Now a days Trading has become one of the second business for everybody who has monthly income.
Those who have money can Trade but most of those who trade doesn't know what exactly trade is all about.
Just in curiousity they start trading, however at the end of the day they will be a losser.
This blog is a place where the bigners can learn what is trading, how can they trade without loss.
The best part of trading is not making profit rather they should know how to avoid loss.
Angel Diet-odin Demo
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HOW TO DO A STOCK ANALYSIS (COVERING FEW MODES AS PER INDIAN STOCK MARKET)
How To Do A Stock Analysis
Technical analysis is the method of predicting the stock price based on different factors. Stock analysts take note of the past market, price of the stock and volume of the traded stocks to do the stock analysis and thereby forecast the price of the stock. In practicetechnical analysis is done on the basis of the different models and trading patterns.
Analysts take note of various indicators such as relative strength index, regressions, moving averages, cycles regressions, inter-market and intra-market price correlations to prepare charts that actually show the pattern of the price movement for a particular stock. On the basis of the chart and indentifying the price pattern stock analysts predict the future movement of the stock. These financial indicators are actually mathematical transformation of the stock price and trading volume. Apart from these indicators some analysts also consider the market psyche while predicting the stock prices.
There are different models and theories in practice for stock analysis.
Candle Stick Charting - The method of candlestick charts was first developed byHomma Munehisa in the 18th century. The candlestick chart is basically a bar style chart that can be used to project and predict the price movement of the stock. The candlestick chart is basically the combination of the line chart and the bar chart and gives an overview of the opening price, closing price, high and low price in a day for over a period of time. This method of charting and technical analysis is very popular among the investors and analysts because of the easy readability of the chart.
Dow Theory - Dow Theory was first developed by Charles H. Dow, who was the first editor of the Wall Street Journal and co-founder of Dow Jones and Company. The theory is based on six basic tenets.
- There are three types of movements in the market.
- Market trends typically have three phases.
- Stock market discounts all news
- The market average must always confirm each other
- Market trends needs to be confirmed by the volume of trading
- Trends can only be said to be ended only when definitive signals prove that.
Elliott wave principle - This theory was developed by Ralph Nelson Elliott in his book The Wave Principle (1938). According to this theory the psychology of the investors generally moves from optimism to pessimism and this swing creates the price pattern that is projected by the three-wave structures of increasing degree or size.
Apart from above technical methods there are lot many methods available to do stock analysis of Indian stock market and movement of stocks listed in NSE and BSE can be estimated based on those indicators.
WHY TECHNICAL ANALYSIS?
Technical analysis is a commonly used term in the stock market and investors and experts are spending sleepless nights over it. Technical analysis of the stock is a method of predicting the stock price. There are different models or methods of doing the technical analysis like the Candle Stick Charting, Dow Theory, Elliott wave principle and so on. Thetechnical analysis is done on the basis of some data that are related to that particular stock. While doing the technical analysis, experts consider the past market, market trends, price of the stock and trading volume. Based on these data analysts perform the stock analysis to predict the price of that particular stock.
Through the stock analysis experts actually try to figure out the movement of a particular stock at the stock market. This is done by preparing charts on the basis of different indicators such as relative strength index, regressions, moving averages, cycles regressions, inter-market and intra-market price correlations. Once the chart or the pattern is formed according to the formula of the technical analysis experts figure out the similarity of the pattern with previous stock movements. When the pattern matches with a previous case, it is predicted that the stock will follow that pattern.
Technical analysis of the stock has given a mathematical and scientific explanation of the stock movements. This is a partially logical way of predicting the price of the stock and hence technical analysis is seriously considered by the experts and the investors in general. But in reality technical analysis is not the absolutely surefire way of predicting the price movement of the stock. Simply because there are so many other factors that influence the price of the stock other than those taken into consideration while doing the technical analysis. For example no technical analysis theory considers the psyche of the investors and panic in the market that hugely influences the stock prices.These factors are only considered by professionals in the market who understand market and are well versed with technical analysis too.
DOW THEORY
INTRODUCTION
The Dow Theory is developed by Charles Dow (1851-1902) who was journalist, founder and editor of WALL STREET JOURNAL this theory is refined by William Hamilton (1902-1929) after Dow’s death. The term Dow Theory was not used by Dow himself. Dow Theory provides basis for Stock price movements as well as Technical analysis. Dow Theory indicates that stock market behaves same today as it did 100 years ago.
