A Demat account allows you to buy, sell and transact shares without endless paperwork and delays. Its is also safe, secure, convenient and a must for trading in share market. The Demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership tittle of securities, and provides easy receipt of public issue allotments.
It helps you avoid bad deliveries caused by signature mismatch, postal delays and loss of certificates in transit. Further, it eliminates risks associated with forgery, counterfeiting, and loss due to fire, theft or mutilation. Demat account holders can also avoid stamp duty, avoid filling up to transfer deeds, and obtain quick receipt of such benefits as stock splits and bonuses. Around 200 “ depository participants” offer the Demat account facility. A comparison of fees charged by different DPs is detailed below. But there are three distinct advantages of having a Demat account with a bank – quick processing, accessibility and online transaction. Generally, banks credit your Demat account with shares in case of purchase, or credit your savings account with the proceeds of a sale on the third day.
Banks are also advantageous because of the number of branches they have. Some banks give the option of opening a Demat account in any branch, while others restrict themselves to a selected set of branches. Some private branches also provide online access to the Demat account. So, you can check on your holdings, transactions and status of requests through the net banking facility. A broker who acts as a DP may not be able to provide these services. Opening an individual Demat account is a two step process: You approach a DP and fill up the Demat account-opening booklet. The Web sites of NSDL and CSDL list the approved DPs. You will then receive an account number and a DP ID number for the account. Quote both the numbers in all future correspondence with your DP.
How Many Accounts?
If your shares are held in joint names, be sure to open the account in the same order of names. If A, B and C jointly hold 100 shares in a company and have three share certificates all listing A, B and C as the first, second and their holders respectively, one account will suffice.
For different combinations of names, open separate accounts for each combination. If the three certificates are held as ABC, BAC and CBA, three different accounts are necessary.
There is no limit to the number of accounts you can open.
There is no limit to the number of DPs you can have accounts with.
You can even open a multiple-sign Demat account, which can be operated by multiple holders, like a joint savings bank account.
You can even open a Demat account even before you acquire your first security.
Documents Required
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 account holder has an edge over the non-account holder. In fact, banks usually offer additionally incentives to customers who open a Demat account with them. Along with the application form, your photography (with co-applicants) and proof of identity/residence/date of birth and have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper.
Monday, March 30, 2009
Saturday, March 28, 2009
Day Trading Commandments
Day trading stock online gives the thrill of the hunt for the convenience of an easy chair. Day trading holds potential for fast profits sometimes could be intense and risky. The most successful day traders understand the process and are willing to commit the time necessary to monitor the markets for hours to catch the slightest favorable change. Day trading combines research and instinct with fearless action. If this sounds appealing, start with the 10 commandments for the success of Day Trading.
1. Set limits on trading funds: Newcomers to day trading need to gain hands-on experience in the market. Start with a reasonable limit of money that you could afford to lose without sacrificing the car payment, since the potential for profit or loss is great.
2. Set limits on losses: Why ride a downturn hoping for a miracle upswing? As the old saying goes, “know when to cut your losses?”.
3. Manage your expectations: Sure, day traders can hit the right time and double their money in a matter of minutes. They could wither out fast. The day trading offers good profit making potential but does not come with a guarantee. Avoid betting on one stock and remain contented with gradually increasing the value of your trades. Day trading is about risk taking rather to mindless gambling.
4. Determine a trading strategy: Day trading requires keeping up with the trends and ranges, but does so on a shorter timeline. Another useful approach is to focus on specific types of business or industries to develop expertise.
5. Trading is the means, not the end: Day trading is fast paced calling for the slow down. Trade frequently just to keep trading by generating fees for online brokerage. Take your hands off the mouse and think before you click. Day traders might make three trades in a day or 12. It is not the number of trades but the result that counts.
6. Find the trends: Trend analysis shows changes that indicate an up or down move in stock prices. Since day trading is so active, you may choose to subscribe to trend reports rather than take time to develop charts.
7. Lose he emotion: The trills and chills of the day trading must be kept in check so that the but/sell decisions are based on informed choices. If you lose, let it go. Dwelling on the loss only blunts decision making for the next trade. Put your emotions within a range, neither too high nor too low.
8. Block the fear: After tanking several times it is easy to start second-guessing your day trading decisions. Successful online traders have to rise above the fear of picking another loser and either work your trading strategy or make changes to improve it.
9. Ignore hype: No matter how much a stock is touted in the tip sheets, if it does not fit your day trading strategy then it is not right for you.
1. Set limits on trading funds: Newcomers to day trading need to gain hands-on experience in the market. Start with a reasonable limit of money that you could afford to lose without sacrificing the car payment, since the potential for profit or loss is great.
2. Set limits on losses: Why ride a downturn hoping for a miracle upswing? As the old saying goes, “know when to cut your losses?”.
3. Manage your expectations: Sure, day traders can hit the right time and double their money in a matter of minutes. They could wither out fast. The day trading offers good profit making potential but does not come with a guarantee. Avoid betting on one stock and remain contented with gradually increasing the value of your trades. Day trading is about risk taking rather to mindless gambling.
