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Email id: editors.ibstimes@gmail.com Mohit Agrawal (Senior Editor Magazine) PoC, Team IBS Times
INTRODUCTION TO THE
of
securities.
It
is
necessary
to
remember that an individual can only
STOCK MARKET –Satya Sree
invest in the stock market through a stockbroker,
who
is
a
licensed
intermediary. Electronic mediums are STOCK
used to buy and sell shares.
A stock (also called equity) is a financial instrument
that
represents
the
Major Stock Exchanges in India –
ownership of a company. This entitles
•Bombay Stock Exchange (BSE)
the stockholder to a share of the
The Bombay Stock Exchange (BSE) was
company's assets and profits equal to
established in 1875. The BSE is Asia's
the amount of stock they own.
first and India's oldest stock exchange.
Stocks are financial instruments that
The BSE Sensex is the company's
reflect a company's equity stake.
flagship index, and it tracks the success
For companies, issuing stock means
of the 30 biggest, most liquid, and
businesses collect funds to expand and
financially stable firms across key
invest in their operations.
industries.
For investors, stocks are a way to expand their wealth and outpace
•National Stock Exchange (NSE)
inflation over time.
The National Stock Exchange (NSE) was
When you own stock in a company, you
Established in 1992. NIFTY50 is the
are called a shareholder because you
flagship index of the NSE consisting of
share in the company's profits.
top 50 companies based on its trading
"Shares" are the units of stock.
volume and market capitalization. This index is widely used as a barometer of
STOCK MARKET
the Indian capital markets by investors
A stock exchange is a marketplace
in India as well as globally.
where investors can purchase and sell publicly traded company shares. It provides a forum for the smooth trading
•India International Exchange (India
•Domestic Institutions-large corporate
INX)
entities based in India (for example LIC
India INX was established in 2017.
of India).
Founded to provide a replacement for
•Domestic
Indian companies' offshore banking
Companies (AMC)- Mutual fund firms
activities. It is the process of raising
such as HDFC AMC, SBI Mutual Fund,
public investments and ensuring that
DSP Black Rock, and others will be
domestic investments remain in the
industry entrants in this segment.
country.
•Foreign Institutional Investors- Non-
•Other Stock Exchanges in India
Indian corporate bodies such as foreign
National Stock Exchange IFSC (NSE
wealth
IFSC). NSE IFSC was established in
funds, and other investors.
Asset
Management
management
firms,
hedge
2016. It is a subsidiary of NSE. The launch aims to expand India’s financial
Listing of Securities
market
The
and
enhance
the
capital
admission
of
a
company's
brought to the Indian markets. It allows
securities to trade on a stock exchange
trade in all currencies.
is known as listing. The listing is not mandatory under the Companies Act.
Different Market Participants
But it is necessary when a public limited
The stock market attracts a large
company is desired to issue the shares
number
or
of
individuals
and
debentures are
to
the public. As
corporations. A market participant is
securities
listed
on
a
stock
someone who buys and sells stocks on
exchange, the company must comply
a stock exchange. The below are few
with the requirements of the exchange.
examples of industry participants: •
Domestic
Retail
Participants-
Listing requirements
Individuals that trade in the markets.
A company that wants to list its shares
•
in a stock exchange must meet the
NRI and Overseas Citizen of
India (OCI)- people of Indian origin who reside outside India.
following requirements:
1. The Memorandum of Association and
Articles
should
of
Listing Procedure
Association
The following are the steps to be taken
included
in the listing of a company’s securities
have
permission for listing.
in stock exchange:
2. At least the minimum specified
1. The promoters must first choose
percentage of the company's
the
share capital should have been
exchanges where the shares will
made
be listed.
available
for
public
subscription (49 percent).
stock
exchange
or
2. They should get in contact with
3. The prospectus should include
the authorities at the stock
all necessary information about
exchange or exchanges where
the opening of the subscription
they intend to list.
list, receipt of share application, and so on.
3. They
should
discuss
the
requirements and eligibility for
4. The allocation of shares should be equal and equitable. In the circumstance
of
an
listing with the stock exchange authorities. 4. The proposed Memorandum of
oversubscription, the company
Association,
should determine the basis of
Association,
allotment in consultation with the
should be submitted to the stock
recognized
exchange
exchange authorities for review.
where the shares are to be listed.
5. The Memorandum, Papers, and
5. The
stock
conclude
stock
exchange into
a
must listing
agreement with the company. The terms and conditions of the listing are outlined in the listing agreement. It also contains the continuous disclosures that the company is required to make.
Articles and
of
Prospectus
Prospectus are then finalized by the company.
WHY STOCK MARKET? Maximize Your Wealth Mitigating the Overall
and one should look into your tolerance towards risk. Build From a historical perspective, long-
Risk – Anish Das
term investment always fetches you better returns rather than investing in bonds. There have been fluctuations in
The Stock Market is one of the most
the market now and then. So, investors
effective aspects of a free market
should
economy. It helps organizations to raise
perspectives
capital
fluctuations tend to streamline over a
through
stock
shares
and
corporate bonds. Through this, it allows
think
about
long-term
because
these
subsequent period.
various investors to participate, invest in shares, earn money using capital
Protect
gains, and dividends. However, there is
Taxes and inflation have a direct or
a possibility of loss. Certain institutional
indirect effect on your wealth. Equity
investors can enjoy a lot of privileges
investments
because of their higher risk-taking
benefits over a longer period. This can
ability. Stock Market provides a stage
eradicate the adverse effects of both
where
taxes and inflation.
you
can
pour
in
your
can
fetch
better
tax
investments and channelize them into Maximize
an investment proposal.
Certain
organizations
can
provide
Key Attributes
dividends to the shareholders. These
It is important to understand that there
payments can fetch regular returns
are
along with an increase in return.
certain
risks
involved
while
investing in the stock market. Similar to other investments, it also comes with
Cumulative Gain or Return
various types of risk-return parameters
A Cumulative return or gain is the amount that the investor has achieved
over a considerable period. It doesn’t
and the most important thing over a
depend directly on the amount of time.
while is that equity can fetch higher
Generally, it is represented as a
inflated returns in comparison to all
percentage
other assets. On the other hand, there is
and
comes
with
an
equation
a risk of losing a substantial portion of money if one doesn't opt for stop-loss.
INVESTMENT OPTIONS There are certain factors that one
Equity Mutual Fund
should think of before investing in the
As per SEBI guidelines, an equity
stock market. They think of procuring
Mutual fund must invest a minimum of
as high returns as possible without
65% of assets in equity and similar
losing too much money. Investment and
kinds of instruments. In an actively
return go hand in hand i.e. higher
traded fund, return depends on the
return is coupled with higher risk.
ability of the fund manager to generate returns. Exchange-Traded Funds and Index Funds are managed to keep in mind the underlying index. Equity schemes are broadly segregated as per the market capitalization as well as the sectors in which they invest. Debt Mutual Funds These
schemes
are
perfect
for
investors who are looking for steady returns. Most importantly they are less volatile Direct Equity Investing in stocks doesn't guarantee a higher return. But finding the right stock to pick from is not an easy task
and
are
less
risky
in
comparison with equity funds. Debt mutual funds are those securities that can fetch fixed interests such as
government securities, treasury bills,
market closes. Also, there is no
bonds, etc.
possibility of ownership of shares held owing to trades. Day traders are quite
Public Provident Fund (PPF) Many
people
always
seek
educated and well-financed i.e., they those
have a good amount of funds with them.
investment opportunities that are there
Illustration of what an intraday
for the long term. PPF has a tenure of
trading strategy looks like
almost 15 years. This is beneficial since the entire amount yields a tax-free
Pros and Cons of Intraday Trading
return, mostly in the subsequent years. Moreover, the principal invested and interest accrued is covered with a sovereign guarantee making it a safer investment.
Derivatives A Derivative is defined as financial security that derives its value from the Intraday/Delivery Trading
underlying assets. It is a contract
Day trading is a kind of speculation or
between
prediction in securities in which traders
Derivatives derive their value owing to
can buy as well as sell shares. In other
certain fluctuations present in the
words, you can simply say that all
underlying assets. So, most of the
positions are squared off before the
common derivatives
two
or
underlying include
more
parties.
assets
for
commodities,
Short Trades While you short trade, it seems to be quite problematic since ideally, you need to buy something before selling it. Day traders in the short term sell assets before buying with the hope that the price will go down drastically. bonds, currencies, interest rates, etc. Trading in derivatives can be done via over-the-counter (OTC) or through the
Traders sometimes make the statement "going short" which signifies their interest in shorting a particular asset.
exchange. Long Trade Potential
Convenience to the Traders with
When a day trader enters into a long
Growing age of Digitalization
trade, they purchase an asset and thereby waits for the seller to surge up. Traders used to make a statement of "going long" which essentially signifies the interest in purchasing a particular asset. If you are looking to buy 1000 shares of ABC organization for $10 per share, the entire buying cost is $10,000. But when you like to sell the share at $11 per share, the selling price becomes $11000. Therefore, you make a net profit of $1000 minus the commission amount charged by the brokers. This is the desired figure while going long.