Robert Rhea further refined the Dow’s theory in1932. Rhea studied the Dow’s and William concept and conveyed their thoughts on the market.
Dow Theory consist 6 basics concept for stock market movements as follows
Basically market has three types of trends upward, downward and volatile.
Dow said when prices are higher levels than those which was achieved in previous levels and prices are low than previous levels lows it means market is upward.(higher lows higher highs).
When there are lower lows and lower highs than it means market is downward. Market was volatile when there are both upwards and downwards.
Trends have three phases Accumulation phase, Public participation phase and Distribution phase.
In Accumulation phase stock prices does not change much more because in this phase investor is actively buying & selling securities against the general opinion of the market.
In public participation phase prices are rapidly changes because of participation by Technical investors.
In Distribution phase investors begin to distribute their holdings to the market.
Market hypothesis are efficient.
Stock prices are changes quickly (minute by minute). Once news about prices released prices will change to reflect this new information. At this point Dow Theory provides basis for efficient market hypothesis.
Trends are confirmed by volume.
Dow believed that trends are confirmed by volume. Low volume shows trend of aggressive seller. Dow believed that if many participants are active in particular security and prices moves significantly in one direction it is a signal of developing trend.
Stock market averages must confirm each other.
Dow first stock averages were an index of manufacturing and rail co.’s. Because goods were ship from manufacturing companies into the market by rail. According to this logic when profits of manufacturers become high than it means they will produce more goods. If they produce more then they have to ship more goods to consumers and therefore profits of railway also become high. Soboth the averages should be moving in same direction.
Trends exist until definitive signals proved that they have ended.
Dow believed that market may be temporarily moved in opposite the trend but it will soon come on prior level. Trends become exist despite of market noise.
CANDLESTICK ANALYSIS: THE MOST POPULAR TRADING CHART
Candlestick analysis is one of the simplest and most effective methods of technical analysis for currency trading as well as stock trading. While there are other types of charts available including line and bar charts, the candle patterns are the most popular.
History Of Candlestick Charts
This type of price tracking chart was developed in Japan in the 18th century and that is why you will sometimes see them referred to as Japanese candlestick charts. It also explains why many of the common recognized patterns have Japanese names such as doji and marubozu.
The charts are believed to have been invented or at any rate used by the very successful Japanese commodity trader Mr. Homma who mainly profited from trading in the price of rice. Previously, simple line charts had been used to track commodity closing prices. Candlesticks gave traders a way of plotting more variables while staying within a two dimensional chart.
While bar charts can also plot the open, close, high and low, the advantage of candlesticks is their visual utility. Bullish and bearing periods are clearly visible at a glance.
Mr. Homma's phenomenal success as a trader led other Japanese commodity traders to adopt his analysis tool and in the early 20th century it was introduced to the American stock market by Charles Dow, the founder of the Wall Street Journal and co-founder of the Dow Jones company.
What Is A Candlestick
A typical candlestick has a block that is the body of the candle, plus vertical lines known as shadows or wicks which stick up and down from the body. The top of the upper shadow is the highest price reached during the trading period and the bottom of the lower shadow is the low.
The top and bottom of the candle block mark the opening and closing prices in either order. The candle was originally unshaded (white) for a rising market where the open was the bottom of the candle and the close was the top, or shaded (black or green) for a falling market where the open was the top of the block and the close the bottom. You may now see other colors used, e.g. green or blue for a rising market and red for a fall.
In a case where there is some coinciding of prices and the open, close, high and low are not all different, the candle may look slightly different. Here are some examples:
Doji - period with an equal opening and closing price, looks like a cross.
Marubozu - period when the opening price was the low and the closing price was the high (white marubozu) or vice versa (black marubozu). Has a candle body block only, with no shadow sticks top or bottom.
Candlestick Analysis In Real Time Trading
Candlesticks can record any measured time period. Typically traders will use 5 or 15 minute candles with the resulting chart showing several hours, but it is possible to set your chart for a longer term or shorter term view. Patterns can be identified that indicate emerging trends or possible forthcoming breakouts. You can then compare with indicators or other time periods to check the signals.
Trading decisions in the live market often need to be made very fast. The colored blocks of candlestick analysis help traders to see movements and reversals at a glance and avoid mistakes.