4. Determine a trading strategy: Day trading requires keeping up with the trends and ranges, but does so on a shorter timeline. Another useful approach is to focus on specific types of business or industries to develop expertise.
5. Trading is the means, not the end: Day trading is fast paced calling for the slow down. Trade frequently just to keep trading by generating fees for online brokerage. Take your hands off the mouse and think before you click. Day traders might make three trades in a day or 12. It is not the number of trades but the result that counts.
6. Find the trends: Trend analysis shows changes that indicate an up or down move in stock prices. Since day trading is so active, you may choose to subscribe to trend reports rather than take time to develop charts.
7. Lose he emotion: The trills and chills of the day trading must be kept in check so that the but/sell decisions are based on informed choices. If you lose, let it go. Dwelling on the loss only blunts decision making for the next trade. Put your emotions within a range, neither too high nor too low.
8. Block the fear: After tanking several times it is easy to start second-guessing your day trading decisions. Successful online traders have to rise above the fear of picking another loser and either work your trading strategy or make changes to improve it.
9. Ignore hype: No matter how much a stock is touted in the tip sheets, if it does not fit your day trading strategy then it is not right for you.
Tuesday, March 24, 2009
Swing and Trend Trading
Swing trading has been a kind of fundamental trading in which positions are held for longer period than a single day . This is because most fundamentalists are actually swing traders since changes in corporate fundamentals generally require several days or even a week to cause sufficient price movement than renders a reasonable profit .
Swing trading is a simplified procedure . In reality , it sits in the middle of the continuum between the day trading to trend trading . A day trader will hold a stock anywhere from a few seconds to a few hours , but never beyond a day . A trend trader examines the long-term fundamental trends of a stock or index and may hold the stock for a few weeks or months . Swing traders hold a particular stock for a period of time , generally a few days or two or three weeks , which is between the extremes . They will trade the stock on the basis of intra-week or intra-month oscillations between optimism and pessimism . Swing trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of trend .
Swing trading combines the best of the two worlds – the slower pace of investing and the increased potential gains of day trading .
Swing traders hold stocks for two days or weeks playing the general upward or downward trends .
Swing trading is not high speed day trading . Some people call it momentum investing , because you only hold positions that are making major moves .
You can quickly build up your equity by rolling money rapidly through short term gains .
How does Swing Trading Work ?
The basic strategy of swing trading is to jump into a strongly trending stock after its gestation period of consolidation .
Strongly trending stocks often make a quick move after completing correction .
One could sell the stock between two to seven days for a 5-25 per cent move . This process could be repeated over and over again . One could play the short side by shorting stocks that fall through support levels .
In brief , a Swing trader’s goal is to make money by capturing quick moves that stock makes in the life span , and controlling risk by proper money management techniques , simultaneously .
Advantages of Swing trading
Swing trading works well for part time traders – especially those doing it while at work . Swing trading does not require that type of focus and dedication while its traders stay glued to computers monitors , feverishly watching minute-to-minute changes in the quote .
Swing traders try to ride “ swings “ in the market while the traders gamble on stocks popping or falling by fraction of points . Swing traders buy fewer stocks and aim for better gains . They pay lower brokerage and have a better chance of earning larger gains , theoretically .
Broker reaps the harvest while day trading . “ Swing traders go for the meat of the move , while a day trader just get scraps .”Furthermore , to swing trade , you need not hook up with sophisticated computers or lighting execution services . You need not have to play about extremely volatile stocks .
We believe that swing trading is a better way for the individual to attain superior investment results through the short-term trading in stock market . This trading strategy has been carefully designed for the needs of the individual investor , who does not have the resources that institutions and professional money managers may have .
How to Swing Trade ?
You need to understand what are the up or down trends to fully understand the significance of the swing trading .
Up Trend : Simply put , an up-trend is a series of higher highs and higher lows . In other words , an up trend is a series of successive rallies that extend through previous high points , interrupted by declines , which terminate above the low point of the preceding sell-off . Often , the high of the last “ swing “ in the trend will serve as the support for the next low . These areas are circled .
Down Trend : Simply put , a down trend is a series of lower highs and lower lows . In other words , a down trend is a series of successive declines that extend through previous low points , interrupted by increases , which terminate below the high point of preceding rally . Often , the low last “ swing “ in the stock’s trend will serve as the resistance for the next high .
Trend Trading
A trend is nothing , but the general direction of price of an asset or market in general . It could apply to equities , bonds , commodities and any other market , characterized by a long-term movement in the price or volume . Trend trading is one of the most effective and easy to use methods for making money in the market . The success of trend trading depends on identifying and catching the trend after it gets out of the trend no sooner it reserves . Trend trading involves taking a position in the markets with that position for weeks to months for larger than the normal gains . Trend traders or investors generally trade long-term or secular trends and are not concerned with the day to day market volatility .
Advantages of Trend Trading
Trend trading is the fastest and most risk free way to make money in the markets . In trend trading you could identify a change of trend in the market as early as possible , take your position , ride the trend and close your position shortly after trend reverses .
