Showing posts with label TechnicalAnalysis. Show all posts
Tweet Share Share Share Share Share

June 07, 2016
Traders are in the business of taking on board vast amounts of information every day. That’s their job. But that information comes to them in the form of undigested prices. There’s no theory to back anything up. No discussion of the fundamentals. And certainly no hint as to whether prices are going to go up or down.

Thus, traders need to go well beyond the raw data. They have to have working models in their minds about how their trades are going to play out. And, in order to do this, they need to have the best tools.


Whether you’re just starting out, or whether you’re a pro, here are some of the resources you’ll need.

Investopedia Dictionary

The world of trading is full of jargon. Traders have developed their own language in order to speed along their work. But that new language takes a little while to learn. Even people who have been in the business for a while still come across new terms.

Investopedia Dictionary is a famous and great resource. It has detailed and fully explained articles on thousands of investment topics. And it’s a great, free resource for investors looking to brush up on their knowledge.

Trading Video Collection

A lot of people don’t learn very well by reading. Not to worry. Not there are online video collections that cover all sorts of trading topics.

What’s more, these videos are actually high quality. Sites like freeonlinetradingeducation.com offer free tuition. They go through entire series of topics from the simplest to more advanced.

Stock Screeners

A stock screener is essentially a program that allows you to find the stocks that interest you. You can filter by price-earnings ratio if you’re interested in fundamentals. Or you can use moving average values if you are interested in trends.

The whole point of stock screeners is to filter information. If you’re a trader who doesn’t have favorites, stock screeners are a great way to buy based on current information. You can get straight to the stocks that interest you, without having to wade through thousands of irrelevant metrics.

News Services

Everyday conditions in the world of trading change. And everyday traders need to be aware of what exactly is going on out there. That’s why most traders will use some type of news service to funnel all the relevant information to their desk. Tools like Newsmap allow traders to see the stories that affect them. These tools are able to gather headlines that affect traders and organise them in one place.

If you’re doing research, you can also scan for relevant topics. Over time, you’ll get a sense of how a market is developing, just from the sheer number of related news articles. Plus, if conditions change, you’ll be able to react quickly, having already built up substantial knowledge.

Nasdaq US Economic Calendar

Keeping track of the market timetable can be difficult. But thanks to tools like the Nasdaq economic calendar, it’s now simple. You can keep track of events in the stock market as easily as you would TV listings. Just log on to a site like nasdaq.com to see what events are coming down the pipe.



Read more »
Tweet Share Share Share Share Share

June 23, 2015
Index heavyweights stocks like Reliance Industries (RIL), ONGC, Larsen & Toubro (L&T), State Bank of India (SBI) and BHEL are among 15 stocks that could see an exit from S&P BSE Sensex over the next decade -  That's what seems to be the case according a research by Ambit Capital.

The report predicts the pace of churn in the 30-share index's constituents to gather momentum.  According to Ambit's analysis, Sensex's churns over a 10-year window from 1986 to date shows that the churn ratio of the Sensex tends to rise when the economy is undergoing irreversible structural changes.

indian-stock-market-indices


Over the next decade, the report predicts the pace of churn in the 30-share index's constituents to gather momentum. The current economic-political environment, Ambit says, will usher in an era of change which will drive Sensex churn higher driven by Prime Minister Narendra Modi's resets to the Indian economy.

Then what could be the stocks replacing them? - The new entrants could include Flipkart, Paytm, Cafe Coffee Day and ICICI Prudential Life Insurance. Well, it seems an interesting analysis. Such changes in indices re-emphasize on investing in Index Funds or Index ETFs like Nifty Bees.

Be a wise investor !


Read more »
Tweet Share Share Share Share Share

December 31, 2014
It is that time of the year we update the historical returns of the major indices, particularly BSE Sensex and NSE Nifty.  This was a huge year for Indian Stock Markets, as they hit life-time highs due to favorable results from General Elections 2014, followed by huge FII inflows into the markets. During the year the index hit an all-time high of  28822, while the Nifty hit 8626. The following table shows S&P BSE Sensex historical data - start  & close values and the yearly returns of the sensex from 2000 to 2014.

master-and-student


As far as the other major  indices are concerned, CnxIT gained about 18%, whereas the BankNifty gave huge returns gaining about 64% and the Cnx Midcap index gained about 55%. Despite the Sensex gaining 30% for the year there were many stocks which have lost 90% and some stocks gaining about 500-600%, many of them from mid-cap space.