An interesting real documentary about trading
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Five Things You Absolutely Need To Know To Become A Successful Day Trader
Most people feel the lure of day trading: seeing the frenzy on the floor of the New York Stock Exchange, grabbing onto the tail of a skyrocketing stock, and earning your millions. They want to start day trading and find the answer to that famous quote from the movie Wall Street: “How many yachts can you water-ski behind?”
Unfortunately, the vast majority of these beginner traders want to see results faster than it takes to watch the movie. In fact, about 90% of beginner day traders are knocked out of the game within the first few months.
The good news is that this fact can easily be addressed. Just about all of those who crashed and burned did so because they didn’t have a plan. If you take the time to develop a plan and learn how to trade, you stand a much better chance of making that top 10% of day traders who go on to successful day trading careers.
Here are five things you need to know before you start day trading:
1. Is Day Trading Right For You? – This seems like a basic question, but you should seriously evaluate your trading personality. Will risking that much money make you nervous? Can you afford to lose money in the stock market? Are you financially – and emotionally – prepared to leave your job and co-workers behind you? These and other questions must be answered before you go any further in planning your day trading career.
2. How to Control Your Emotions – What most beginner day traders don’t realize is that trading psychology has a huge impact on your success – and the market likes to play with your mind! There are many different emotions that come into play, but it boils down to two main dangers: fear and greed. It is vitally important you learn how to control your emotions before you try to tackle the market.
3. How to Develop a Solid Trading Plan – If you fail to plan, you plan to fail. And yes, it really is that simple. A solid trading plan will include details like determining what type of trader you are, your trading strategies (see below), what products (stocks, e-minis, etc.) you will trade, what software you will use, even your entry points, exit points, and stop
loss points. The more detailed your plan, the more likely you are to have day trading success.
4. What Kind of Trading Strategies You Will Use – There are many trading strategies that will help you succeed at day trading. As a beginner trader you will probably be best served learning one or two to start with. For example, the Bull Trap is an easy type of momentum play for beginners to learn that allows you to predict a trend reversal, and cash in by following the momentum. But there are many different trading strategies; the key is finding the right set of strategies for you.
5. How to Develop a Business Plan – You should approach day trading as a business, not a hobby. Even if you plan to trade just part time, make sure you develop a full business plan that covers all the financial basics like how much trading capital you have, what your short-term and long-term financial goals are, developing cash flow statements, etc. You should also decide how you will work: where your office will be, what time you will be in your office in the morning, what daily preparation you will need, etc.
Learning these five things won’t guarantee that you will become a successful day trader. But if you start day trading before you find out these answers, you most certainly won’t get too far.
ARTICLE SUMMARY:
About 90% of beginner day traders are wiped out within a few months. The biggest reason is that most traders just jump into the market without any experience, knowledge, or planning. This article discusses five key things you need to know before you start risking real money in the market and helps increase your chances of day trading success
Unfortunately, the vast majority of these beginner traders want to see results faster than it takes to watch the movie. In fact, about 90% of beginner day traders are knocked out of the game within the first few months.
The good news is that this fact can easily be addressed. Just about all of those who crashed and burned did so because they didn’t have a plan. If you take the time to develop a plan and learn how to trade, you stand a much better chance of making that top 10% of day traders who go on to successful day trading careers.
Here are five things you need to know before you start day trading:
1. Is Day Trading Right For You? – This seems like a basic question, but you should seriously evaluate your trading personality. Will risking that much money make you nervous? Can you afford to lose money in the stock market? Are you financially – and emotionally – prepared to leave your job and co-workers behind you? These and other questions must be answered before you go any further in planning your day trading career.
2. How to Control Your Emotions – What most beginner day traders don’t realize is that trading psychology has a huge impact on your success – and the market likes to play with your mind! There are many different emotions that come into play, but it boils down to two main dangers: fear and greed. It is vitally important you learn how to control your emotions before you try to tackle the market.
3. How to Develop a Solid Trading Plan – If you fail to plan, you plan to fail. And yes, it really is that simple. A solid trading plan will include details like determining what type of trader you are, your trading strategies (see below), what products (stocks, e-minis, etc.) you will trade, what software you will use, even your entry points, exit points, and stop
loss points. The more detailed your plan, the more likely you are to have day trading success.