It is very possible to catch 60 to 80 percent of many intermediate term and long term market movements thereby creating wealth for yourself and your family .
Trend trading helps in taking larger profits out of the market without watching the market or stocks on a minute-by-minute or even a day-day basis .
Whether you are a short term day trader or a long term investor , we believe incorporating Trent Trading into your overall trading plan is a must . There are two types of trades : “ Income producing “ trades and “ Wealth building “ trades .
Swing trading and day trading produce income , while Trend trading picks is designed to amass wealth . add this wealth building component to your trading today .
Swing trading is a simplified procedure . In reality , it sits in the middle of the continuum between the day trading to trend trading . A day trader will hold a stock anywhere from a few seconds to a few hours , but never beyond a day . A trend trader examines the long-term fundamental trends of a stock or index and may hold the stock for a few weeks or months . Swing traders hold a particular stock for a period of time , generally a few days or two or three weeks , which is between the extremes . They will trade the stock on the basis of intra-week or intra-month oscillations between optimism and pessimism . Swing trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of trend .
Swing trading combines the best of the two worlds – the slower pace of investing and the increased potential gains of day trading .
Swing traders hold stocks for two days or weeks playing the general upward or downward trends .
Swing trading is not high speed day trading . Some people call it momentum investing , because you only hold positions that are making major moves .
You can quickly build up your equity by rolling money rapidly through short term gains .
How does Swing Trading Work ?
The basic strategy of swing trading is to jump into a strongly trending stock after its gestation period of consolidation .
Strongly trending stocks often make a quick move after completing correction .
One could sell the stock between two to seven days for a 5-25 per cent move . This process could be repeated over and over again . One could play the short side by shorting stocks that fall through support levels .
In brief , a Swing trader’s goal is to make money by capturing quick moves that stock makes in the life span , and controlling risk by proper money management techniques , simultaneously .
Advantages of Swing trading
Swing trading works well for part time traders – especially those doing it while at work . Swing trading does not require that type of focus and dedication while its traders stay glued to computers monitors , feverishly watching minute-to-minute changes in the quote .
Swing traders try to ride “ swings “ in the market while the traders gamble on stocks popping or falling by fraction of points . Swing traders buy fewer stocks and aim for better gains . They pay lower brokerage and have a better chance of earning larger gains , theoretically .
Broker reaps the harvest while day trading . “ Swing traders go for the meat of the move , while a day trader just get scraps .”Furthermore , to swing trade , you need not hook up with sophisticated computers or lighting execution services . You need not have to play about extremely volatile stocks .
We believe that swing trading is a better way for the individual to attain superior investment results through the short-term trading in stock market . This trading strategy has been carefully designed for the needs of the individual investor , who does not have the resources that institutions and professional money managers may have .
How to Swing Trade ?
You need to understand what are the up or down trends to fully understand the significance of the swing trading .
Up Trend : Simply put , an up-trend is a series of higher highs and higher lows . In other words , an up trend is a series of successive rallies that extend through previous high points , interrupted by declines , which terminate above the low point of the preceding sell-off . Often , the high of the last “ swing “ in the trend will serve as the support for the next low . These areas are circled .
Down Trend : Simply put , a down trend is a series of lower highs and lower lows . In other words , a down trend is a series of successive declines that extend through previous low points , interrupted by increases , which terminate below the high point of preceding rally . Often , the low last “ swing “ in the stock’s trend will serve as the resistance for the next high .
Trend Trading
A trend is nothing , but the general direction of price of an asset or market in general . It could apply to equities , bonds , commodities and any other market , characterized by a long-term movement in the price or volume . Trend trading is one of the most effective and easy to use methods for making money in the market . The success of trend trading depends on identifying and catching the trend after it gets out of the trend no sooner it reserves . Trend trading involves taking a position in the markets with that position for weeks to months for larger than the normal gains . Trend traders or investors generally trade long-term or secular trends and are not concerned with the day to day market volatility .
Advantages of Trend Trading
Trend trading is the fastest and most risk free way to make money in the markets . In trend trading you could identify a change of trend in the market as early as possible , take your position , ride the trend and close your position shortly after trend reverses .
It is very possible to catch 60 to 80 percent of many intermediate term and long term market movements thereby creating wealth for yourself and your family .
Trend trading helps in taking larger profits out of the market without watching the market or stocks on a minute-by-minute or even a day-day basis .
Whether you are a short term day trader or a long term investor , we believe incorporating Trent Trading into your overall trading plan is a must . There are two types of trades : “ Income producing “ trades and “ Wealth building “ trades .
Swing trading and day trading produce income , while Trend trading picks is designed to amass wealth . add this wealth building component to your trading today .
Friday, March 20, 2009
Stock Market Players
If one is interested in investing , it is valuable to know who the main players in the stock market game are . The main players in the stock market are the exchanges . Exchanges are where the sellers are matched with the buyer to both facilitate the trading and help to set the price of the stock shares . The primary exchanges are the NASDAQ , the New York Stock Exchange , all of the ECNs ( electronic communication networks ) and several other regional exchange . Not too long ago , all of the trading was done through the traditional exchanges , but today most of the stock market trading is done through NASDAQ , which uses ECNs and other firms with access to the NASDAQ to facilitate the trading .