We are slowly moving towards an age where data is going to the cloud. Stock exchanges are coming up with new technical approaches to making the process faster giving convenience to traders.
All
the
trading-related
activities are carried out on an online platform
to
make
sure
the
best
investment opportunities are available for investors. Although, investing in the stock market comes with lots of benefits, but traders need to be cautious
while
making
decisions.
Going through the basics of the stock market and getting hold of the financial instruments is required to reduce risk and maximize return.
2. Put some money to the side
HOW TO INVEST INTO STOCK MARKET? – Anjali Arun
Before putting some of your money at risk, make sure you have some, put aside that will not be harmed in any way. A cash balance of at least three
It can be intimidating to invest in the
months' worth of
stock market if you've never done so
should be kept at all times, and it
before. Stocks are not like savings
should be kept in safe places like
accounts, money market funds, and
certificates of deposit or money market
certificates of deposit, in that their
accounts.
living expenses
principal value can fluctuate. You can lose most or even all of your investment
3. Choose an investing account
capital if you don't have enough
The foremost thing to enter into a stock
investing experience, knowledge — or
market or to start trading is choosing a
emotional power.
Demat
All you need to know for starting
Account is now needed if you want to
investing in the stock market. So, here’s
trade/invest in the stock market (NSE &
how to invest in stock-
BSE) or other securities.
account.
Having
a
Demat
Just like a bank account holds your 1. Determine Your Goals
money, a Demat account holds your
Before you engage in some form of
shares or securities. When you want to
investing, you must first ensure that
trade or hold shares on a delivery
your overall financial condition is
basis, you'll need a Demat account.
capable of accommodating the new
A
operation. Anything from your salary to
account") is an electronic holding
your mortgage to your household
account for financial securities (equity
budget
financial
or debt). In 1996, India implemented
luggage. Personal Capital, our favorite
the Demat Account scheme for trades
personal finance app, allows you to
on the NSE (India’s first and largest
organize your finances for free.
depository system) to eliminate the
is
part
of
your
Demat
account
("dematerialized
paperwork. Physical certificates are no
costly
longer
no
account. You may open an individual
Central
retirement account, also known as an
Depository Services (India) Ltd came
IRA, or a taxable brokerage account
into existence in February 1999, which
with a broker if you're not saving
was supported by the Bombay Stock
enough for retirement in a 401(k) or
Exchange.
other plans at work.
issued,
paperwork
Securities
and
involved.
there The
Presently Depository
is
National
Limited
and
Central Depository Services Limited
with
an
online
brokerage
The top 5 brokerage company offering Demat account are-:
are the two depository organizations in India that manage Demat accounts. A
i.
Zerodha
depository participant, such as a bank, serves as an intermediary between the lender and the depository. The Demat account number is quoted
With over 30 lakh users, Zerodha is the
for all transactions to enable electronic
largest and most trusted discount
settlements of trades to take place. An
broker. The main reason for Zerodha's
internet password and a transaction
popularity is its superior customer
password are needed to access the
service to all other discount brokers.
dematerialized account. Then you can
Zerodha charges a lower brokerage
start transferring or buying securities.
fee of 0.03 percent per executed order
When transactions are verified and
or
completed, automatic purchases and
whichever is lower. If you deal in large
sales of securities are made on the
quantities, you can save up to 90%
dematerialized account. There are so
compared
many brokerage companies offering
stockbrokers.
the Demat account facility in India.
delivery is completely free.
Buying stocks, funds, and several other assets is likely to be easier and less
Rs.
20
per
to
executed
other At
order,
full-service
Zerodha,
stock
ii.
Upstox
the 5Paisa mobile app is the best in India. iv.
IIFL
Due to low brokerage fees, advanced technology systems, and high margins, Upstox is one of the best discount
With over 40 lakh customers, IIFL
brokers in India. Upstox charges a
Securities Ltd (IIFL) is one of the largest
fixed intraday brokerage of Rs. 20 per
full-service
sale, regardless of the trading volume,
who need guidance and research
and offers free stock delivery. When
assistance when making investment
opposed to other full brokers, you can
decisions should consider an IIFL
save a lot of money on brokerages.
Demat account.
iii.
5 paisa
v.
stockbrokers.
Investors
Angel broking
Under the addon Ultra Trader kit, 5Paisa charges the lowest brokerage
Angel Broking is one of India's oldest
fees of flat Rs 10 per trade. You can
brokerage firms, with 2.15 million
make a single trade worth crore and
brokerage accounts. The customer
pay just Rs 10 in brokerage. The Ultra
support provided by Angel Broking is
Trader pack is available for Rs. 999 per
excellent.
month. 5Paisa charges a flat brokerage
Apart from that, there are Motilal, ICICI
fee of Rs. 20 per executed order without
Direct, Karvy, Share khan, Edelweiss,
the pack. You can trade using the
etc. which provide a Demat account.
5Paisa mobile trading app. In terms of ease of use, user interface, and speed,
4. After
opening
a
Demat
account, Set a budget for your
portfolio and bond for the remaining 20%.
stock investment
5. Focus on the long term
In this step of the process, new
Stock investing is rife with complex
investors often have two questions:
strategies and methods, but some of the
How much money do I need to begin
most active investors have done little
stock investing?
more than stuck to stock market
The amount of money required to
fundamentals.
purchase a single stock is determined
putting the majority of your money into
by the price of the shares. (Shares can
mutual
be purchased for as little as a few
famously said that a low-cost S&P 500
dollars or as much as a few thousand
index fund is the best investment most
dollars.) If you want mutual funds but
Americans would make — and picking
don't have a lot of money, an exchange-
individual stocks only if you believe in
traded fund (ETF) may be the way to go.
the
Mutual funds also have $1,000 or more
prospects.
minimums, but ETFs trade like stocks
The best thing you can do after you start
which means you purchase them for a
investing in stocks or mutual funds may
share price — (in some cases, less than
be the hardest: Don’t look at them. It's
$100).
best to stop the practice of checking
How much money I can put into
how your stocks are doing many times
stocks?
a day, every day unless you're trying to
If you're investing through funds that
beat the odds and succeed at day
most financial advisors prefer. You can
trading.
allocate a significant portion of your
That
funds
company's
—
usually Warren
long-term
means Buffett
growth
6. Manage your stock portfolio
portfolio to equity funds if you have a
Although fretting over daily fluctuations
long-time
30-year-old
isn't good for your portfolio or your
investing for retirement could invest in
wellbeing, you'll need to check in on
stock funds for 80% of his or her
your stocks or other investments from
horizon.
A
time to time. If you use the measures
above
to
buy
mutual
funds
and
individual stocks over time, you can review your portfolio at least once a year to ensure it still meets your investment objectives. Consider purchasing stocks or funds in a different sector to diversify the portfolio if it is too heavily weighted in one sector or industry. Finally, regional diversification should be considered. International stocks can account for up to 40% of your portfolio. To get this exposure, you can buy foreign stock mutual funds. This is all you need if you want to start investing in a stock market. Many people put off investing because they believe it takes a lot of money to get started in the stock market. But this is not the case. You can begin investing as little as Rs. 500 per month. The key to acquiring wealth is to form healthy habits, such as investing a small amount of money in the stock market every month. If you make it a habit to save regularly, you would be in a much better position.
COMMODITY MARKET – Dishant Mehta “Stock Prices Can Go to Zero. Commodities Cannot. Unlike Shares in a Company, Commodities Are Real Things That Are Always Likely to Be Worth Something to Somebody.”
both perishable and non-perishable items, in this manner moderating the risk factor, yet additionally giving support against inflation rates in an economy. There are currently around 50
significant
commodity
markets
worldwide that work with trade-in around 100 primary commodities. Commodities are often split into two general
classes:
commodities. incorporate
hard
Hard natural
and
soft
commodities resources
that
should be mined or extracted like gold, rubber, and oil, while soft commodities are agricultural items or livestock like corn, wheat, coffee, sugar, soybeans, and pork.
HOW COMMODITY MARKET –
Jim Rogers
WORKS? The
producers
INTRODUCTION A commodity market is a marketplace for buying, selling, and trading raw materials or primary items. It works with an exchange of physical goods among
residents
commodity
in
a
country.