4. What Kind of Trading Strategies You Will Use – There are many trading strategies that will help you succeed at day trading. As a beginner trader you will probably be best served learning one or two to start with. For example, the Bull Trap is an easy type of momentum play for beginners to learn that allows you to predict a trend reversal, and cash in by following the momentum. But there are many different trading strategies; the key is finding the right set of strategies for you.
5. How to Develop a Business Plan – You should approach day trading as a business, not a hobby. Even if you plan to trade just part time, make sure you develop a full business plan that covers all the financial basics like how much trading capital you have, what your short-term and long-term financial goals are, developing cash flow statements, etc. You should also decide how you will work: where your office will be, what time you will be in your office in the morning, what daily preparation you will need, etc.
Learning these five things won’t guarantee that you will become a successful day trader. But if you start day trading before you find out these answers, you most certainly won’t get too far.
ARTICLE SUMMARY:
About 90% of beginner day traders are wiped out within a few months. The biggest reason is that most traders just jump into the market without any experience, knowledge, or planning. This article discusses five key things you need to know before you start risking real money in the market and helps increase your chances of day trading success
India’s Top 10 Stock Broking House
Many times new investor or trader gets confusion for open a D Mat and trading Account in Broking house. Many of Broking House promises to you for better service but clients get problem due to trading session in theirs Broker house firm.
Here we are giving list of India’s top 10 Broking House on base of survey of investor and trader of many cities. In their views following Broking Houses gives best and reliable services
Here we are giving list of India’s top 10 Broking House on base of survey of investor and trader of many cities. In their views following Broking Houses gives best and reliable services
4. Share Khan
5. Indiabulls
8. SMC
10. Reliance Money
Stock-broking-companies list
- 5Paisa.com - Online trading, live stock quotes and market research
- Advani Share Brokers - Share broking and market research services
- Anand Rathi Securities - Portfolio management, corporate finance, equity & fixed income brokerage services
- Brescon Group - Advisory and broking services
- CIL Securities - Stock broking & merchant banking services
- CRN India - Trends of stock market, trading tips, chat etc
- Churiwala Securities - Stock trading, quotes and market analysis
- DSP Merrill Lynch - Investment banking and brokerage services
- Dalmia Securities - Stock broking & depository services
- Gandhi Securities - Stock broking and investment services
- Gogia Capital Services - Stock broking and market analysis
- Hasmukh Lalbhai - Stock trading services
- Idafa Investments - Stock broking services
- India Market Access - Offers stock broking, portfolio management and investment banking services
- Investsmart India - Personal finance advisory & online brokerage service
- Kisan Ratilal Choksey Shares - Stock broking and e-trading services
- Kisan Ratilal Choksey Shares - Stock broking and e-trading services
- Kotak Securities - Brokerage services & retail distributor of financial securities
- Manubhai Mangaldas Securities - Stock broking and market analysis
- Moneypore - Investment and broking services
- Navia Markets - Stock broking, IPO and mutual funds services
- Parag Parikh - Stock broking and portfolio management
- Parsoli Corporation - Investment management & stock trading services
- Sivan Securities - offers services related investment banking & stock broking with a focus on South India.
- Skindia Finance - Brokerage firm focusing on GDR arbitrage, equities & debt
- Stock Holding Corporation of India - Custody management, safekeeping & stock broking services
- StockMarkit.com - Stock quotes, news, market indicators etc
- Valia Consultancy - Stock investment and trading consultancy
Candlestick chart
A candlestick chart is a style of bar-chart used primarily to describe price movements of a security (finance), derivative, or currency over time.
It is a combination of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in technical analysis of equity and currency price patterns. They appear superficially similar to error bars, but are unrelated.
Candlestick layout
The basic candlestick
Candlesticks are usually composed of the body (black or white), and an upper and a lower shadow (wick). The wick illustrates the highest and lowest traded prices of a security during the time interval represented. The body illustrates the opening and closing trades. If the security closed higher than it opened, the body is white or unfilled, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is black, with the opening price at the top and the closing price at the bottom. A candlestick need not have either a body or a wick.
To better highlight price movements, modern candlestick charts (especially those displayed digitally) often replace the black or white of the candlestick body with colors such as red (for a lower closing) and blue or green (for a higher closing).