One of the foremost and most prominent exchanges for investing in the stock market is the New York Exchange . It is also one of the largest stock market exchanges in the world . The NYSE is operated by the not-for-profit corporation New York Stock Exchange Inc, with its main building located at 18 Broad Street , at the corner of the Wall Street , in the New York City , New York , U.S.A. It is home to some 2,800 companies whose stock is valued at nearly $15 trillion in the global market capitalization . Investing your money on NYSE , unlike investing in some other more “ virtual “ exchanges , always involve face-to-face communication in a particular physical location . There is a podium /desk on the trading floor for each of the members of the stock exchange . Exchange members interested in buying and selling a particular stock on behalf of investors meet in a predetermined spot , where NYSE employee facilitates the stock price negotiations between the buyers and the sellers .
A different kind of stock market exchange arose in the later part of 20th century and has changed the landscape of the stock market . NASDAQ , which is an acronym for National Association of Securities Dealers Automated Quotations , is a stock market run by the National Association of Securities Dealers . The NASDAQ National market consists of over 3000 companies that have a national or international shareholder base , meet stringent financial requirements , and agree to specific corporate governance standards . It began trading on February 8 , 1971 as the world’s first electronic stock market . Fueled by the growth of internet stock trading , NASDAQ became the largest American stock exchange by 1999 , with over half the companies trading in United States listed . NASDAQ is made up of the NASDAQ National Market and NASDAQ SmallCap Market . Although the market is based primarily in the United States , NASDAQ has many aliances worldwide , so that today , investing in the stock market is a global activity . NASDAQ allows multiple stock market participants to trade through electronic communication networks structure . To ensure that in chaotic stock market conditions , those placing small market orders are not ignored . NASDAQ created a feature known as the Small Order Execution System .
Before the advent of internet , full service stock brokerage firms like Merryl Lynch have dominated the market . As discount brokers embraced the internet market , full service brokerage firms pretty much ignored what was happening . They didn’t feel they were really competing on price . Instead , they felt their differentiating factors were research recommendations and a relationship with a broker . They didn’t believe their customers were very concerned about price when investing . In addition , it was tough for them to figure out how to incorporate low-priced Internet services into their business models . Most full service brokers are paid commissions out of the fat transaction fees charged to the customers . If they were to provide low-cost trading , how could they provide their brokers with generous compensation ? As a result , investors have been running from full service stock brokers into the hands of firms offering cheap Internet trades . This boom in internet-based stock market investing brought many companies to the front , including such big names as E-trade , TDWaterhouse etc.
One of the foremost and most prominent exchanges for investing in the stock market is the New York Exchange . It is also one of the largest stock market exchanges in the world . The NYSE is operated by the not-for-profit corporation New York Stock Exchange Inc, with its main building located at 18 Broad Street , at the corner of the Wall Street , in the New York City , New York , U.S.A. It is home to some 2,800 companies whose stock is valued at nearly $15 trillion in the global market capitalization . Investing your money on NYSE , unlike investing in some other more “ virtual “ exchanges , always involve face-to-face communication in a particular physical location . There is a podium /desk on the trading floor for each of the members of the stock exchange . Exchange members interested in buying and selling a particular stock on behalf of investors meet in a predetermined spot , where NYSE employee facilitates the stock price negotiations between the buyers and the sellers .
A different kind of stock market exchange arose in the later part of 20th century and has changed the landscape of the stock market . NASDAQ , which is an acronym for National Association of Securities Dealers Automated Quotations , is a stock market run by the National Association of Securities Dealers . The NASDAQ National market consists of over 3000 companies that have a national or international shareholder base , meet stringent financial requirements , and agree to specific corporate governance standards . It began trading on February 8 , 1971 as the world’s first electronic stock market . Fueled by the growth of internet stock trading , NASDAQ became the largest American stock exchange by 1999 , with over half the companies trading in United States listed . NASDAQ is made up of the NASDAQ National Market and NASDAQ SmallCap Market . Although the market is based primarily in the United States , NASDAQ has many aliances worldwide , so that today , investing in the stock market is a global activity . NASDAQ allows multiple stock market participants to trade through electronic communication networks structure . To ensure that in chaotic stock market conditions , those placing small market orders are not ignored . NASDAQ created a feature known as the Small Order Execution System .
Before the advent of internet , full service stock brokerage firms like Merryl Lynch have dominated the market . As discount brokers embraced the internet market , full service brokerage firms pretty much ignored what was happening . They didn’t feel they were really competing on price . Instead , they felt their differentiating factors were research recommendations and a relationship with a broker . They didn’t believe their customers were very concerned about price when investing . In addition , it was tough for them to figure out how to incorporate low-priced Internet services into their business models . Most full service brokers are paid commissions out of the fat transaction fees charged to the customers . If they were to provide low-cost trading , how could they provide their brokers with generous compensation ? As a result , investors have been running from full service stock brokers into the hands of firms offering cheap Internet trades . This boom in internet-based stock market investing brought many companies to the front , including such big names as E-trade , TDWaterhouse etc.