Individuals planning to diversify their portfolio can attempt investments in
and
market
allows
consumers
of
commodity products to gain access to them in a centralized and liquid marketplace. These market actors can also utilize commodities derivatives to hedge
future
consumption
or
production. Speculators, investors, and arbitrageurs also play an active part in these markets. Certain commodities,
like
precious
metals,
have
been
considered to be a decent hedge against
inflation,
and
a
broad
arrangement of commodities as an alternative
asset
class
Fiber
can
Energy
Cotton Yarn Crude Oil, Furnace Oil, Natural Gas
diversify a portfolio. Because the costs
Cardamom, Jeera, Spices
Pepper, Red Chilli,
contrary to stocks, a few investors also
Turmeric
depend
Cashew
on
commodities
during
periods of market volatility. In the past, commodities
trading
Plantations
required
significant amounts of time, money, and expertise, and was primarily restricted
Coffee
Kernel, (Robusta),
Rubber Pulses
to professional traders. Today, there are more alternatives for participating
Staple,
Brent Crude Oil,
help
of commodities will in a general move
Cotton
Chana,
Masur,
Yellow Peas HDPE,
Petrochemicals
in the commodity markets.
Polypropylene (PP), PVC Castor Oil, Castor
TYPES OF COMMODITY
Seeds,
MARKET
Cake, Coconut Oil,
Types of Commodities in the market,
Cotton Seed, Crude
accessible for trading are arranged
Palm
Oil,
Groundnut
Oil,
Mustard
Oil,
Mustard
Seed,
into the following classes, given their
Oil & Oil Seeds
natural nature. Aluminum, Metal
Bullion
Copper,
Refined
Lead,
Coconut
Soy
Oil,
Sponge
Refined Sunflower
Iron, Steel, Tin, Zinc
Oil, Rice Bran DOC
Nickel,
Gold, Silver
Maize, Guar Seed, Cereals
Mentha Oil, Potato, Sugar
A few instances of commodities in the market that were most regularly traded in significant commodity exchanges in India included crude oil and silver. While crude oil goes about as quite possibly the main energy source needed for practically every industry, silver is perhaps the most precious metal other than gold with consistent demand. As crude oil is not locally accessible in wealth, practically 82% of it is imported from
OPEC
and
Middle
Eastern
countries. Also, silver is traded in broad amounts from countries such as Mexico, Peru, etc.
National
Multi
Commodity
Exchange (NMCE) All
activities
of
such
nationwide
exchanges come under the regulation of
Commodity
Derivatives
Market
Regulation (CDMRD) of the Securities and Exchange Board of India, which converged with the Forward Market Commission
in
2015.
Commodity
markets work with an exchange of both physical
goods
and
derivative
contracts while the physical exchange is embraced by institutional investors and commodity brokers intending to realize gains through the resale of the products in the retail sector of the country. On the other hand, a derivative contract
HOW TO INVEST IN
does not need a physical store of the
COMMODITY MARKET?
goods obtained, as individuals can exchange products online through
Commodity trading is managed by four
digitized
significant commodity exchanges in
transaction hassle-free and helpful.
India:
Investors can work on investing in
Multi Commodity Exchange (MCX)
commodity markets through a futures
Indian
Commodity
Exchange
National
making
the
or options contract. While a futures contract directs individuals to sign a
(ICEX)
contracts,
Commodity
Derivatives Exchange (NCDEX)
and
deed specifying delivery of a product sometime in the future concerning a fixed price, an options contract goes
about as an agreement however not a
forecast, positive or negative returns
liability of the equivalent.
can be realized, subject to spot prices.
TRADERS
BENEFITS OF COMMODITY
IN
COMMODITY
FUTURES MARKET
MARKET The
commodity
markets
hold
Price Discovery: Based on data
importance for two sorts of individuals
sources in regards to explicit
dependent on the commodity market
market data, buyers and sellers
activities they participate in-
lead
investors
at
futures
exchanges. This outcome is a
1. HEDGERS Such
exchanges
intend
to
continuous
reduce
discovery
mechanism.
exposure to market volatility by going into a futures contract with traders. Any
price
Hedging: It is the procedure of
adjustment in the price level does not
managing price risk that is
influence the rate at which particular
inherent in the spot market by
commodities are traded in the market.
taking an equal however inverse
Most hedgers trade physical goods in
position in the futures market to
the
shield their business from an
commodities
require
the
market,
specified
as
goods
they
production or resale purposes. aiming
Import-Export competitiveness:
2. SPECULATORS Investors
unfavorable price change.
or
to
generate
The
exporters can hedge their price
substantial profits from trade in the
risk
commodity
named
competitiveness by utilizing the
speculators. An expectation regarding
futures market. A dominant part
the direction of movement of market
of traders who are associated
prices is assumed by such individuals
with
before signing a futures contract, and
internationally intend to buy
relying on the accuracy of the market
forwards. The presence of a
market
are
futures
and
improve
physical
market
permits
their
trade
the
exporters
to
hedge
their
the two, the order gets executed.
proposed
purchase
by
Price discovery of commodities
temporarily
substituting
for
is possible with no control and
genuine purchase till now is the
this is the major benefit of using
ideal opportunity to buy in the
progressed
physical market.
platforms. Lower margins in
Portfolio
commodity futures urge small
Diversification:
traders to utilize this segment to
investment options which are
support their risk and get higher
generally negatively correlated
leverage.
offers
with equity and currency and accordingly
could
extraordinary
offer portfolio
diversification. Risk Management: As trading happens on exchanges, there is no fear of counterparty risk. Proper
risk
management
procedures are maintained by the exchanges to protect the Transparency transactions: trading
LIMITATIONS OF COMMODITY MARKET
High Risk: The commodity market is volatile, as any fluctuations in the productive
limit,
changing
social
promptly
influence
in As
occurs
trading commodity over
the
exchange, there is no control of prices neither by buyers or sellers. The buyer provides a cost estimate and similarly, a seller provides a cost estimate and if there is a match between
demand,
or
circumstances the
prices.
Because of such high volatility, predicting
the
commodity
investors.
trading
other
Commodity
online
development
prices
may
of be
challenging, causing investors to miss out on substantial returns because
of
unexpected
market
events. Subsequently, individuals should be exceptional with both the internal working of an economy as well
as
external
factors
like
international trade before choosing to trade in commodities. Moreover, the demand and supply patterns
ought to be remembered to mitigate
Market
demand
and
supply:
the risk further.
Market demand and subsequent
Limited Returns: While stock and
supply of goods exchanged on a
bond markets have periodic pay-
commodity
outs, for example, dividend yields,
impact the market price. A rising
coupon
on
demand (under any circumstance)
just
can make prices rise in the short
While
run, as supply cannot be increased
commodity market investments can
immediately to make up for the
harvest
returns,
higher demand in the market.
substantial expertise is needed for
Generally, such a rise in demand
something very similar. However,
can be ascribed
individuals can trade in goods
presentation viewpoint towards the
through any recognized commodity
stock market, consequently making
exchange by registering with a
investors move towards generally
commodities broker.
safer investment avenues.
payments,
commodity produce
and
investment capital
so can
gains.
significant
HOW PRICES ARE
deeply dependent on the market demand and supply of commodities, both locally and from foreign sources. Speculative news
also affects
the
commodity prices intensely, as socioeconomic
conditions
profoundly
impact the profitable limit of respective companies. The elements influencing commodity prices in an economy are discussed below:
a
determining
The prices of commodity markets are
deeply
to a critical
Global Scenario: Global indicators assume
DETERMINED?
exchange
significant the
part
prices
in of
commodities accessible internally in a country. For instance, any turmoil
in
the
Middle
Eastern
countries can influence the prices at which crude oil is exported, thereby affecting the prices at which it is traded locally. A critical example can be referred to in this regard when a supply shock was capable by all significant countries on the
world triggered by Iraq-Kuwait
aim to close the contract before the
tensions in the 1990s.
termination date to acknowledge
External factors: Any condition
capital
influencing the total production of
Individuals
specified
an
physical delivery of the goods can
exchange can cause price changes
decide on cash settlement contracts,
accordingly. For instance, a rise in
an endless supply of the tenure of
the cost of production can drive up
the futures contract, the difference
the prices at which a product is sold
between the price in spot trading
in the market, thus influencing the
and the price expressed in the
equilibrium
futures contract must be paid.
goods
rate.
in
Also,
the
on
total
unwilling
market
of
assumptions, individuals can accept
negative
either a short or a long position in a
the as
prices a
the
take
Depending
affects
upon
to
gains.
performance of the stock and bond commodities,
futures
performances
divert
expecting the price to drop in the
commodity
future can attempt a short position
market securities. Individuals often
(sell the security at a fixed price on
trade commodity derivatives to
a specified date) to acknowledge
make up for stock market risks, or to
profits through a fall in the market
shield their portfolio from stock
price. Then again, if individuals
market downturns.
expect the price of a commodity
Speculative Demand: Demand for
future contract to rise in the future,
derivative investing in commodities
they can pick to go long (purchase
online can arise from speculative
the security at a fixed price on a
investors, who aim to acknowledge
specified date) to sell something
profits
very similar at higher prices in the
tends
towards
through
to
market
price
regarding
the
direction of movement of prices and
Investors
future.
variances. Speculators often make expectations
contract.
market
perspective in regards to their investors
traded
gains
Market
Outlook:
Any
unanticipated fluctuations in the
stock market can make investors shift towards commodity trade, as odds of extreme fluctuations in prices of certain commodities, for example, precious metals are low. Thus,
commodity
market
investments are secure and act as a hedge against inflation for riskunwilling individuals.
