Stock Market Analysis
Posted on June 16, 2008 - Filed Under Stock Market | Leave a Comment
Stock Market Analysis
There are two main types of stock market analysis utilized by investors. They include other concepts, some of which will be explained in this article. When performing analysis on the stock market, there are many factors to consider, but first you must decide which method you would like to utilize. Stock market analysis includes fundamental and technical analysis. Investors will typically stick to one method or the other and will typically not use both in tandem.
Stock Market Analysis includes the concept of fundamental analysis. Fundamental analysis is the long-term assessment of a company’s financials in order to calculate how much the business is worth. This tells investors how much the company’s stock is worth to determine the potential shares the investor is willing to buy for that company. Investors who utilize this method also practice other concepts. These concepts include knowing the price to earnings ratio of a company, meaning that investors need to know what the company’s share price is compared to its earnings per share.
Investors also need to know the dividend yield which is the company’s annual dividend payments and also need to know what the dividend per share divided by the price per share is for that company. There are other concepts included in this type of stock market analysis, but the main idea of fundamental analysis is bases on long-term investing.Another form of Stock Market Analysis includes technical analysis. This type of analysis includes the forecasting of future financial price movements based on past price movements. This method can assist investors to anticipate what is likely to happen to prices over time. Technical analysts are not interested in the intrinsic value of a company but prefer to identify patterns that suggest future activity.
These investors use technical analysis tools, including the use of stock charts. The use of charts in this type of stock market analysis enables the investor to identify the underlying trends or stock chart patterns for that stock. They look for stock charts with rising trends and the familiarity with trend line formations can help to measure the overall attitude of investors towards stock and companies. When performing technical stock market analysis the investor will take part and learn about stock charting. When learning how to read stock charts the beginner investor should learn now to read four types of charts. Those include bar charts, line charts, point and figure charts, and candlestick charts. Many successful traders believe that candlestick chart patterns are the easiest and most beneficial to read. Unlike bar chart that illustrates what price movements did during a specific timeframe, candlestick charts reveal ‘how’ that price moved. Candlestick charts demonstrate what investor sentiment was doing during the timeframe and how it did it.
This additional information creates a huge advantage for the candlestick investor when participating in stock market analysis.When deciding which type of stock market analysis is right for you, please note that there are two arguments against stock fundamental analysis. The first is that a lot of the fundamental type of information is very subjective since it is based on each individual investor’s interpretation. The second reason is that stock technical analysis investors believe that fundamental analysis provides no real advantage. They believe this is due to the fact that all of the investing information is based on information that investors in publicly traded markets already know.
If you have decided to participate in stock market analysis, be sure you understand the advantages and disadvantages of both types. This will help you to make a decision as to which method you would like to practice when playing the stock market.
Indian Stock Market Golden Rules
Posted on June 16, 2008 - Filed Under Rules, Stock Market | Leave a Comment
Indian Stock Market Golden Rules
We are mentioning few golden rules for trading and investing in Indian stock market or in any other Stock market.If you want to be a successful intraday / day trader or Positional / Delivery investor then simply follow these golden rules.”Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly” Think in terms of probabilities and act upon them.
There are no certainties in trading. You can keep yourself out of trouble by thinking in terms of probabilities. Get comfortable with approximate predictions and interpretations.”To trade/invest successfully, think like a fundamentalist; trade like a technician”Along with economic fundamentals that will drive a market higher or lower, but we must try to understand the technical as well.”Don’t be a hero. Don’t fight the trend. Follow the money flow” You should forget the news, remember the chart as chart already knows the news is coming and buy on rumors; sell on news.”In trading/investing, an understanding of mass psychology is often more important than an understanding of economics”Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself. Hope, fear and greed are not strategies: they are emotions. Simple emotions are not an effective strategy.