Thursday, March 12, 2009
Risk Management in Stock Market
Stock market provides the same chance for investors to take their return , but so many investors could not earn enough returns and lose money , Why ? Because they do not know what is risk management and do not use it .
There are different ways and definition about risk management . Some people call it position sizing , while others call money management . Most of the books presented risk management so complicatedly that common investors unable to understand formulas for calculating the risk . But in this user-friendly handbook, we describe it simple and practical as possible .
Risk management is the process of measuring , or assessing risk and then developing the strategies to manage the risk , while attempting to maximize the returns . Typically involves utilizing a variety of trading techniques , model and financial analysis . The potential return from any investment is generally depending to the amount of the risk the investor is willing to assume .
Investors will not take on greater risks without the possibility of higher earnings . This is called the risk premium . In general , the greater the risk , the higher the potential return ; the lower the risk , the lower the expected return .
Different markets have varies risks . Their volatility varies for example risk in the stock market , and currency market is not the same . Also, each stock in the stock market has its own risk , because the volatility is varies. So, if a stock has more volatility you should invest less money in it . Risk management is a must for stock trading of any kind
Common Types Of Risk :
There are several main types of risk , and investors should understand them well because some affect certain investments more than others . The two common type of risks that apply to almost all investments are :
Market Risk : The chance that financial markets in general may rise or fall in value .
Inflation Risk : May be the most important factor for long – term investors to consider , because inflation is cumulative , and it compounds just as interest does .You can’t control the inflation risk , but with a good strategy you can manage and control the affect of market risk on your stocks.
A professional trader always tries to understand and control protfolio risk . Before entering into any trade , good traders first think about how much risk to take and how much risk exposure comes with a particular trade selection . Only then do they allow themselves to think about how much profit they stand to make .
Prudent investors always close their position and exposure if they determine that a protfolio caries too much risk .
Risk Management For a Trade :
Before you decide to trade consider to these fundamental principles .
Before you trade a stock , know how much you are willing to lose .
Check the stock to be sufficiently liquid , could you buy or sell promptly ?
Determine the cut-loss level before trading .
Determine your profit target ( take-profit-level ).
Buy the stock only at an acceptable price level . Use a limit order when you buy a stock .
Immediately after the trade has been confirmed , enter the stop-loss-at-market order at your predetermined stop-loss level .
Take profit when the trade reaches your profit targets .
Protfolio Risk Management :
Your protfolio risk will be well under control and you manage your protfolio risk actively , by managing the risk of each trade . Follow the pointers to control your protfolio risk management
Determine your overall cut-loss level . Usually your protfolio should not lose more than 10 percent of your capital .
Diversity your investment in at least six or more different stocks .
Know your overall risk tolerance before building up the protfolio.
Act quickly when you see your risk limits exceeded .
Close out the entire protfolio if it losses to your overall stop-loss level.
There are different ways and definition about risk management . Some people call it position sizing , while others call money management . Most of the books presented risk management so complicatedly that common investors unable to understand formulas for calculating the risk . But in this user-friendly handbook, we describe it simple and practical as possible .
Risk management is the process of measuring , or assessing risk and then developing the strategies to manage the risk , while attempting to maximize the returns . Typically involves utilizing a variety of trading techniques , model and financial analysis . The potential return from any investment is generally depending to the amount of the risk the investor is willing to assume .
Investors will not take on greater risks without the possibility of higher earnings . This is called the risk premium . In general , the greater the risk , the higher the potential return ; the lower the risk , the lower the expected return .
Different markets have varies risks . Their volatility varies for example risk in the stock market , and currency market is not the same . Also, each stock in the stock market has its own risk , because the volatility is varies. So, if a stock has more volatility you should invest less money in it . Risk management is a must for stock trading of any kind
Common Types Of Risk :
There are several main types of risk , and investors should understand them well because some affect certain investments more than others . The two common type of risks that apply to almost all investments are :
Market Risk : The chance that financial markets in general may rise or fall in value .
Inflation Risk : May be the most important factor for long – term investors to consider , because inflation is cumulative , and it compounds just as interest does .You can’t control the inflation risk , but with a good strategy you can manage and control the affect of market risk on your stocks.
A professional trader always tries to understand and control protfolio risk . Before entering into any trade , good traders first think about how much risk to take and how much risk exposure comes with a particular trade selection . Only then do they allow themselves to think about how much profit they stand to make .
Prudent investors always close their position and exposure if they determine that a protfolio caries too much risk .
Risk Management For a Trade :
Before you decide to trade consider to these fundamental principles .
Before you trade a stock , know how much you are willing to lose .
Check the stock to be sufficiently liquid , could you buy or sell promptly ?
Determine the cut-loss level before trading .
Determine your profit target ( take-profit-level ).
Buy the stock only at an acceptable price level . Use a limit order when you buy a stock .
Immediately after the trade has been confirmed , enter the stop-loss-at-market order at your predetermined stop-loss level .