CONCLUSION India is one of the top producers of an enormous number of commodities and has a long history of trading in commodities and related derivatives. Regardless of this fact, commodity futures
markets
are
generally
underdeveloped. The explanation has something to do with the broad government
intervention
in
the
agriculture sector. The fact is that the production and distribution of a few agricultural commodities are as yet governed by the state and futures trading has just been specifically presented
with
tough
regulatory
controls. If the futures market needs to prosper, market forces should be permitted to assume their part instead of attempting to control the prices.
BOND MARKET
invested, the issuer pays interest to the
– L.H. Vadiraj The word Bond does not comply with the relations you have with your friends, family, or close ones. Here Bond refers to the debt market which involves
trading
of
fixed
income
instruments. As per Section 2(h) of the Securities Contract Regulation Act, 1956
Bonds
Securities.
are
referred
Talking
from
to
as the
perspective of our country it's typically the Government that issues bonds to raise the capital to put a stop to their debts or reduce them or maybe to fund various infrastructural projects. The key terms which are important to be understood by the reader before moving forward areFace Value - Bond’s Value at the maturity Yield - Effective rate of interest Coupon - Rate of interest paid Coupon Payment - The frequency can be annual, semi-annually, or quarterly In simple words, bonds can be defined as the loan where the investor is the lender. In return for the amount
investor. The interest is termed as “Coupons”. Various factors are influencing the growth of the bond market: ● The
introduction
of
new
instruments ● Improvements in the settlements systems ● Increase in the liquidity Sometimes people have differences of opinion about the investment in stocks and bonds, which involves the risk appetite. In bonds, you don’t have to face the risk but stocks come with the element of risk. Along with the risk element,
the
stocks
are
growth-
oriented and are suitable for those who are interested in long-term investment whereas
the
bonds
are
income-
oriented investment options and are suitable for those who are interested in short-term investment. Along with the above key benefits mentioned, bonds provide tax advantages to the investor. The bonds are for a fixed period as it may be from 7 days to 30 years and it comes with fixed income. Each and everything in this world has both pros and
cons.
So,
some
of
the
disadvantages that bonds hold are the
they use the funds to finance
risk involved in credit, liquidity, call,
necessary things, any social
and reinvestment.
programs, or other important aspects. Whereas Corporates
The Key Players involved in the Bond
issue bonds so that the fund
Market are -
could
1. Bond
Issuers
Governments, Corporations
-
They
Banks, whose
be
used
in
various
are
diversified portfolios like for
and
current
main
operations,
maybe
opening a new facility, etc.
concern is to sell the bonds or
2. Bond Underwriters - They are
any other debt instruments in the
composed of Investment Banks
market to fund the operations of
and other financial institutions
other
or
which does the work of guiding
organizations. The government
or helping the issuer to sell
being the biggest issuers of the
bonds in the market to fulfill the
bonds as
issuer’s objectives.
businesses
3. Bond Purchasers - They are the
Financial
institutions,
Banks,
investors who want debt that is
Provident Funds, Mutual Funds,
being available in the market.
Corporates
&
Insurance
Companies.
DEBT/
BOND
MARKET
IN
Securities
Market - It is the largest
INDIA It was the East India Company which has a major role in bringing the public borrowing concept to India. During the 18th century, they borrowed funds from the public to finance their campaigns for railway construction. The interest rates varied from time to time. Well, the Indian Debt Market is considered one of the largest Debt Markets in Asia with Banks, FIIs, Financial
2. Government
Institutions,
Insurance
Companies & Mutual Funds being the major players in this market. In India, the bond market or the debt market comprises of mainly two segments –
less
compared
to
Securities
liquid
as
Government
Market.
The
Corporate Debt Market has been showing
tremendous
The latter classification for Market is 1. Private Sector Bonds 2. PSU Bonds With LPG coming into force in 1991 in India, there have been significant changes in the bond market. There are almost 20 types of bonds available to investors. Only a few of them are discussed below. 1. Plain Vanilla Bond - It’s the most basic and simplest form of bonds available. It comes up
1. Corporate Debt Market - It is relatively
segment of our Debt Market.
growth
over time so we have seen increased participation from the
with paying the principal amount at the bond maturity. Here fixed coupon
payment
intervals
that
at
fixed are
predetermined. 2. Zero-Coupon Bond - It is issued at the discount price and is redeemed at the face value. The
investor earns the yield as the difference
between
the
two
values mentioned above. Here no coupon payments are made. 3. Floating
Rate
Bond
-
The
interest rate is not fixed here. The bonds where the coupon is not fixed but are linked to the benchmark. 4. Callable Bonds - The bonds where the issuer can redeem the bonds at a pre-agreed price before the maturity kicks in. 5. Puttable Bonds - The opposite of Callable bonds where the investor can redeem the bonds before the actual redemption date.
FOREX Market- The Right Way of Currency Trading – Mohammed Abdullah Afridi
currency conversions or Forex deals take place directly over the counter, thus thereby removing the need for an exchange. The Forex market is run by a global network of banks that are spread across different time zones: London,
In this era of modern trading, there are
New York, Sydney, and Tokyo. There is
many instruments in which trading can
no central location for Forex traders
be done. Some of the instruments are
and it can be done 24 hours a day. In
stocks, commodities, bonds, etc. one
this type of trade, the amount of
more such instrument that has gained
currency converted each day can
popularity in past few years is foreign currency exchange trading. Unlike regular trading, this type of trading is not done in exchanges. These are done in markets called FOREX markets also known as foreign exchange markets. Forex or foreign exchange can be interpreted as a network of buyers and
trigger
the
price
movement
of
sellers who are willing to transfer
currency, thus making them highly
currency between them at a mutually
volatile. This volatility makes Forex
agreed price. In this way individuals,
trade attractive to traders. Thereby
companies, and central banks convert
giving them a better chance of high
one currency to other. For example, if
profits and also increasing the risk.
you have traveled abroad, then you will change your native currency to local
There are three different types of Forex
currency.
markets:
This
transaction.
is
also
Practically,
currency
conversions
intending
to
earn
a a
Forex lot
of
1.
Spot forex market: This type of
take
place
market
involves
physically
profit.
These
exchanging the currency and this takes place at the same time
the trade is settled. I.e., on-the-
advantage of price movements in the
spot settlement or within a short
market.
period. 2.
3.
Forward forex market: In this
Forex currencies are always listed in
market, a contract is made to buy
pairs. The first currency in the forex
or
of
pair is called the base currency, while
currency at a specified price and
the second currency is called quote
this can be settled at any date in
currency. As forex trade involves the
the future or within any specified
selling of one currency to buy another
dates.
currency, it is always quoted in pairs.
Future forex market: In this
The
type of market, a contract is
determined by how much one unit of
made to buy or sell a set amount
the base currency is worth in quote
of given currency at a set price
currency. The currency pair is marked
on any day in the future. Here,
as a three-letter code. Here the first two
the contract made is legally
letters stand for the country and the
binding,
third letter stands for the currency
sell
a
fixed
unlike
amount
that
of
the
forward forex market. Here the majority of traders that are speculating forex prices do not plan to take delivery of currency itself; instead, they predict the exchange rate and take
price
of
the
forex
pair
is
itself. For example, in pair GBP/USD, we are buying Great British Pounds and selling United States Dollars. Here GBP is known as base currency and USD is known as the quote currency. If GBP/USD will be trading at 1.35361 then one pound is equal to 1.35361 dollars. In this pair, if the pound increases against the dollar, then the price of the pair will increase and in other cases, if the pound decreases against the dollar, then the price of the pair will decrease.
You just need to get started by Basic terminologies used in forex
following simple steps
trading:
1) Get a good internet connection.
Bid & Ask: The price at which currency is being bought is
3) Open a trading account with the
the price at which currency is
broker and deposit the initial
being sold is called the "ask"
amount. 4) Get access to the broker's forex
Spread:
The
difference
between the bid price and ask price is known as the spread.
Pip: also known as the point in price, is the smallest movement (change) in exchange rates of the currency pair.
brokers.
known as the "bid" price and
price.