Positive emotions could cause us to fail to apply risk precautions. Negative emotion could cause us to hesitate.”Learn to monitor yourself and draw conclusions from your mistakes. “Predetermine maximum losses in every potential trade. Do not risk more than 5% of your capital on any trade. Don’t average your losses.”Buy that which is showing strength - sell that which is showing weakness”The public continues to buy when prices have fallen. The professional buys because prices have rallied. This difference may not sound logical, but buying strength works. The rule of survival is not to “buy low, sell high”, but to “buy higher and sell higher”. Furthermore, when comparing various stocks within a group buys only the strongest and sells the weakest.”Think like a guerrilla warrior.”We wish to fight on the side of the market that is winning, not wasting our time and capital on futile efforts to gain fame by buying the lows or selling the highs of some market movement. Our duty is to earn profits by fighting alongside the winning forces. If neither side is winning, then we don’t need to fight at all.”When you lose, don’t lose the lesson!”Forget the names but remember the events.
Those who don’t remember the past are doomed to repeat it.
Make mistakes with composure and character, without blaming others, and don’t dwell on mistakes.”Evaluate your results at least monthly”.Monitor your P&L, your win/loss ratio, and the relationship between your biggest wins and worst losses. Reviewing these results helps you continually improve your understanding of the markets and yourself.”When in doubt, get out.”Scrutinize your positions at all times, each day, and you will not be left holding a stock without reason. Be willing to change direction at any time, because your flexibility as an individual investor is a big advantage which should be embraced! “There is no “genius” in these rules. They are common sense and nothing else, but as Voltaire said, “Common sense is uncommon.” Trading is a common-sense business. When we trade contrary to common sense, we will lose. Perhaps not always, but enormously and eventually. Trade simply. Avoid complex methodologies concerning obscure technical systems and trade according to the major trends only”.indian share market is one of the most volatile share markets in the world, that is why SEBI is so strict and demanding in terms of compliance.
This website is meant for technical analysis only, as we dont follow news much, its only the quarterly results and the normal news related to stocks like bonus and splits important for us, some news, like recent SEBI declaring a scam done by prominent share brokers, this type of news comes very rarely but if it comes then it is by chance and techncial analysis does not follow by chance news.Technical analysis follows mathetical methods like statistics and technical analysis involves lot of stats, which is performed automatically by the softwares, like Metastock Professional, supercharts, tradestation, Advanced Get, and so on.
STOCK OPTIONS - WHAT ARE THEY
Posted on January 22, 2008 - Filed Under Stock Market | Leave a Comment
STOCK OPTIONS - WHAT ARE THEY ?
A stock option is a specific type of option with a stock as the underlying instrument (the security that the value of the option is based on). Thus it is a contract to buy (known as a “call” contract) or sell (known as a “put” contract) shares of stock, at a predetermined or calculable (from a formula in the contract) price.
It is Having the Rights to purchase a corporation’s stock at a specified price.
Infact There are two definitions of stock options.
1. The right to purchase or sell a stock at a specified price within a stated period. Options are a popular investment medium, offering an opportunity to hedge positions in other securities, to speculate on stocks with relatively little investment, and to capitalize on changes in the market value of options contracts themselves through a variety of options strategies.
2. A widely used form of employee incentive and compensation.In some Companies, Stock options constitute part of remuneration.
Employee stock options are stock options for the company’s own stock that are often offered to upper-level employees as part of the executive compensation package. An employee stock option is identical to a call option on the company’s stock, with some extra restrictions.
Performance Stock Options are Options that vest if pre-determined performance measures are achieved. The performance goal (revenue growth, stock-price increases…) must be reached for the options to be exercisable or for the vesting to be accelerated
Stock Market Tutorials
Posted on January 20, 2008 - Filed Under Tutorials | 1 Comment
Stock Market Tutorials
What is equity trading?
It is simply buying and selling of equities. However, unlike other commodities, equities are not traded everywhere, and are traded only in special market places called exchanges.
What is an exchange?
An exchange is a mechanism through which buyers and sellers of equities are brought together. These days, this is largely electronic and done with computers.
Investors cannot, however, participate directly in the exchange and can participate only through members of the exchange, popularly referred to as brokers.
How does the exchange works?
An exchange has pre-specified timings. During that time, all the members of the exchange link up to a central computer through their remote terminals. The members then place bids to buy equities, or make offers to sell equities. Other members who can match the bid or the offer confirm their acceptance, and the transaction is completed.
Members of stock exchanges place bids and offers on behalf of their clients, who are the investors.
Why are brokers required?