Despite markets hitting all time highs only a few stocks made all-time highs or the highs which were made in 2008 bull run,  while most of them are still languishing well below their historical highs.
The message for retail investors is clear - index investing is better than individual stocks.  Unless the investor has an extraordinary stock picking skills, the Retail investors can achieve above-average returns by investing in index through Exchange Traded Funds (ETFs) like Nifty Bees or Top mutual funds, which have given consistent returns over longer periods of time.

Be a wise investor !

Read more »
Tweet Share Share Share Share Share

July 20, 2014
An Inverse Index tries to provide inverse return of its underlying index. A broader index provides good
exposure to an economy, an inverse index on a broader index will provide the desired exposure when the
investor is bearish on the markets. We have already seen Alpha and Beta Indices provided by National Stock Exchange of India and now NSE India has introduced few more indices like Nifty TR 1x Inverse Index and Nifty TR 2x Inverse Index.

Nifty TR Inverse Index provides the investor an opportunity to create an position which gives inverse (opposite) returns as compare to Nifty TR Index. The index is designed to provide the inverse performance of the Nifty TR, representing a short position in the index.

Methodology:

Index value calculation -
Nifty TR 1x Inverse Index Value = Previous day’s Nifty TR 1x Inverse Index Value * (1+ Nifty TR 1x Inverse Index Return).

Graphical Representation:

nifty-inverse-index


Similar to Nifty TR 1x Inverse Index, there is one more index namely Nifty TR 2x Inverse Index, which is a Leveraged index is designed to generate multiple time return of the underlying index in situations where the investor borrows funds to generate index exposure beyond his/her cash position.

Hope we can expect Inverse mutual funds soon from Indian Mutual Fund Industry and these indices could act as benchmark to the schemes.
Read more »
Tweet Share Share Share Share Share

January 05, 2014
We have already seen the historical returns of the S&P BSE Sensex, which has given an average return of about 20%  per year, despite volatility and price fluctuations of about -20% to +60%. The following table shows S&P BSE Sensex historical data - start  & close values and the yearly returns of the sensex from 2000 to 2013.

sensex-returns-2014


As far as the other major  indices are concerned, CnxIT gained about 58%, whereas the BankNifty lost about 9% and the Cnx Midcap index lost about 5%. Despite the sensex gaining 9% for the year there were many stocks which have lost 95% and some stocks gaining about 10-200%, most of them from the Information and Technology sector.

During the year the index hit an all-time high of  24483 and despite markets hitting all time highs only a few stocks made all-time highs or the highs which were made in 2008 bull run,  while most of them are still languishing well below their historical highs. The message for retail investors is clear - index investing is better than individual stocks.  Individual or Retail investors can achieve above-average returns by investing in index through Exchange Traded Funds (ETFs) like Nifty Bees or Top mutual funds, which have given consistent returns over longer term.

Be a wise investor !

Read more »
Tweet Share Share Share Share Share

July 25, 2013
nse-lix-15
NSE (National Stock Exchange of India) has introduced a new index of liquid stocks, namely LIX 15. LIX 15 Index is designed to provide exposure to the liquid stocks while making the index easily replicable and tradable.

In order to make the index easily replicable and tradable, criteria’s such as minimum turnover ratio and free float market capitalization are applied while selection of stocks. The index constitutes only 15 stocks with maximum weight of single stock capped at 15%.

Some of the liquid stocks like State Bank of India, Axis Bank and Yes Bank are included in this list. You can download the complete list here LIX15 stocks  Currently, these stocks represent nine industries, 22 per cent of turnover in cash segment and 34 per cent of single stock derivatives turnover in F&O segment on NSE.
Read more »
Tweet Share Share Share Share Share

October 05, 2012
The country's leading stock exchange NSE was halted for a few minutes due to a crash of 1000 points in the S&P CNX Nifty, hitting a low of 4888 intra-day. Many of the Nifty stocks were down anywhere between 15-20%. As per NSE India website the circuit breaker rules (upper circuit and lower circuit) are as follows:
Index-based Market-wide Circuit Breakers:
The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%.In case of a 20% movement of the index, trading shall be halted for the remainder of the day.
Since the index showed a downward movement of about 20%, the nse was closed and rightly so. But surprisingly, the exchange was re-opened in few minutes, citing reasons of erroneous trades by one of the broker for about 650cr.

From the following table you can check out the lows of index and other nifty stocks below: There were many stocks in the nifty down as much as 15-20% , all were actual trades done during normal market hours and no freak trades which would happen in small-cap or penny stocks.

masterandstudent-nifty


Such a crash had happened in nifty futures a few months ago, for which the reason attributed was algo trading, but this one was a manual execution of orders. Considering market at these higher levels, big selling could be anticipated, if not such a big one. Traders should be aware of such events and get themselves protected using proper risk management systems. Had the markets been frozen, it would have been a black swan event and if you wonder what's this black swan is all about, you can read about it here at Black Swan Theory.