Candlestick simple patterns
There are multiple forms of candlestick chart patterns, with the simplest depicted at right. Here is a quick overview of their names:
White candlestick - signals uptrend movement (those occur in different lengths; the longer the body, the more significant the price increase)
Black candlestick - signals downtrend movement (those occur in different lengths; the longer the body, the more significant the price decrease)
Long lower shadow - bullish signal (the lower wick must be at least the body's size; the longer the lower wick, the more reliable the signal)
Long upper shadow - bearish signal (the upper wick must be at least the body's size; the longer the upper wick, the more reliable the signal)
Hammer - a bullish pattern during a downtrend (long lower wick and small or no body); Shaven head - a bullish pattern during a downtrend & a bearish pattern during an uptrend (no upper wick); Hanging man - bearish pattern during an uptrend (long lower wick, small or no body; wick has the multiple length of the body.
Inverted hammer - signals bottom reversal, however confirmation must be obtained from next trade (may be either a white or black body); Shaven bottom - signaling bottom reversal, however confirmation must be obtained from next trade (no lower wick); Shooting star - a bearish pattern during an uptrend (small body, long upper wick, small or no lower wick)
Spinning top white - neutral pattern, meaningful in combination with other candlestick patterns
Spinning top black - neutral pattern, meaningful in combination with other candlestick patterns
Doji - neutral pattern, meaningful in combination with other candlestick patterns
Long legged doji - signals a top reversal
Dragonfly doji - signals trend reversal (no upper wick, long lower wick)
Gravestone doji - signals trend reversal (no lower wick, long upper wick)
Marubozu white - dominant bullish trades, continued bullish trend (no upper, no lower wick)
Marubozu black - dominant bearish trades, continued bearish trend (no upper, no lower wick)
Complex Patterns
Itimoku Kinkô Hyô, the applied candlestick chart commonly used in Japan .
In addition to the rather simple patterns depicted in the section above, there are more complex and difficult patterns which have been identified since the charting method's inception.
Candlestick charts also convey more information than other forms of charts, such as bar charts. Just as with bar charts, they display the absolute values of the open, high, low, and closing price for a given period. But they also show how those prices are relative to the prior periods' prices, so one can tell by looking at one bar if the price action is higher or lower than the prior one. They are also visually easier to look at [citation needed], and can be colorized for even better definition.
Use of candlestick charts
Candlestick charts are a visual aid for decision making in stock, forex, commodity, and options trading. For example, when the bar is white and high relative to other time periods, it means buyers are very bullish. The opposite is true for a black bar.
Open-high-low-close chart
An open-high-low-close chart (also OHLC chart, or simply bar chart) is a type of chart typically used to illustrate movements in the price of a financial instrument over time. Each vertical line on the chart shows the price range (the highest and lowest prices) over one unit of time, e.g. one day or one hour. Tick marks project from each side of the line indicating the opening price (e.g. for a daily bar chart this would be the starting price for that day) on the left, and the closing price for that time period on the right. The bars may be shown in different hues depending on whether prices rose or fell in that period.
The Japanese candlestick chart is another way of displaying market price data, with the opening and closing prices defining a rectangle within the range for each time unit. Both charts show the exact same data, i.e. the opening, high, low, and closing prices during a particular time frame. Some traders find the candlestick chart easier to read.
Demat account
In India, a demat account, the abbreviation for dematerialised account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialised account is used to avoid holding physical shares: the shares are bought and sold through a stock broker.
This account is popular in India. PHISICALLY ONLY 500 SHARES CAN BE TRADED AS PROVISION GIVEN BY SEBI . As of April 2006, it became mandatory that any person holding a demat account should possess a Permanent Account Number (PAN),
1.Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened).
2.Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation.
3.Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent .
4.After dematerialisation, your depository account with your DP, would be credited with the dematerialised securities.
2.Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation.
3.Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent .
4.After dematerialisation, your depository account with your DP, would be credited with the dematerialised securities.
The Benefits
- A safe and convenient way to hold securities;
- Immediate transfer of securities;
- No stamp duty on transfer of securities;
- Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.;
- Reduction in paperwork involved in transfer of securities;
- Reduction in transaction cost;
- No odd lot problem, even one share can be sold;
- Nomination facility;
- Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;
- Transmission of securities is done by DP eliminating correspondence with companies;
- Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.
- Holding investments in equity and debt instruments in a single account.
