How to learn Trading | Where I can learn Stock market

Question-5

What are the different Trading Formats & rules related to them ?

• SCALPING is a trading style that specializes in capturing small profit, it requires fast execution skills, strong exit plan, minimum transaction cost. This Trade can be for few Seconds or a minute
• INTRADAY TRADING Is Buying & selling a Stock same day with Pre-decided Target and defined stop Loss. Always Prefer to Trade in highly liquid stock {in good quality stock you can get margin up to 5X}
• SWING TRADING involves taking position in a financial instrument for more than day (and less than a month), Target & Risk can be predefined with the help of option strategy
• Positional Trading refers to a Trading style where one Take position in a good fundamentally strong stock. This position can be for few weeks or few months depending upon market cycle etc but while making such Trades one should be ready for measures like averaging & call writing etc.

one of the most common & in demand form of trading is Intraday trading, if you are taking position in any stock with a defined target & SL broadly, we can call it intraday trading.Let’s discuss in details rules & right timeframe required for intraday trading: –

1. your Stop Loss & target should be clearly defined,
2. Your stop Loss should not be more than 1 % of capital,
3. Always prefer to trade in highly liquid stocks where entry & exit should be very easy,
4. Prepare a watchlist of 3 to 5 stocks, for human brain tracking too much stocks in live market are not possible,
5. Prefer to do one trade in a day or maximum 2 trades in a day,
6. overtrading & revenge trading should be avoided,
7. Time frame # 15 minutes & 5 minutes are the most preferred one,
8. impact of trade should be same on your capital,
9. Avoid any trading in first 15 minute,
10. Always remember Trading is not about strategy infect its more of game of psychology

For Swing & Positional Trader Margin Trading Funding can be quite helpful feature, Lets understand it

When you use certain amount of yours and raise remaining part from Broker this facility of Fund arrangement is known as MTFand Broker charge interest on the sanctioned amount (interest rate is usually between 9 to 15 %) it all depends upon your Broker and the Plan you are having.Last but not least never forget leverage is a double edge sword if you don’t how to use it then it’s very dangerous and you can’t expect same amount of MTF on different stocks, it keeps on changing as you change the category of Stock

you can click this link to find out available MTF on different stocks

Question-6

What is Market Capitalisation & related concepts ?

• Total Market Capital # Numbers of Share available to Trade X Market Price of the Stock
• Free Flot Capital # Number of shares available to Trade (doesn’t include Promotor Share)

Free Flot Capital, further can be divided into :-

• Large Cap # Above then 20,000 Crore
• MID CAP # Between 5,000 to 20,000 Crore
• SMALL CAP # Up to 5,000 Crore
• Micro Cap # Less than 100 Crore

Lets discuss biggest company of India or NIFTY Top 10 Company :-

As we Know Nifty is Group of Top 50 Company of India these company selected or shortlisted on the basis of Some criteria like Floating Capital etc but surprising fact is only 10 Company the Bigger one Carry more than 50 % weightage in the Nifty Now the question arises Do you know the Name of Top 10 company and where you can find the updated List of these companies?

As I do active trading in NIFTY top 10 stocks on a positional basis (made 100 % return in last 18 months) quite actively as these stocks are institutional favourite provide better Price action based opportunity and i also get good Margin Trading facility in these Stocks.

You can also check the list of these stocks on NSE Site and get the discussed benefits.

Question-7

What are the Key events & Corporate Action that affects Stock Prices ?

Key Events refers to the act of Goverment or Regulator which are beyond the control of Market Participents but affects stock Prices in a bigger way. Some of them are :-

• Monetary Policy by RBI,
• Budgetary Policy or Budget,
• Elections,
• Fed Meeting & Policy related decisions,
• Corporate Earning Announcements,
• Indian Industrial Production (IIP) Data,
• Inflation data

Other then above mentioned Key events there are some Corporate (or Internal actions) also which affects share Price. Lets dicuss them in details :-

A)Dividend (Positive)# it’s a part of profit which divided among shareholders, It’s up to company Management to decide whether they want to distribute profit among shareholders or wants to reinvest the same in business progress or future activities. Some of the Dividend paying company are ITC, TCS, Infosys, IOC

B) Stock Split (Positive)# it’s a managerial decision which convert stock into small Ticket size only reason behind this stock is to increase the liquidity & Trading volume. Let’s take an example of MRF

C) Bonus Issues (Positive) # Bonus issue is the Reward given by the company out of the reserve to the Shareholders usually its given in the Ratio

Real life Example :-

D) Right issues (Positive)# Right issue is the way to raise Capital instead of Going to Public, company approach to the existing Shareholders

Real life Example: –

E) Buyback(Positive): – Buy back is an exercise where Company buys shares from the existing Shareholders, it works as an incentive for the Shareholders and helps in preventing company from take over

Real Life Example: –

F) Promotor Stake Sale(Negative) # Its quite possible Promoter of Listed company would like to sell his stake (or position) in the company, reason could be anything (known or unknown). Market doesnt take this news very positively most of the Time