Take profit when the trade reaches your profit targets .
Protfolio Risk Management :
Your protfolio risk will be well under control and you manage your protfolio risk actively , by managing the risk of each trade . Follow the pointers to control your protfolio risk management
Determine your overall cut-loss level . Usually your protfolio should not lose more than 10 percent of your capital .
Diversity your investment in at least six or more different stocks .
Know your overall risk tolerance before building up the protfolio.
Act quickly when you see your risk limits exceeded .
Close out the entire protfolio if it losses to your overall stop-loss level.
Monday, March 9, 2009
Returns with Low Risk
Delivery based trading means buying shares and holding them for a certain period of time is called delivery based trading . The shares you bought will be in you Demat account . Once you take the delivery of shares you could hold them as long as you want . You must have sufficient funds in your account . To take delivery . You need not get any margin to buy shares in delivery . Study the following points carefully and get the best returns in a short period of time
Basically , Delivery based trading can be minimum one week , one month or a couple of months . How long you hold your scrips and shares will depend on other technical indicators and averages .
How to select best scrips ?
There are thousand of shares and stocks, which one is best for delivery trading and which one will give maximum profit in short period of time . Have a look on the selection criteria points :
1. Sector-50 percent of stocks rise and fall is directly related to the strengths and the weakness of its industry group .
2. Never lose more than 1 – 2 percent of your total mount on any trade .
3. Promoters holding more than 40 percent indicate safety for retail investors .
4. Liquidity – buying and selling of shares minimum one litre per day .
Consistent Earnings : Generating profit consistently year after year or quarter after quarter .
EPS : Earning per share is calculated by taking a company’s net earning and dividing by the numbers of outstanding shares of the stock the company has .
P/E Ratio : EPS is a great way to compare earnings across companies , but it does not tell you anything about how the market values the stock . That is why fundamental analysis use the P/E ratio , to figure out how much the market is willing to pay for a company’s earnings. Higher the PE ratio , more people are convinced to pay high for that share expecting higher growth in the coming future .
Dividend Yield : It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stock price . Its percentage return a company pays out to its shareholder in the form of dividends . The higher the percentage the better will be the return .
Price/Book Ratio : The higher the ratio the higher the price the market is willing to pay for the company above its assets . It is more useful to value investor than the growth investor .
Price/Sales Ratio : As with earning a book value , you could find out how the market is valuing a company by comparing the company’s price to its annual sales . Lower Price/Sales are usually thought to be the better investment since their sales are priced cheaply . P/S ratios are usually used for only for unprofitable companies , since such companies don’t have a P/E ratio .
Returns on Equity : It is used as a general indication of the company’s efficiency , in other words , how much profit it is able to generate given the resources provided by the stock holders . Investors usually look for the companies with ROE that are high and growing .
Debt to Equity Ratio : This should not be more than 1 , and less than 1 indicates the company has very less debt . This is very important during market down trend as the company has to pay lots of interest ratio beside low profitability . So its good sign , if company has less debt and that is debt equity ratio.
Investment Tips in Delivery Based Trading :
1. Buy shares of different companies : Don’t ever try to pull all your money in a single share . Try to get shares of the multiple companies and if possible from different sectors . You will always get benefited , by investing in companies of different sectors , because we never know which sector will have good news and which sector will have a bad news . “ Market always reacts for news “
2. Be Patient : When you buy shares , they may go down . In share market its general practice that shares go up and down . If they go down than don’t panic and sell your shares . Most of the investors wait till their shares come to their buying level and then sell , but generally they forget that is the actual buying level of shares and from this level onwards the share price will starting moving upwards .
3. Hold as long as you want : If you buy shares and if it goes down , then you can hold them and sell them only when your shares go above your buy price .
4. Loan : Now – a – days , some banks and some financial firms provide loans on your shares . So you can utilize your shares in your bad times .
5. Dividend : If companies make good profit , then they may declare dividend per share . If you hold shares of such companies then you may get dividend per share .
6. Good Returns : Now – a – days if you keep your money in banks then you get maximum 9 or 9.5 percent per year . If you invest in shares of good growing companies then you can earn minimum 15 percent returns per year . Some companies give 30 to 40 percent returns per year . Best share market returns are based on delivery based trading for long term .
7. Bonus Share : If the company makes extra ordinary profit then company may declare bonus shares . Bonus shares like 1:1 means if you have one share then you may get another free . So if you have delivery of such share then you are liable for such bonus shares .
Financial Planing for your Share returns : It is another important point to consider , if you hold more than one share then it is always advisable to prepare technical document for all your shares . You ca prepare excel or word sheet on your computer or you can write in your notebook .
In this manner you will come to know what is happening about your share and you can decide when to sell or till what period to hold . This system is called portfolio maintaining .
Even you can keep a close watch on share which you are planning to buy and if you get proper signal or feel comfortable with its results , then you can jump and buy that share .
Basically , Delivery based trading can be minimum one week , one month or a couple of months . How long you hold your scrips and shares will depend on other technical indicators and averages .
How to select best scrips ?