- Immediate transfer of securities;
- No stamp duty on transfer of securities;
- Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.;
- Reduction in paperwork involved in transfer of securities;
- Reduction in transaction cost;
- No odd lot problem, even one share can be sold;
- Nomination facility;
- Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;
- Transmission of securities is done by DP eliminating correspondence with companies;
- Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.
- Holding investments in equity and debt instruments in a single account.
Required Documents
The extent of documentation required to open a demat account may vary according to your relationship with the institution. If you plan to open a demat account with a bank, a savings, current and, or other account for which the holder has been issued a check book, such holder has an edge over the non-account holder. In fact, banks usually offer additional incentives to customers who open a demat account with them. Along with the application form, your photographs (with co-applicants) and proof of identity/residence/date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper. Here is a broad list:
- A cancelled check, preferably MICR
- Proof of Identification
- Proof of Address
- Proof of PAN card (mandatory)
- Recent photographs, one and/or more
- Proof of Identification
- Proof of Address
- Proof of PAN card (mandatory)
- Recent photographs, one and/or more
For proof of identification and, or address self-attested facsimile copies of PAN card, Voter’s ID, Passport, Ration card, Driver’s license, Photo credit card, Employee ID card, Bank attestation, latest IT returns and, or latest Electricity/Landline phone bill are sufficient. While they only ask for photocopies of the documents, they will need the originals for verification.
Points to remember while opening your trading account
- Enquire about brokerage rates and taxes you have to pay for your trading account.
- You have to open the trading account with the agent who is offering you the lowest brokerage rates.
- Different brokerage rates are available for different trading methods like delivery trading and intraday (day trading) trading.
- Before opening your account try to insist the agent to get demo of there online trading software or terminal and check your reliability and Speed.
- Also confirm about there charges and any hidden charges if you have to pay.
Please properly verify above points and then decide with whom you would like to open the trading account.
Now you have your on online trading account, let’s go for another most important requirement needed for you to start your online trading account.
- You have to open the trading account with the agent who is offering you the lowest brokerage rates.
- Different brokerage rates are available for different trading methods like delivery trading and intraday (day trading) trading.
- Before opening your account try to insist the agent to get demo of there online trading software or terminal and check your reliability and Speed.
- Also confirm about there charges and any hidden charges if you have to pay.
Please properly verify above points and then decide with whom you would like to open the trading account.
Now you have your on online trading account, let’s go for another most important requirement needed for you to start your online trading account.
Group A, B1, B2, S, T, TS, & Z classification of BSE
The Bombay Stock Exchange (BSE), India ’s leading stock exchange, has classified Equity scripts into categories A, B1, B2, S, T, TS, & Z to provide a guidance to the investors. The classification is on the basis of several factors like market capitalization, trading volumes and numbers, track records, profits, dividends, shareholding patterns, and some qualitative aspects.
As on February 2008 following criterion are used for classifying stocks into various categories by the Bombay Stock Exchange (BSE).
Group A:
It is the most tracked class of scripts consisting of about 200 scripts. Market capitalization is one key factor in deciding which scrip should be classified in Group A.
At present there are 216 companies in the A group.
Group S:
“The Exchange has introduced a new segment named “BSE Indonext” w.e.f. January 7, 2005. The “S” Group represents scripts forming part of the “BSE-Indonext” segment. “S” group consists of scripts from “B1” & “B2” group on BSE and companies exclusively listed on regional stock exchanges having capital of 3 crores to 30 crores. All trades in this segment are done through BOLT system under S group.”
Group Z:
“The ‘Z’ group was introduced by the Exchange in July 1999 and includes the companies which have failed to comply with the listing requirements of the Exchange and/or have failed to resolve investor complaints or have not made the required arrangements with both the Depositories, viz., Central Depository Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for dematerialization of their securities.”
Group B1 & B2:
All companies not included in group ‘A’, ‘S’ or ‘Z’ are clubbed under this category. B1 is ranked higher than B2.
B1 and B2 groups will be merged as a single Group B effective from March 2008.
Group T:
“It consists of scripts which are traded on trade to trade basis.”
Group TS:
“The “TS” Group consists of scripts in the “BSE-Indonext” segments which are settled on a trade to trade basis as a surveillance measure.”Besides these equity groups there are two other groups i.e. Fixed Income Securities (Group F) and Government Securities (Group G).