2) Find authorized and real forex
Lots: In forex markets, the deals are always done in lots, unlike that of share market
trading platform. 5) Place your first trade and you are done. Different strategies of forex trading: There is no single strategy for all traders. Every trader has their unique trading
positions
against
basis
of
their
forex trading strategies are:
Price
action
trading:
This
strategy involves seeing the
Leverage: It helps you to take big
on
investment approach. Some of the used
where you can buy 1 share.
style
historical price movement of
small
currencies and deciding the
collateral.
support and resistance level. This strategy can work in all
HOW
TO
START
market conditions and across all
FOREX
TRADING? As currency contracts are always cashsettled, there is no physical delivery of currency and there is no need for a Demat account for currency trading.
time frames.
Position trading: This is a longterm strategy. It requires the trader to take a position to benefit from shifts in currency
rates. Getting returns through
If you are a beginner, it is always
this strategy may take months
advised to start with demo accounts
and requires a high amount of
before actual trading as these markets
patience and discipline from the
are highly volatile and a wrong move
trader.
can lead you to high losses.
Day trading: This strategy is also known as the intraday trading strategy. It is a shortterm technical strategy in which positions are closed by end of the trading day. This strategy does not involve fundamental analysis.
Scalping:
Scalp
trading
is
buying and selling currency pairs for the smallest pips. This type of trade lasts between 30 seconds to 1 minute. Here trader needs to be cautious and alert to take
advantage
of
smallest
currency movements.
CONCLUSION Forex market is a type of market where all kinds of investors can make money. It just takes a lot of discipline, patience, and practice. In India, forex trading has certain restrictions like there should be compulsory
involvement
of
Indian
rupee while trading; So Indian traders cannot trade in third party currencies.
TIME AND PSYCHOLOGY – Mohit Agrawal Knowing
own
self
and
the
sentimentalities will take anyone a long way in the field of the stock market. The Ego and sentiment are more sensitive to investor decisions in the stock market than many would be willing to admit. For years, people who have worked with trained finance managers and committees have found that they were less likely to follow the crowd and other irrational emotional mistakes than any young investor. For the most
very high. Inflation is initially seen as a good
opportunity
to
sell
them
ultimately led to the purchase of greed caused at very high levels. The reason is
replaced
by
emotions
and
adjustments with such familiarity, that those who see the signs and changes in the charts can benefit greatly from this knowledge. Investors who engage in anti-social and anti-sentiment behavior are prepared to make money in the financial
markets.
Financial
and
emotional risks are not the same.
OPTIMISM,
PESSIMISM,
part, they had better knowledge, but
GREED & FEAR
the facts alone are not enough to make
Why aren´t more people making more
beneficial decisions. The human factor,
money
which includes
wide range of
Because, as we have seen, people are
emotions from fear to greed, plays a
motivated by greed (optimism) when
much bigger role in decision-making
buying and by fear (pessimism) when
than most investors realize. In a
selling. People are motivated to buy
practical sense, many investors are
and sell by changes in emotion from
doing
the
optimism to pessimism and vice versa.
reasonable rationale for low and high
They formulate fundamental scenarios
prices
emotional
based on their emotional state (a
responses that can be expected to rise
rationalization of the emotions), which
or fall. Inflation initially seen as a
prevents them from realizing that the
transaction creates fears of losing at
main drive is emotion. Investors must
very low prices when the chances are
learn to buy when they are fearful
the
a
exact
based
on
opposite the
of
in
the
financial
markets?
(pessimistic) and sell when they feel
what is happening will continue until
euphoric (optimistic). This may sound
the next morning, which is a common
easy (simple contrary opinion), but
psychological choice. In the world of
without Technical Analysis it is hard to
financial trading, every minute on the
achieve.
market is different and anything can
The
main
purpose
of
technical
happen at any time.
analysis is to help investors identify turning points which they cannot see
Trading with FOMO shows that our
because of individual and group
greed and our predominant jealousy -
psychological factors.
we wish to get the same profit those
In trading, FOMO is a situation in which
who
a trader fears losing a great opportunity
regardless
of
to trade in the market. FOMO is a
movement
may
common problem in financial trading
Unfortunately, the feeling of FOMO
and can affect anyone - both new
becomes
traders with trading accounts and
continues to move in that direction.
professional traders working for large
However, as the price moves, there is a
institutions may be afraid to miss out.
good chance that it will convert or make
That feeling of missing trading occurs
a reversal. From experience, most
when you see a sharp rally in stock and
trades placed outside of FOMO often
feel like “I should have ridden this ride;
end up as a loss, which could have been
I can’t let this opportunity pass me by.”
avoided with a little discipline.
already
do
trading
whether
greater
have as
receive,
the
price
continued. the
market
The desire to join a price movement undermines your judgment, making it
FOMO has become a very common
difficult
the
thing in today's world where social
before
media makes it easier to know what
for
necessary
you stock
to
perform
analysis
placing a trade.
others are doing. It seems that there is a kind of cattle concept in FOMO,
Putting trade into FOMO results from
which, analysts believe, is holding
our natural tendency to believe that
irrational market meetings in the post-
epidemic period. In addition to the
impatience, and then you are tempted
effects of the Coronavirus epidemic,
to buy again when the market goes up.
the U.S. stock market keeps pulling out the top recording cord. It seems that social media is growing a huge FOMO,
Features of a FOMO trader? –
Greed: The FOMO trader wants
with investors stepping into the market
it all and wants it NOW resulting
so as not to miss out, making the
to think about how much you can
markets move forward. At each level,
do with trading rather than
FOMO is caused by the feeling that
focusing on doing your job well.
some merchants are making money
–
Thinking about the herd: A
while you are left out, so you also want
FOMO trader often likes to do
to get a piece of the pie. However, it
things because others do them
leads to a lack of long-term vision, a
and not because he understands
reluctance to wait, high self-esteem or
why they are doing them. In
very low self-esteem, and extremely
trading, following the crowd can
high expectations. FOMO is basically
lead to immoral trading and
about emotional trading, and if left
disastrous results.
unchecked, you can end up ignoring
–
Impatience: FOMO vendors are
your trading plans and taking a very
often impatient. They don’t want
serious risk.
to wait for a setup; they simply want to get into the business
To win FOMO in trading, you need to
because they are afraid that the
overcome your trading emotions, such
price will run out.
as greed, envy, envy, patience, fear,
–
High
expectations:
joy, and anxiety. These feelings keep
sellers
you in the FOMO cycle, where you shop
expectations.
high in the market for greed, envy,
double their accounts in months,
envy, and happiness and sell below the
so they trade unreasonably.
market
for
fear,
anxiety,
and
–
have
Some
very They
high
want
to
Lack of confidence: For some traders, after losing a few skills,
they try to play. They engage in
–
Winner prediction: The FOMO
random trading just to make a
trader often believes he knows
quick profit and make up for
what will happen next in the
their losses. Unfortunately, they
market. There is a belief that as
put
long as it is in trade, the market
themselves
at
a
great
disadvantage.
will continue to move forward.
– Decision: Some traders are not
–
Analytical impairment: Some
only bad at making decisions but
traders affected by FOMO see
making good decisions is the
the trading set up early enough
key to trading. The trader always
but are disabled in their analysis
makes one or the other decision
that they can pull the trigger at
- when to enter the trade, the size
that moment. When the price
of the position, where to place
finally starts to rise on the
the loss of position and profit
expected side, they try to chase
margin, etc. Those who are
the trade even though it has gone
unable to make decisions tend to
from the right entry-level. –
form.
No risk management system:
– No trading strategy: FOMO
Those who trade for fear of
traders often have no trading
losing usually do not plan how to
strategies. They sell just the way
manage risk in trading. Many
they feel. When the price goes
times, when they enter a trade,
one way, they think it will go that
the price is already extended
way forever.
that it becomes difficult to find
– No long-term vision: FOMO traders often approach trading with a long-term vision. If they do, they will know that there are thousands
of
new
markets
expected and will not put much value on just one trade.
the right place to place a stoploss order.
DERIVATIVES – Ankush Kapoor “Derivatives are financial weapons of mass destruction” –
Warren Buffett
of
national
currencies,
international/global traders wanted a system to account for the differences. You would be surprised to know that there are also derivatives based on weather data, like the amount of rain or the number of sunny days in an area.
What Is a Derivative? A derivative is a contract between two
For
or more parties, and the derivative
investor, whose investment accounts
derives its price from moderations in
are all denominated in Indian Rupees
the underlying asset. Common types of
(INR). This investor purchases shares of
underlying assets for derivatives are
a
equity,
commodities,
exchange using U.S. dollars (USD). Now
currencies, market indexes, etc. These
in this example, the investor has the
assets
risk of exchange-rate fluctuations while
bonds, are
commonly
purchased
through brokerages.
example,
U.S.
imagine
company
an
through
Indian
a
U.S.
holding that stock. Exchange-rate risk the threat that the value of the rupee will increase in relation to the USD. If the value of the rupee rises, any profits the investor realizes upon selling the stock become less valuable when they are converted into rupees.