Read more »
Tweet Share Share Share Share Share

September 13, 2012
MAS-MCX-SX-40
The country's new stock exchange MCX-SX would start functioning from Diwali and along with the new exchange, the investors and traders are in for a new index as well. The MCX-SX, which is expected to be a full-fledged stock exchange, is set to begin trading with about 1,000 - 1,200 stocks. MCX-SX will commence trading in cash market and derivative segments (futures and options).

Not only the exchange, MCX-SX  is all set to take on the country's two most popularly traded equity indices, the Sensex-30 and the Nifty-50, with its own benchmark index  SX-40. It will select top stocks from the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) to create the SX-40. The new index, SX-40 is expected to consisting of BSE-30 stocks and the rest 10 would be of picked from stocks reflecting the growth story of India.

Currently, the Sensex and Nifty are recognised globally, of which NSE comprising of  exchange-traded funds (ETFs), exchange-traded futures and options and other index funds, generates a little over half of the trading volumes in India's equity derivative market. The new exchange MCX-SX and the new index SX-40 is definitely bound to catch everyone's attention globally as well as locally.


Read more »
Tweet Share Share Share Share Share

July 16, 2012
Moneycontrol has introduced a new feature Moneycontrol Terminal - an enhanced version of real time price updates. Though there were live quotes provided by the website previously, the present form  gives a better update of live quotes of indices and stocks.

This terminal provides live streaming quotes for both NSE and BSE free. It also provides quotes for most of the indices and also the constituents/stocks of the indices in BSE and NSE.  The terminal also provides live news and other market news, which might be useful for traders. The hardware recommended is minimum of 1 GB RAM.

It would be better if stock of any choice could be added ( market watch of a set of stocks ), which would be easier to track one's trading positions. Anyway, this is a better alternative for people who don't have access to any trading software, to view live action of the markets.


MasterAndStudent Live


You could just try the same here at Moneycontrol Terminal


Read more »
Tweet Share Share Share Share Share

April 22, 2012
Nifty futures flash crash
There was huge and abnormal activity in Nifty Futures on 20 April 2012 around 2.40 pm, when it fell from 5338 to 5000, a drop of 7% within few seconds. Later it recovered and settled around 5250/5300.  During this crash the number of contracts traded were 35,000 lots or 17.5 lakh shares.  What could have happened and how can a trader protect himself from such wild swings?

To start with, there could be many possibilities which could have caused this crash.The error could be due to wrong punch or entry of  a sell order with a wrong quantity or price. Another possibility is that it may be due to algorithmic trading or prominently known as Algo trading, which is so programmed, that in case there is a fall below a particular price level, the algo will initiate a sell order no matter what the price is. There was also a similar flash crash in US markets in 2010, when Dowjones crashed about 1000 points in a matter of few seconds.

What does this all mean for a trader? As a trader, if you are long or short, you have to hedge your positions to minimize your risks in trading. One has to be prepared for such kind of  flash crashes or up-freeze market, when markets went up 20% in 2009 post-election results.Any retail trader trading nifty futures or other similar derivative products, must hedge his positions buying puts or selling higher strike price calls. Say, one is long in nifty futures at 5300, it is better to sell 5400 strike calls or buy 5200 puts. There are  many more such strategies which could be used depending upon individual trading positions.


As an investor, such wild swings give you big opportunities. Such crashes provide you an opportunity to buy good stocks for long-term, if they come down 15-20% , for no fundamental reason. As always, if wealth creation over the long term is really your objective, it is better for retail investors to invest in mutual funds and leave the rest to the market.
 
Read more »
Tweet Share Share Share Share Share

April 02, 2012
master and student short selling
What is short selling?

Short selling is a a trading technique a trader uses to profit from the falling price of a stock. It is a technique of selling a stock without owning it, with the view that the price is likely to fall further and, hence, there is profit to be made by buying it back at a lower price.

When the market is bearish or in downtrend, it presents a window of opportunity for traders to make money by 'shorting' stocks with the hope that the market will continue to be bearish and this is where short selling comes into picture.  

Is short selling dangerous?