Real Life Example: –

G) Bulk Deal/Block Deal (moderate to Negative)# If more then 0.5 % of  equities (in any listed company) are exchanged between two parties, typically through a negotiated deal (not using open Market operations) is considered as Block/Bulk Deal

Click this Link to for NSE Bulk/Block data least Page

H) FPO (Follow on Public Offer (Positive) # When already listed company offers new shares to the existing shareholders. Company usually brings this scheme either :-

• To reduce its debt
• To increase its Capital Base
• Real Life Example: –
• 

I) OFS (Offer for Sale) (usually Negative) # Under FPO listed company offers to the general public but its different from Regular IPO route and company is supposed to meet some Conditions

K) IPO (Initial Public Offer) # when a Non listed entity decided to get listed into stock market, reasons for fund raising could be :-

• Reducing Debt
• Raising Capital for upcoming project
• To know more about Latest IPO update click this link
• Real Life example
• 

L) Insider Trading # Though Insider Trading is not a legal practice but its so common even in big corporates. Lets understand Insider Trading with realtime example

When a key person like Promotor,senior management creates position or help someone to create position is broadally covered under the Category of Insider Trading

Decison taken by Exchanges which affects share Price :-

Upper Circuit & Lower Circuit

• Maximum a Stock or Index can reach in any particular day is known as upper Limit
• Minimum a stock or Index can reach in any particular day is known as Lower Limit
• This Limit is created by exchange in Market to avoid any undue volatility and to protect the interest of small market player
• Exchange on a regular basis update the list of these stocks and limit is decided on the basis of stock category, F&O (or NON-F&O) etc

Question-8

What is  INDEX & how investment,Trading & Hedging can be done in Index ?

• Index of any Country defines the strength of a Economy,
• In India we have two popular Index (Sensex/NIFTY),
• Sensex is the older one NIFTY introduced later on,
• Sensex is group of 30 Stocks & NIFTY represents 50 Stocks,
• Both Index represents almost all the sectors of economy,

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• Index investing is one of the safest form of Investing and most of the time it has seen INDEX ETF investing beat Mutual fund Performance ( we will study this concept later on in details)
• Trading in Index weekly or monthly expiry is also one of the possibility provided you have system to Trade and you know the importance of RISK & REWARD concept
• Index can also be used as hedging (its like buying insurance) tool for your position in ETF or individual stock
• For making a perfect hedging strategy knowing the concept of BETA is very important,
• BETA measures the change in stock Price or expected move in stock
• BETA more then 1 = stock is highly volatile
• BETA Less then 1= Stock is Less volatile
• Check your Stock or Portfolio BETA value here

Investment in Index or Concepts of ETF

• ETF is a collection of Investement such as Equity/Bonds,
• It provides you the benefits of both diversification of Mutual Funds & ease of Equity(easy buy/Sell)
• Low operational Cost
• Possibility of Customisation
• ETF available almost for all asset class (Index,Commodity,Fixed income,Foreign market) List is end less
• Check this NSE Site Link to know more about ETF and other related details

Question-9

What is the Tax structure for Trading & invsting activities ?

To uderstand Tax Structure Click on the Link

Question-10

What is Derivative Market and its Significance ?

In Derivative trading Margin refers to the minimum amount required to maintain in account which allows Traders or Investors to take position in a particular stocks with borrowed Funds.

Key features  :-

• It allows Traders to take position without investing the entire value in a particular Trade
• In case if open position start going against the Trader he is required to deposit the short funds or Broker can liquidate his position (to protect his capital)

Concept of Expiry & Lot Size in Derivative Market 

If you are trading un the Derivative Market (Future & Option) the expiry date refers to the last date of the contract after which the contract would not hold valid

• Monthly Expiry held on last  Thursday of evey month
• As expiry  comes closer volatility increases and option prices react in a quite unique (or wild) way

Hedging implies taking opposite position in a particular stock (or index ETF) which helps you offset your loss in a investment.

• It helps in reducing Loss and increase profit if it uses effectively
• It works like insurance and provide protection against short term uncertainity and helps Traders or investors to focus on their original positional
• Understanding the concept & importance of Beta also helps in creating hedging strategy
• Click this link for better understanding of NIFTY ETF & Hedging

Question-12

What is Option Chain and its important content (ITM,ATM & OTM)

Option Chain can be described as detailed information of all option contract in that particular Expiry. Now question arise how Option cahin looks and what are the important contents of Option Chain, I will try to solve this puzzle with the help of Real Option Chain taken from NSE Website

Lets understand this concept with the help of Real example, Today is Sept-1 and NIFTY Closed at 25235

All coloured portion is ITM & Non coloured is OTM

Question-13

How Option Prices are calculated (Option greeks + IV + VIX ) ?

Option Price of any instrument mainly affected by :-

• Intrensic value and Time value,
• Option prices are also affected by volatiliy & Demand or supply factor
• Last but not least Option Greeks, IV & VIX
• Click this Link for details on Intrensic & Time Value
• Click this link for detail on Major Option Greeks (Delta, Theta Gamma, Vega ), IV and VIX

Question-14

What do you mean by Option Strategy ?