The Basics of a Derivative The value of the derivatives comes from the moderations of the values of the underlying
assets.
Historically,
derivatives were marketed to ensure balanced exchange rates for goods traded globally. With different values
To hedge this risk, the investor can purchase a currency derivative to lock at a specific exchange rate. Derivatives that could be used to hedge such a kind of risk mainly include currency futures and currency swaps.
The derivatives market can be a world
dollar but short on the Rupee. Similarly,
of itself. The market is so large and so
if you agree to deliver 100kg of wheat
different from the other markets that it
to someone at a later date for a fixed
has its terminologies. A person with a
price, you are going short on the wheat.
new interest in this market, trying to even
Spot Contract: A Spot is a contract for
understand the information that is
immediate delivery. Since derivatives
being offered to him/her. It is therefore
include delivery at a future date, spot
important to know the vocabulary of
contracts
this market before indulging in any
derivatives market. However, they are
trades.
the basis for the price fluctuations of
trade
derivatives
may
not
Long Position: When we trade in stocks or bonds, we are either buy or sell. However, this terminology is used differently in the derivatives market. In the derivatives market, if you are the
are
not
a
part
of
the
futures, forwards, and options. If a certain financial asset is being sold for “A” amount in the spot market and the future expectations can be determined, then the price of the derivative can be derived.
person buying a contract, then you are on the long side of the contract. This is simply referred to as going long. For example, if you buy a contract wherein you agree to exchange $1000 for 900 Indian Rupees, you are going long on the Dollar. Short Position: The opposite of Long is called Short. In simple words, this means that you are selling a derivative contract. In the same example, if you agree to exchange $1000 for 900 Indian Rupees, then you are going long on the
Expiration: bound
Derivatives
financial
are
time-
instruments
which
means they come with an expiration date. They have an intrinsic worth only to that date and post that date they are worthless. Market Maker (MM): MM provides both buy and sell for financial assets. In the case of the derivatives market, such assets are derivatives. The motive of the market maker is to deliver enough
liquidity to the market. Let’s assume
Bid Price: It is the highest price that the
you wanted to sell derivative security
bidder would agree to pay to you.
that you had and you go to the market
Therefore, for you, this would be a
to find a buyer. Now, this is a really
selling price.
difficult task. There is one party that is always willing to buy as well as sell.
Ask Price: The minimum price which
Hence, if you want to sell you go to the
the MM expects you to pay when they
MM, and also if you want to guy to buy,
transact with you is called the Ask Price.
you go to the same MM. The MM never
This can be considered as the buying
holds the other side of the bet. If they
price for you.
go long on a certain trade with you,
There is always a negligible difference
they will simultaneously find someone
between the bid and ask price. This
with
might
whom
they
can
go
short
seem
like
an
arbitrage
immediately. This cuts them out of the
opportunity for the MM since they can
trade and in the end, you are holding
make a risk-free profit from the price
the long end of the deal whereas the
difference. However, that isn’t the case.
other party is holding the short end.
The MM has to hold the derivative
This generates liquidity in the market
security for a few minutes before they
as the MM is always available to take
can make an opposite bet. And since
the other side of the trade with you.
securities are highly volatile, they drastically change values within this
Bid-Ask
Spread:
In
derivatives
time.
The
bid-ask
spread
is
markets, MMs will always give you two
compensation provided to the MM to
different sets of prices. One set is called
help them offset the risk that they
the bid price whereas the other is
undertake when they enter into open-
called the ask price. The difference
ended transactions.
between both is known as the Bid-Ask Spread.
Common Forms of Derivatives There are various types of derivatives that are used for risk management,
speculation, leverage a position, etc.
such contracts are standardized and the
The types are discussed below:
agreement cannot be altered in any
Forward
Contracts
-
Forward
contracts are the simplest and the oldest form of derivatives available today.
A
forward
contract
is
an
agreement to sell something at a future date,
though
the
price
of
this
transaction is decided in the present. A forward contract takes place between two parties which means that the exchange is not an intermediary to these transactions. Hence, there is a chance of counterparty credit risk in such transactions. A point that needs to
way. Exchange contracts come in a fixed format, fixed sizes, and have fixed expirations. Since such contracts are traded on an exchange, they have to follow the daily settlement procedure meaning that any gains or losses incurred on this contract on a given day have to be settled on that day itself. This is
mandatory
to
negate
the
counterparty credit risk. An important point that needs to be noted is that in a case of a futures contract, the buyer and seller do not agree with one another, they agree with the exchange.
be noted is that if such contracts have to be reversed before their expiration date, the terms might not be favorable since each party has only one option i.e., to deal with the other party. Futures Contracts - Futures contract is similar to a forward’s contract. The similarity is that futures contracts also warrant the sale of the commodity at a future date but at the price which is decided in the present. The futures contracts are listed on the exchange which means that the exchange is an intermediary to the transaction. Hence,
Options Contracts - The third type of derivative is an option. It is significantly different from the first two types discussed above. Options contract binds one party although it lets the other party decide at a future date i.e., at the expiration of the option. So, one party must buy or sell at a future date whereas the other party has a choice to make. The party that makes a choice has to pay a certain premium for this privilege. There are two types of options, Call Option and Put Option.
The call option gives the right but not
Usually, it is the investment bankers
the obligation to buy something at a
who act as middlemen for these
later date at a given price whereas the
contracts.
put option gives the right but not the obligation to sell something at a later date at a given pre-decided price. Any individual, therefore, has 4 options when they buy an options contract. They can be on the long side or the short side of either the put or call option. Options are also traded on the exchange just like a futures contract. Swaps
-
Swaps
are
the
most
complicated derivatives. Swaps permit the participants to exchange their cash flows. For example, at a future date, one party may switch a cash flow which it thinks is uncertain for a certain one. The most common instance of swaps is swapping a fixed interest rate for a floating one. Participants of swaps can also decide to swap the interest rates or the underlying currency. Swaps enable companies to avoid foreign exchange risks amongst other prevailing or uncertain risks. Swap contracts are usually not traded on the exchange, rather these are private contracts that are worked out between two parties.
THE
FORMULA
FOR
A
PERFECT ANALYSIS -
PRADEEP GUPTA
A Balance Sheet is a type of financial statement that consists of detailed data and a report of a particular company’s assets and liabilities pairing up with shareholders’ equity. The main concept of a balance sheet is nothing but providing a basis for computing rates and returns for calculating and getting the company’s capital structure. In short, it can be defined as a snapshot of what a company owns and owes,
including the money flowed in via the shareholders. A financial statement alongside a balance sheet comprises of income statement and cash flow statement of the company which is counted as essential for analyzing the firm’s major financial ratios and also for one of the most important things which is the fundamental analysis. Asset, liabilities, and equity value each comprise a few more modest records that separate the particulars of an organization's funds. These records change generally by industry, and
similar
terms
can
have
various
Fundamental Analysis is a strategy for
ramifications relying upon the idea of
estimating a security's characteristic
the
worth by inspecting related monetary
business.
Extensively,
notwithstanding, there are a couple of
and
monetary
components.
basic segments financial investors are
examiners
probably going to go over.
influence the security's worth, from
study
Major
whatever
can
macroeconomic factors, for example, The balance sheet, similar to every financial statement, will have minor contrasts
among
associations
and
enterprises. Nonetheless, there are a few
details
that
are
quite
often
remembered for normal accounting reports. We momentarily go through regularly discovered details under Current Assets, Long-Term Assets, Current
Liabilities,
the condition of the economy and industry conditions to microeconomic components like the viability of the organization's
administration.
The
ultimate objective is to show up at a number that a financial investor can contrast and a security's present cost to see
whether
the
security
is
undervalued or overvalued.
Long-term
Liabilities, and Equity.
This technique for stock investigation is viewed as rather than a specialized
Another intriguing part of the asset report is how it is coordinated. The resources and liabilities segments of the balance sheet are coordinated by how current the record is. So, for the resource
side,
the
records
are
arranged ordinarily from generally liquid to least liquid. For the liabilities side, the records are coordinated from short to long haul borrowings and different obligations.
examination, which conjectures the heading
of
costs
through
an
investigation of chronicled market information like cost and volume. All stock examination attempts to decide if security is accurately esteemed inside the more extensive market. The basic study is typically done from a full scale to a miniature viewpoint to recognize protections that are not effectively evaluated by the market.
