is considered to be very risky as there are many risks involved in the market. This is the main reason why investors need to make a good research of the stock market when it comes to investing their money in order to get good profits. They need to know the functioning of the stock market. They should know howNSE, BSE, NASDAQ…etc functions in the stock market.

It is very necessary that you come in contact with a good broker or a stock market consultant who can show you the right path to making profit in the market. Unless you are updated yourself of the stock market, you cannot make good income out of your investment. So, you need to be very careful as well as well informed when you make your investment in the stock market.  If you are interested in short term investment, then you can always go for day trading. But there are investors who think this type of trading to be very risky. So, if you wish you can go for the advice of a good consultant before going for day trading.  When you are making your decision to invest in the stock market, you should not be impatient. You should also not be in a haste to make your investment decisions.

In this stock market differs from mutual funds. So, you have come to know about mutual fund vs stock market. Do remember to make a good research for both of them so that you get the ultimate profit out of your investment.

Concept Of Day Trading And Day Trading Techniques For Individuals

The term day trading refers to the practice of buying and selling financial instruments. However it should be noted that it should be done within the same trading day such that all the positions are usually closed before closing of the market in the trading day. People who practice or participate in this type of trading are called day traders. A day trader actively searches for potential trading setups in the stock market.

What Is Margin Trading?

There are day traders that sometimes borrow money to practice their trade which is known as margin trading. There is no cost to day trader for the margin benefit since margin interests are typically only charged on overnight balances. It can be either extremely profitable or extremely unprofitable because of the nature of financial leverage and the rapid returns that are possible. High risk profile traders can generate either huge percentage of returns or huge percentage of losses in their cash. Thus day traders are sometimes portrayed as 'gamblers' by other investors because of the high profits or losses born by them.

Is It risky?

There are many people who considers this type of trading as risky and thus regulations requires brokerage firms to ask whether they have prior trading experience before entering into the market and also to whether the clients understands the risks of this type of trading. There are some strategies that relatively require sophisticated trading systems and software. Many day traders use multiple monitors or even multiple computers in order to execute their orders. Some of the traders also use real time filtering software which is programmed to send stock symbols to a screen which meet specific criteria during the day.

There are some concepts in the markets like BSE, NSE, and NASDAQ…etc that plays an active role in the market. Day traders may buy or sell many times during a particular trading day and so they receive trading fee discounts in return from the broker. So if you are willing to go for day trading, then you should make it a point to take some guidance from your broker so that you need not waste a lot of money in the market.

Day Trading Strategies

To some, stock market day trading is a good way to earn money with a bit of gambling. But you need to have some idea about day trading strategies so that you get good profits out of it. However once you get into day trading, then you have to devote your whole life into the stock market.

Prepare for ups and downs of the market
When you invest money in the Indian stock market, you need to be fully prepared for ups and downs in the market. The value of the stock may rise or fall down in a single day. So each trader makes his or her own strategy in order to earn maximum results. There are traders who do their trading from their computers but this does not mean that trading can be done only through the computers. There are some traders who make the use of their phones. Whichever method you utilize, but the main important thing which you have to do is to make a good research. You should be able to study the whole market very carefully so that you do not lose any cash investing in the stock market.

Avoid worthless rumors 
Apart from studying the market about NSE, BSE, NASDAQ…etc, you should also take some precautionary measures. You should always avoid worthless rumors about the companies by people who do not know much about them. This people just make you confused. So, you need to avoid this type of people. It is always better to buy stocks when they are available in low price and then sell them at a higher price in the market. There is a limit on the gains from a single share in the stock market day trading. So, you should always try to buy and change stocks in regular intervals.

Knowing the day trading strategieshelps you in investing the right stock and selling the same in the right time. If you do not have any idea about the market scenario, then it is best to go for a good stockbroker who would guide you for your investment and profit.