To start with, traders should be aware that short-selling is trading and not investing. They should also be aware that trading requires lot of skills and discipline and there are risks involved with it. To find whether short selling is dangerous or not, let us look at some of the key points below.
  •  Historically, individual stocks and equity markets, both domestic and global, have moved upwards (short-term movement aside). Thus, if we agree that the direction of markets is generally bound upwards, then holding on to a short position for a longer time is betting against the historical trend of a market is very risky. 
  • A trader should always exit the market once the target is achieved or the stop loss is triggered. But as this discipline in market is against our natural instincts of fear and greed and lack of such discipline, makes the position riskier. 
  • Theoretically, one stands to make only limited profit on a short sell with chances of unlimited loss. This is because, the stock price can rise to any level, whereas the gain is limited since the stock price cannot go below zero. 
In Indian equity markets, short selling is typically undertaken via the futures and options route, since short positions in the cash markets can be held only intra-day. One may not be able to carry forward short positions in cash markets, since stock lending and borrowing is yet to kick in a big way to facilitate short selling in cash markets. As for as the futures  are concerned, the quantity or the lot sizes of the stock futures are so high that many are not aware of the huge risks involved in short selling such instruments.

To summarize, though short selling could a profitable strategy occasionally, it could result in substantial losses and it should not be used by investors or traders who are new to the market and who do not understand the dynamics of stock market.
Read more »
Tweet Share Share Share Share Share

February 01, 2012
200 DMA or the 200 Day (Simple) Moving Average, is an important indicator in technical analysis. The 200 DMA is a long term moving average that helps determine overall strength of an index or a stock. The 200 DMA is generally used as a trend following indicator, which do not predicts market direction, but rather gives an idea about the current direction. Moving average is a lagging indicator, since it is based on past prices of an index or a particular stock.

An index that is trading below its 200 DMA is considered to be in a long term downtrend and when it is above, it is in an uptrend. Whenever the index or a stock trades near these averages, they attract support in a bull market and finds resistance in a bear market. Currently, the 200 DMA of Nifty is around 5200 and the index has closed around this level of 5200.

What does this indicate ? Is the market heading higher or is it going to correct after good run in the past few weeks? As said earlier during bearish phases, the 200 DMA find some resistance and attracts selling.We have seen many times in the past, nifty reacting down from the 200 DMA. But any strong close above this level would attract fresh buying and the prices may move higher. Hence, watch out these levels and follow-up action closely, to make your trading decisions better. The following chart may be of helpful, which shows the 200 DMA and the current market prices of the Nifty and Nifty-50 stocks. Also you would find the data for leading indices like Bank Nifty , CNX IT and CNX Midcap as well.

masterandstudent-nifty

If fact, the 200-day moving average may act as support or resistance simply because it is so widely used. It is almost like a self-fulfilling prophecy. The advantage of using moving averages is they are trend following and these indicators are always lagging, This lag factor not necessarily be construed as a disadvantage, but can be used viewed as a supportive factor to identify that whether a trader is line with the current trend or not.

For a trader, trend is your friend, isn't it?

Read more »
Tweet Share Share Share Share Share

January 10, 2011
trading-formula
Do Technical Analysis and Charting Work? Can Technical Analysis and Charting make me money? Is there any Secret Formula for Success in Trading? These are the questions which are always on every trader's mind.

There are many documented success stories of individuals who win big year after year, using technical trading methods exclusively.There's Ed Seykota, who multiplied his clients’ accounts by 2500 times(250,000%) in about ten years and Michael Marcus, who parlayed a $30,000 initial stake into $80 million.

Another famous trader, Larry Williams, who won a national trading competition in 1987 by multiplying $10,000 into over $1,000,000 in one year. He subsequently wrote a book titled, How I Turned $10,000 Into $1 Million in One Year.

Is there any Secret Formula to make such money? Did these gentlemen discover the secret to riches? Not according to them. Each of these traders said they use technical methods, almost exclusively. If you read their interviews, you will find that each trader said basically the same thing - "develop a trading system that matches your trading style,and maintain discipline in sticking to your system".

According to them, the Formula for Success in Trading is:

1. Find a trading style that matches your personality.
2. Develop a system according to the trading style.
3. Stick to the system (discipline).


Every successful trader develops a trading style that matches his or her personality. You, too, have a natural inclination towards your own, personal style. And whatever your style, it is important that your trading match it.
  • You may be very short-term oriented, wanting to capitalize on quick, five-to-ten-day moves to make many small profits over a long period of time.
  • If you are less active or more sensitive to commission costs, you may want to trade every six weeks or so, and to set wide stops so that your trades have breathing room.
  • You may want to focus on the general market trend, or may feel more confident trading short-term opportunities against the trend. 
Hence, almost any method will work, if it matches your personality and incorporates good money management principles. So, select a method which suits you well , trade accordingly and avoid looking for Trading Tips.
Read more »
Subscribe to: Posts (Atom)
Powered by Blogger.