Investigators
all
An analyst attempts to make a model for
together, the general condition of the
deciding the assessed worth of an
economy and afterward the strength of
organization's offer cost dependent on
the particular business before focusing
freely accessible information. This
on singular organization execution to
worth is just a gauge, the examiner's
show up at an honest evaluation for the
informed assessment, of what the
stock. Basic examination utilizes public
organization's offer cost ought to be
information to assess the worth of a
worth contrasted with the current
stock or some other sort of safety. For
market cost. A few investigators may
instance,
allude to their assessed cost as the
a
commonly
financial
study,
investor
can
perform fundamental analysis on a bond's value at monetary factors, for example, interest rates and the general condition of the economy, at that point, examining investor.
data For
about
stocks,
the
bond
fundamental
analysis utilizes incomes, profit, future development, return on value, net revenues, and other information to decide an organization's hidden worth and potential for future development.
organization's characteristic worth. If an expert figure that the stock's worth ought to be altogether higher than the stock's present market value, they may distribute a purchase or overweight rating for the stock. This goes about as a suggestion to financial investors who follow that expert. On the off chance that the expert computes a lower characteristic worth than the current market value, the stock is viewed as exaggerated and a sell or underweight proposal is given. Financial investors who follow these proposals will expect that they can purchase stocks with great suggestions because such stocks ought to have a higher likelihood of ascending after some time. Similarly, stocks
with
horrible evaluations are required to
variables can be assembled into two
have a higher likelihood of falling in
classes: quantitative and subjective.
cost. Such stocks are a contender for
The monetary significance of these
being taken out from existing portfolios
terms isn't vastly different from their
or added as "short" positions. This
standard definitions. Here is how a
strategy
word
for
stock
examination
is
reference
characterizes
the
viewed as something contrary to the
terms: Quantitative – "identified with
specialized
which
data that can be appeared in numbers
costs
and sums." Subjective / Qualitative –
through an examination of chronicled
"identifying with the nature or standard
market
of
conjectures
investigation, the
heading
information
like
of cost
and
volume.
something,
as
opposed
to
its
amount." In
this
quantitative
specific
circumstance,
essentials
are
hard
numbers. They are the quantifiable attributes of a business. That is the reason the greatest wellspring of quantitative
information
summaries.
Income,
is
budget benefits,
resources, and more can be estimated with
incredible
accuracy.
The
The issue with characterizing the word
subjective
essentials is that it can cover anything
unmistakable. They may incorporate
identified with the monetary prosperity
the nature of an organization's key
of an organization. They incorporate
heads,
numbers like income and benefit;
acknowledgment,
however, they can likewise incorporate
exclusive
anything from an organization's piece
subjective nor quantitative examination
of the overall industry to the nature of
is
its administration. The different crucial
experts think of them as together.
essentials
its
less
image
name
licenses,
innovation.
intrinsically
are
better.
and Neither
Numerous
CANDLESTICKS AND ITS
Candlesticks can be utilized by traders searching for graph designs.
PATTERNS – Supriya Reddy
There are different candlestick designs used to decide value course and force,
INTRODUCTION
including three-line strike, two black
So, what is a candlestick not the one
gapping, three black crows, evening
which we usually use for lighting so
star, and an abandoned baby. Not all
what does it mean? A candlestick is a
candlestick
type of value graph utilized in technical
admirably. Their gigantic prominence
analysis that shows the high, low, open,
has brought down unwavering quality
and shutting costs of security for a
since
particular period. Candlestick graphs
flexible
are
packs
calculations. These all-around financed
information for various periods into
players depend on lightning-speed
single value bars. This makes them
execution to exchange against retail
more helpful than conventional open-
financial backers and customary asset
high, low-close bars or basic lines that
administrators who execute technical
come to an obvious conclusion of
analysis systems found in famous
shutting costs. Candlesticks fabricate
writings.
a
technical
tool
that
they've
designs
been
function
examined
investments
and
by their
designs that anticipate value bearing once finished. Appropriate shading
All in all, multifaceted investments
coding adds profundity to this vivid
administrators use programming to
technical tool, which traces back to
trap members searching for high-
eighteenth-century
rice
chances bullish or bearish results.
dealers. Candlesticks started from
Nonetheless, dependable examples
Japanese rice dealers and brokers to
keep on showing up, taking into
follow market costs and everyday
consideration
momentum many years before getting
benefit openings.
advocated
in
the
Japanese
United
States.
short-and
long-haul
BASIC CANDLESTICK The five candlestick patterns are -
PATTERN
1. THREE LINE STRIKE PATTERNS OF CANDLESTICK
The
Here are five candlestick designs that
reversal design cuts out three dark
perform especially well as antecedents
candles inside a downtrend. Each
of value bearing and momentum. Each
bar posts a lower low and closes
works
inside
encompassing
bullish
three-line
strike
the
setting
of
close to the intraday low. The fourth
value
bars
in
bar opens even lower however
anticipating sequential costs. They are
turns
likewise time-sensitive in two ways:
outside bar that closes over the high
1. They
just
work
inside
around
in
a
wide-range
the
of the principal candle in the
constraints of the diagram being
arrangement. The opening print
surveyed, regardless of whether
additionally denotes the low of the
intraday, day by day, week after
fourth
week, or month to month.
Bukowski, this inversion predicts
2. Their power diminishes quickly three to five bars after the
bar.
As
indicated
by
more exorbitant costs with an 83% accuracy rate.
pattern has finished.
2. TWO BLACK GAPPING The bearish two dark gapping continuation design shows up after a
prominent top in an upswing, with a hole down that yields two dark bars posting lower lows. This example predicts that the decrease will keep on evening lower lows, maybe setting off a more extensive scale downtrend.
As
indicated
by
Bukowski, this example predicts
plays. As per Bukowski, this example
lower costs with a 68% precision
predicts lower costs with a 78%
rate.
precision rate. The bearish evening star inversion design begins with a tall white bar that conveys an upturn to another high. The market holes higher on
the
following
purchasers
neglect
bar,
yet
new
to
show
up,
yielding a thin reach candlestick. A hole down on the third bar finishes the example, which predicts that the decay 3. THREE BLACK CROWS The
bearish
three
dark
will keep on evening lower lows, crow’s
maybe setting off a more extensive
inversion design begins at or close to
scale downtrend. As per Bulkowski,
the high of an upswing, with three dark
this example predicts lower costs with
bars posting lower lows that nearby
a 72% precision rate.
close to intraday lows. This example predicts that the decrease will keep on evening lower lows, maybe setting off a more extensive scale downtrend. The most
bearish
rendition
begins
at
another high since it traps purchasers entering energy
CONCLUSION
4. ABANDONED BABY The bullish deserted child inversion design shows up at the low of a
Candlestick patterns catch the attention
downtrend after a progression of dark
of
candles prints lower lows. The market
inversion
holes lower on the following bar,
radiated by these patterns don't work
however, new dealers neglect to show
dependably
up, yielding a thin reach candlestick
electronic
with opening and shutting prints at a
measurements by Thomas Bukowski
similar cost. A bullish hole on the third
show strange precision for a restricted
bar
which
choice of these patterns, offering
predicts that the recuperation will keep
merchants noteworthy purchase and
on
sell
finishes evening
the
example,
higher
highs,
maybe
market
players, and
signals.
yet
numerous
continuation
in
the
cutting-edge
climate.
Putting
signals
Luckily,
the
bits
of
setting off a more extensive scale
knowledge
upturn. As per Bukowski, this example
candlestick patterns to utilize and
acquired
from
seeing
putting resources into a resourcedependent on them would require a money market fund.
predicts more exorbitant costs with a 49.73% exactness rate.
TECHNICAL INDICATORS –
P Yamini Apoorva
Why
should
we
use
technical
indicators?
What are technical indicators? Traders use price, volume, and/or interest of security to calculate patternbased signals, and such signals are known as technical indicators. In simpler terms, they use historic data to predict future price movements, which is
ultimately
done
to
evaluate
investment opportunities and make trading decisions. Unlike fundamental analysis where a security’s intrinsic value is estimated based on financial and/or economic data, traders focus on patterns, trade signals, and many other analytical chart tools to evaluate the potential of security in any form - stocks, futures, options, commodities, and any security with historic data. These indicators are primarily
implemented
to
analyze
short-term movement which is why they are used by active traders and are also popular in commodities and forex markets (short-term trading markets). However, this does not imply that longterm
investors
cannot
use
aforementioned indicators at all.
the
Well, traders state that these indicators aid them in alerting, confirming, and predicting. Technical indicators can be computed to alert traders of a possible break
for
support
or
resistance
breakouts and signal them to take necessary actions. They may also be used to confirm the results of other indicators and analysis tools. And certain traders believe indicators can be tactfully utilized to predict future movements. Types of indicators: Instead of blindly following the herd, novice traders can break down the data they want to track into the market day, week, and month information. Such information can further be divided into leading
and
lagging
indicators.
Leading indicators offer predictions for price movements and other patterns i.e., futuristic. On the other hand, lagging indicators offer perspective about historic data or in simpler words breaks down the past patterns that lead to the current position as a result.
Another approach is identifying them as a trend, volume, momentum, or volatility indicator. Trend indicators enable traders in identifying any trends in the market. Momentum indicators allow the traders to understand the degree of intensity of the trends and if there is a possibility for a reverse scenario
in
the
market.