There are thousand of shares and stocks, which one is best for delivery trading and which one will give maximum profit in short period of time . Have a look on the selection criteria points :
1. Sector-50 percent of stocks rise and fall is directly related to the strengths and the weakness of its industry group .
2. Never lose more than 1 – 2 percent of your total mount on any trade .
3. Promoters holding more than 40 percent indicate safety for retail investors .
4. Liquidity – buying and selling of shares minimum one litre per day .
Consistent Earnings : Generating profit consistently year after year or quarter after quarter .
EPS : Earning per share is calculated by taking a company’s net earning and dividing by the numbers of outstanding shares of the stock the company has .
P/E Ratio : EPS is a great way to compare earnings across companies , but it does not tell you anything about how the market values the stock . That is why fundamental analysis use the P/E ratio , to figure out how much the market is willing to pay for a company’s earnings. Higher the PE ratio , more people are convinced to pay high for that share expecting higher growth in the coming future .
Dividend Yield : It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stock price . Its percentage return a company pays out to its shareholder in the form of dividends . The higher the percentage the better will be the return .
Price/Book Ratio : The higher the ratio the higher the price the market is willing to pay for the company above its assets . It is more useful to value investor than the growth investor .
Price/Sales Ratio : As with earning a book value , you could find out how the market is valuing a company by comparing the company’s price to its annual sales . Lower Price/Sales are usually thought to be the better investment since their sales are priced cheaply . P/S ratios are usually used for only for unprofitable companies , since such companies don’t have a P/E ratio .
Returns on Equity : It is used as a general indication of the company’s efficiency , in other words , how much profit it is able to generate given the resources provided by the stock holders . Investors usually look for the companies with ROE that are high and growing .
Debt to Equity Ratio : This should not be more than 1 , and less than 1 indicates the company has very less debt . This is very important during market down trend as the company has to pay lots of interest ratio beside low profitability . So its good sign , if company has less debt and that is debt equity ratio.
Investment Tips in Delivery Based Trading :
1. Buy shares of different companies : Don’t ever try to pull all your money in a single share . Try to get shares of the multiple companies and if possible from different sectors . You will always get benefited , by investing in companies of different sectors , because we never know which sector will have good news and which sector will have a bad news . “ Market always reacts for news “
2. Be Patient : When you buy shares , they may go down . In share market its general practice that shares go up and down . If they go down than don’t panic and sell your shares . Most of the investors wait till their shares come to their buying level and then sell , but generally they forget that is the actual buying level of shares and from this level onwards the share price will starting moving upwards .
3. Hold as long as you want : If you buy shares and if it goes down , then you can hold them and sell them only when your shares go above your buy price .
4. Loan : Now – a – days , some banks and some financial firms provide loans on your shares . So you can utilize your shares in your bad times .
5. Dividend : If companies make good profit , then they may declare dividend per share . If you hold shares of such companies then you may get dividend per share .
6. Good Returns : Now – a – days if you keep your money in banks then you get maximum 9 or 9.5 percent per year . If you invest in shares of good growing companies then you can earn minimum 15 percent returns per year . Some companies give 30 to 40 percent returns per year . Best share market returns are based on delivery based trading for long term .
7. Bonus Share : If the company makes extra ordinary profit then company may declare bonus shares . Bonus shares like 1:1 means if you have one share then you may get another free . So if you have delivery of such share then you are liable for such bonus shares .
Financial Planing for your Share returns : It is another important point to consider , if you hold more than one share then it is always advisable to prepare technical document for all your shares . You ca prepare excel or word sheet on your computer or you can write in your notebook .
In this manner you will come to know what is happening about your share and you can decide when to sell or till what period to hold . This system is called portfolio maintaining .
Even you can keep a close watch on share which you are planning to buy and if you get proper signal or feel comfortable with its results , then you can jump and buy that share .
Friday, February 27, 2009
Quick Bucks
Many people become very rich in the commodity markets . It is one of a few investment areas where an individual with limited capital can make an extraordinary profits in a relatively short period of time .
Nevertheless because most people lose money , commodity trading has a bad reputation as being too risky for the average individual . The truth is that commodity trading is only as risky as u want to make it .
Those who treat trading as a get-rich-quick scheme are likely to lose because they have to take big risks . If you act prudently , treat your trading like your business instead of a giant casino gambling and are willing to settle for a reasonable return , the risks are acceptable . The probability of success is excellent . The process of trading commodities is also known as futures trading . Unlike other kinds of investments , such as stocks and bonds , when you trade futures , you do not actually buy anything or own anything . You are speculating on the future direction of the price in the commodity you are trading . This is like a bet on future price direction . The terms “ buy “ and “ sell “ merely indicate the direction you expect future prices will take .
If for instance , you were speculating in corn , you would buy futures contract if you thought the price would be going up in the future . You would sell a futures contract if you thought the price would go down . For every trade , there is always a buyer and a seller . Neither person has to own a corn to participate . He must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trade lose money . In addition to speculators , both the commodity’s commercial producers and commercial consumers also participate . The principal economic purpose of the future markets is for these commercial participants to eliminate their risks from changing prices .