Initial public offering (IPO)
When a company reaches a certain stage in its growth, it may decide to issue stock, or go public, with an initial public offering (IPO). The goal may be to raise capital, to provide liquidity for the existing shareholders, or a number of other reasons.
Any company planning an IPO must register its offering with the Securities and Exchange Commission (SEC).
In most cases, the company works with an investment bank, which underwrites the offering. That means marketing the shares being offered to the public at a set price with the expectation of making a profit.
(An initial public stock offering (IPO) referred to simply as an "offering" or "flotation," is when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market.
An IPO can be a risky investment. For the individual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.)
Stock Formulas
Stock Formulas used to date:
PE Ratio = Price / Earnings
Return on equity they earn ______ on every $ of equity = earnings per share / stockholders equity
DPS = dividends per share (yearly)
Dividend yield = dividends per share / stock price
Dividend pay out ratio = dividends per share / earnings per share
Total return = (ending price + div. income received / beginning price) - 1
Earnings per share = current (last 12 months)
Earnings per share = earnings available to shareholders / # shares outstanding
Earnings per share growth = return on equity x (1-Pay out ratio)
Pay out ratio = dividends per share / earnings per share
Net working capital = current assets - current liabilities
Profit margin = net income / net sales
Turn over = net sales / total assets
Leverage = total assets / current earnings
For every sales dollar, they earn___________ = net income / net sales
For every dollar they invested they got ________ worth of sales = net sales / total assets
For every $1 they have ______ working for them = Total assets / shareholders equity –
Internal growth or implied sustainable growth = return on equity x (1 - pay out ratio)
NAV per share, net asset value per share = total value of portfolio / number of shares outstanding in fund
Retention ratio = (1- pay out ratio) Stock Market Related Definitions
The January effect - Historical tendency for stock prices to increase in January more than any other month
Market Order - Buy or sell for whatever you can get for it ASAP.
Stop Order - A Stop Order is when you tell the broker to trade your stock once it reaches a certain price (above or below what you bought it at). Once it hits that price, it turns into a "market order" and gets executed at whatever the going rate is.
Limit Order - A Limit Order is where you tell the broker to ONLY execute at a specific price (above or below). Example - buy 100 shares at no more than 20. Or sell 100 for no less than 20.
NAV - Net Asset Value - Current value of a mutual fund
CAPM - Capital Asset Pricing Model - Values various investments based on their risk vs. return characteristics
Round Lot - Stocks are sold in lots of 100.
Odd Lot - When stocks are sold in quantities less than 100
Specific risk - The risk associated with buying only one stock.
Penny stocks - Stocks that are priced at under $5.00 each share and can even be priced under $1.00.
The greater fool theory - Buying something for no other reason than the belief that you will be able to sell it to some other sucker for a higher price
Long position - When you buy a stock with the hope that it will increase in price.
Short Position - When you sell a stock (that is borrowed) with the hope that it will decrease in price (so that you can buy them cheaper to replace the stock you borrowed). Short sellers think the price will decrease.
Markets - are self-regulating
SEC – Securities and Exchange Commision - enforcement agency – insider transactions – try to ensure a fair market. (Officers, directors, key employees cannot buy or sell share of the company without filling a report)
Insider transactions - Officers, directors, key employees cannot buy or sell share of the company without filling a report with the SEC.
Penny stocks – brokers selling small companies (usually non-NYSE members)
Full service broker – has polished stuff on everything – usually cost approximately 2% of transaction (broker gets 1/3 of that)
Discount broker – no advice or recommendations
Beta - tends to show how a stock will move relative to the market. If beta is greater then 1, it will tend to move more than the market (because of specific risk)
Alpha - the characteristic line showing the specific risk if alpha is zero then no specific risk.
Bull market – when asset prices are rising
Bear market – when asset prices are falling
Inflation - not good for stocks or bonds
Long position - Buying stocks is said to be long (expect increase in stock’s price)
Short position - Short selling - Selling a borrowed stock. Short selling corrects overpriced stocks. (Going short is anticipating the market decreasing)
Margin - borrowing from broker (Borrow after $25000 is spent @ 11%, maximum = $50,000) Margin deposit can be T-bills, cash, or non-margin stocks
Squeeze on the shorts – people trying to cover their short interest causes prices to increase.
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