Volume
indicators convey the changes in volume over time, for instance, the number of units of a cryptocurrency being bought and sold in a period. Oscillators are indicators that swing between two extremes during a time frame, signaling when to enter and/ or exit, many of which are explained below. Finally, the Volatility indicators convey how much
Moving Averages (MA / SMA): Moving averages is the simplest and the most popular indicator used by traders and is also a lagging indicator. A Moving Average (MA) produces a series of averages of different subsets of the same whole data set. For example,
to
understand
the
performance of a cricketer, one may take a simple average of the runs he scored in the last 10 matches before every match, this is nothing but MA. Similarly, one may quickly compute the
the price is changing in a certain period. Most used indicators: New indicators are formulated almost every
week,
impossible
and
to
it
study
is all
humanly at
once.
However, the following are some of the
average of certain security’s closing
most
price for 5 days to gauge its average for
popularly
indicators.
used
and
known
that period and repeat the same for the upcoming days.
So, the data points keep changing as
most suitable for ones’ strategy
one
is found.
progresses
by
dropping
the
earliest data point and adding in the
● The simplest use of this tool is to
latest one, consequently changing the
identify if a security price has an
average.
uptrend or downtrend. ● A slightly complex method to
Key points about SMA:
use
could
be
through
● MA is extremely customizable
comparison between averages
and can be calculated for any
of different time frames. When a
time frame. The most popular
shorter-term SMA crosses below
periods are the 50 days MA and
a longer-term day SMA, it is
200 days MA.
known as a death cross, a
● The time frame may be decided
bearish signal. On the other
based on the trading objectives.
hand, when a short-term SMA
A shorter time frame implies
crosses above a long-term SMA,
relatively less lag and is relevant
it is known as a golden cross,
to
bullish signal!
analyze
short-term
movements. A longer time frame implies
greater
relevant
for
lag
and
is
long-term
Exponential Moving Averages: The exponential moving average is a type of moving average where greater weightage and significance are given to most recent data, to make the results sensitive to new information. The formula to calculate EMA is as
movements.
follows:
● Like most trading, there is no single best time frame to select.
The smoothing factor can be any value,
One can figure this out only
but the most common value given is 2.
through experimenting until the
It is to be noted that the greater the
smoothing value, the greater will be the
● EMA may be preferred over
influence of recent data on the average.
SMA for the simple reason that it mitigates the “lag” to an extent
Key points about EMA:
by using weights.
● Similar to SMA, the 50 days EMA and 200 days EMA are most
Bollinger Band:
commonly used for long-term
John
patterns. And 12 days EMA and
copyrighted the Bollinger BandsⓇ to
26 days EMA are used quite
help investors find openings that give
frequently
them a better chance of correctly
for
short-term
movements.
Bollinger
determining
developed
whether
an
asset
and
is
● EMAs are highly suitable for
oversold or overbought. This tool is
trending markets. This indicator
defined by trendlines - 2 standard
can be extremely helpful when
deviations,
used correctly but may also lead
plotted away from the SMA of a
to
misinterpreted.
security’s price. The trend line above
Therefore, it is suggested that
SMA is known as the upper band and
EMA be used to confirm the
the one below is known as the lower
result of other indicators or a
band.
chaos
if
negative
and
positive,
market move rather than be led by them. ● When the price is trading over the EMA, it is a good time to buy, and the amount below this line should be seen as a stop loss for this transaction. Similarly, if the stock is trading below the EMA, it can be used as a signal to short in the market, with the amount above it serving as a stop loss.
Steps to calculate Bollinger Band: 1. Compute the SMA of security’s price, let’s say 20-day SMA.
2. Compute the standard deviation
● However, these bands are no
of the security’s price.
signals to trading decisions, they
SD = √variance
are merely volume indicators.
3. Multiply the SD with the number of
standard
deviations,
conventionally it is 2. 4. BOL upper band = SMA + 2*(SD) 5. BOL lower band = SMA - 2*(SD) Key points about Bollinger Band: ● If the market is trading close to
● An interesting phenomenon to
BOL's upper limit it is time to sell
discuss is the breakout. Most of
/ short the security. And if the
the
market is trading close to BOL's
between the bands but on the off
trade
does
take
place
lower limit it is the signal to buy the security. ● While Bollinger Bands can be used in any market it is apt for
chance that trade moves above
rangy markets.
or below the bands it is known as
● When markets turn volatile the
a breakout.
bands widen, implying a lower
Relative Strength Index (RSI):
volatile market in near future and
The Relative Strength Index (RSI) was
signaling
by
originally developed by J. Welles
traders. And when they turn less
Wilder Jr. It is a momentum indicator
volatile, they come closer and
i.e., calculates the magnitude of recent
contract towards the SMA line.
price changes of the asset to estimate
This contraction is known as
the overbought or oversold situation
squeeze which is signaling that
and
the market is bound to turn more
decisions. RSI is a line graph that
volatile in near future.
oscillates between 2 extreme readings,
potential
exit
then
0 and 100.
take
necessary
trading
undervalued/oversold, a bullish Steps to calculate RSI:
sign.
1. RSI calculation involves 2 parts and the first step is to compute the
following
by
using
the
average gain percentage and average loss percentage from the lookback period. (Use the positive value of average loss). 2. The 2nd step smooths the RSI results and is done with the following formula. Key points about RSI: ● The RSI rises as the number and size of positive closes rises, and it falls as the number and size of losses rises. The RSI is just close to 100 or 0 in a highly trending market since the second part of the equation smooths the effect. ● If the RSI line reads at 70 or above it implies that the security is being overvalued/overbought with
a
high
chance
of
a
● New
analysts
may
find
it
corrective price pullback in near
confusing to see that the stock
future, a bearish sign.
can sustain in overbought or
● On the contrary, if the reading is
oversold regions for extended
at 30 or below it quite obviously
periods. Therefore, it is key to
implies
understand the context of the
the
security
being
prevailing transactions to avoid
Moving
Average
such confusion.
Divergence (MACD):
Convergence
● Another scenario to keep in
MACD is a tool that allows traders to
mind is when the peak of a price
analyze the rapid price changes by
during its downward trend is
using a fast line, slow line, and
below 70 and/or the lowest point
histogram. This indicator may be
during the upward trend of
complicated for a novice trader but is
security falls above 30. To help
an extremely useful tool. For easier
identify
during
understanding, let us take an example
strong trends, traders draw a
of the most commonly used MACD, “12,
horizontal line between 30 and
26, and 9”. Let us break it down into
70.
simple steps:
extremities
1. Compute 12 and 26-day moving ● RSI offers traders 2 choices, one
averages.
to enter early and earn high
2. Calculate
the
difference
returns but always have the
between the 12 and 26-day
chance of making losses before
moving averages.
the win. Another is by waiting for
3. Now,
find
out
the
moving
results to be confirmed and then
average of the results of step 2.
make safe but small profits. This
This is the MACD fast line.
choice is to be made depending
4. MACD slow line is simply the 9-
on the risk appetite of the
day moving average of the
investor.
MACD fast line.
● The best way to use RSI is to see
5. The histogram is the difference
if other tools conform with the
between MACD fast line and
trends that have been plotted
MACD slow line.
through RSI.
Though this method comes off as a complicated indicator compared to previously
discussed
tools,
grasped can be highly useful.
once
CONCLUSION A novice trader must understand that there is no single best indicator or tool to
win
in
the
market.
Technical
indicators envelope large numbers of simple, and complicated indicators but they all offer a unique perspective to be able to make educated decisions. It is the traders themselves who must choose the indicators that are most suitable for their trading objectives and strategies.
Key terms in MACD: ● Convergence is when both the MACD lines come close to each other and Divergence is when the difference between the two is increasing. These are the terms that offer signals to traders. ● A new trend will bring the lines together (converge), eventually, cross and then move apart (diverge) as reversal occurs. ● It is worthy to note that MACD involves moving averages of other
moving
averages,
therefore lagging quite a bit. Therefore, it is a great tool to confirm trends but not the best to get early signals.
Because
ultimately,
indicators exist to cut through the noise and chaos of the market through simple outputs.
MONEY FOR THOUGHT: A record-breaking number of retail investors debuted the stock markets when the world was battling a pandemic. The steep market fall in March 2020 paired with many being stuck at home drew immense attention. This led to records like over 10 million new investors entering in 2020, SENSEX rising 16%, incredibly well-performing IPOs, and so on. Though it makes one wonder if the novice investors are equipped enough with knowledge and strategies to face the volatility of markets in the upcoming sessions. Especially considering that many new investors were recorded to be under 20 years. Will the millennium and Gen Z investors survive the market by going head-on and learning from experience, or will they equip themselves with tried and tested techniques to reign the market? Only time will tell.
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