Investing in equities is quite risky. The broker is a professional, who knows the risk and can advise the investor accordingly. Secondly, an exchange will become an unwieldy mechanism if the entire universe of investors were to go and start making bids and offers. Reducing the number of individuals is a way of keeping control.
Third, equity trading can also be abused. To prevent these abuses, exchanges as well as the Government has a number of regulations in place. Restricting activity to the members of the exchange will enable the regulations to be followed, preventing abuse of the system.
How are shares traded?
Like in any other buying or selling, once the broker confirms the trade, if you are buying the share, you pay the broker the value of the shares and take delivery of the shares. If you are selling the shares, you hand over the equities to the broker and the broker will pay you for your shares.
When settlement does happen?
Each exchange has its own settlement period within which the entire process of delivery and purchase should be completed. Typically, the process is completed in a week to ten days time.
Which shares to Buy and sell?
An index is an indicator of how the stock market is doing on the whole. An index comprises a basket of stocks. The collective value of these stocks on a given date is taken and given a score of 100. From that day onwards, the value of these stocks is tracked and its score relative to 100 is computed.
The stocks selected are based upon a number of parameters that the creators of the index decide. Equally, the valuation is also done using complex mathematical principles. Periodically, the list of shares used for computing the index also undergoes a change. These changes are decided by the index creators based on the parameters they have set for the stocks for inclusion.
An index shows whether the stock market, on the whole, is appreciating in value or declining in value.
The movement of the index itself is no indicator for individual shares. You may find that a particular share may be increasing in its price even when the index is down and vice versa. The index is only an indicator of the general trend
The common indexes in Indian stock markets are the SENSEX, the index for stocks listed on the Bombay Stock Exchange and Nifty, the index for stocks listed on the National Stock Exchange.
What is an index?
Buying and selling shares involve a fair amount of research. These involve assessing how well the company is managed, how the company is performing compared to others in the industry, how the industry itself is doing, the financial performance of the company, the interest of the lay public in the company, etc.
It is best that you consult an expert in such analysis, before you decided to buy or sell a particular share. Such investment advice is also provided by your share brokers.
How Long to hold on the shares?
Historically, it has been demonstrated that investments in equities offer the best long term returns and hence the highest opportunity to enhance your capital. Thus, the longer you stay invested in the equity markets, the better will be your returns.
However, this holds true for the equity market as a whole, and not necessarily for shares of individual companies. The value of shares of specific companies are subject to various pulls and pressures which could cause a share that is highly valued one day, to drop its value overnight, as a result of unpredictable factors ranging from Government policy to acts of omission and commission by the management of the company.
It is advisable that you periodically, at least once in a year, evaluate your holdings and decide whether to continue with them or change them.
However, one very important thumb rule which the professionals offer is, never to get emotional about a share. In other words, do not hold on to the share of a company whose value is declining, just because its history has been very good!
Are investment in shares safe?
Any investment is prone to a certain degree of risk. Shares, as a class of investment have the highest element of risk. The only services riskier than shares are lotteries and other games of chance.
These risks arise as a result of factors described earlier.
However, today there is strong legislation, procedures and a regulatory authority - Securities Exchange Board of India (SEBI), which to a large extent prevents risk as a result of misleading the investing public.
Share and Stock Market Rules
Posted on January 20, 2008 - Filed Under Share Market | Leave a Comment
Share and Stock Market Rules
It’s been almost a month now, but I am back, they say that Indian stock market is rising and there is very good future for almost all investors but still i could see a lot of people fail and struggle in trading.The basic cause for this failure is not abiding yourself with rules, what ever be the situation you should not forget the basic rules, basic rules are almost the same to almost all markets and in all situations.
When you are investing in market donot enter the market with certainities, think always in terms of probabilities, certainities will never help in share market.
When you want to invest for long run see for the fundamentals of the company and invest but when you want to invest for short term and day trading you should see for the technical analysis .
Never bring your emotions inside the market emotions cannot be strategies and they will never help in your investing.
Never try to go against the market that is not recommended even by the big guns
Keep watching your holding always you just cannot hold a share which is not at all useful to you or going against the probabilities, be ready to gain or be ready come out of the market immediately when you smell danger.
Try to analyse your stay in the market and the business done by you atleast every month and learn the plus and negatives, reviewing your lose, and profit will help you to plan further in the coming month.