On one side of a transaction may be a producer like a farmer . He has a field full of corn growing on his farm . It won’t be ready for harvest for another three months . If he is worried about the price going down during that time , he can sell future contracts equivalent to the size of his crop and deliver his corn to fulfil his obligation under the contract . Regardless of how the price of the corn changes in the three months until his crop will be ready for delivery , he is guaranteed to be paid the current price . On the other side of the transaction might be a producer such as a cereal manufacturer who needs to buy lots of corn . The manufacturer such as Kellogg g, may be concerned that in the next three months the price of corn will go up , and it will have to pay more than the current price . To protect against this , Kellogg can buy future contracts at the current price . In three months Kellogg can fulfil its obligations under the contracts by taking delivery of the corn . This guarantees the regardless of how the price moves in the next three months , Kellogg will pay no more than the current price for its corn .
In addition to agricultural commodities , there are futures for financial instruments and intangibles such as currencies , bonds and stock market indexes . Each future market has producers and consumers who need to hedge their risk from the future price changes . The speculators , who did not actually deal in the physical commodities , are there to provide liquidity . This maintains an orderly market where price changes from one trade to the next are small . Rather than taking delivery or making delivery , the speculator merely offsets his position at some time before the date set for future delivery . If the price has moved in the right direction , he will profit . If not , he will lose .
In addition to reducing the costs of production , marketing and processing , future markets provide continuos , accurate , well-publicized price information and continuos liquid markets . Futures trading is beneficial to the public which ultimately consumes the goods traded in the future markets . Without the speculator futures markets could not function .Since the speculators perform the valuable functions of providing liquidity and assuming the risk of the price fluctuation , they can earn substantial returns . The potentially large profits are available precisely because there is also a risk of substantial loss .
As An Investment Vehicle :
There are many inherent advantages of commodity futures as an investment vehicle investment over other alternatives such as savings account , stocks , bonds , options , real estate and collectibles . The primary attraction , of course , is the potential for the large profits in a short period of time . The reason that future trading can be so profitable is leverage . While profits can be large in commodity trading , it is not easy to make consistently correct decisions about what and when to buy and sell .Commodity speculation offers an important advantage over such illiquid vehicles as real estate and collectibles . The balance in your account is always available If you maintain sufficient margin , you can even spend your current profit on a trade without closing out the position . With stocks , bonds and real estate , you can’t spend your gains until you actually sell the investment .
As you will see , commodity trading is not particularly complicated . Unlike the stock market where there are over ten thousand potential stocks and mutual funds , there are only about forty viable future markets to trade . Those markets cover the gamut of market sectors , however o you can diversify throughout important segments of the world economy . In futures trading , it is as easy to sell as it is to buy . By choosing correctly , you can make money whether prices go up or down . Therefore , trading a diversified portfolio of the futures markets offers the opportunity to profit from any potential economic scenario . Regardless of whether we have inflation or deflation , boom or depression , hurricanes droughts, famines or freezes, there is always the potential for profit trading commodities.
There are even tax advantages to making your money from futures trading. Regardless of the actual holding period , commodity profits are automatically taxed as sixty percent long-term capital gains and forty percent short-term capital gains . The current maximum capital gains rate is thirty-three percent , somewhat less than maximum rate of ordinary income . To extent that capital gains tax rates are reduced in the future , commodity traders will benefit . If the distinction is re-establishes so that the taxes on long-term gains are lower than on short-term gains , commodity traders will benefit .
Nevertheless because most people lose money , commodity trading has a bad reputation as being too risky for the average individual . The truth is that commodity trading is only as risky as u want to make it .
Those who treat trading as a get-rich-quick scheme are likely to lose because they have to take big risks . If you act prudently , treat your trading like your business instead of a giant casino gambling and are willing to settle for a reasonable return , the risks are acceptable . The probability of success is excellent . The process of trading commodities is also known as futures trading . Unlike other kinds of investments , such as stocks and bonds , when you trade futures , you do not actually buy anything or own anything . You are speculating on the future direction of the price in the commodity you are trading . This is like a bet on future price direction . The terms “ buy “ and “ sell “ merely indicate the direction you expect future prices will take .
If for instance , you were speculating in corn , you would buy futures contract if you thought the price would be going up in the future . You would sell a futures contract if you thought the price would go down . For every trade , there is always a buyer and a seller . Neither person has to own a corn to participate . He must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trade lose money . In addition to speculators , both the commodity’s commercial producers and commercial consumers also participate . The principal economic purpose of the future markets is for these commercial participants to eliminate their risks from changing prices .
On one side of a transaction may be a producer like a farmer . He has a field full of corn growing on his farm . It won’t be ready for harvest for another three months . If he is worried about the price going down during that time , he can sell future contracts equivalent to the size of his crop and deliver his corn to fulfil his obligation under the contract . Regardless of how the price of the corn changes in the three months until his crop will be ready for delivery , he is guaranteed to be paid the current price . On the other side of the transaction might be a producer such as a cereal manufacturer who needs to buy lots of corn . The manufacturer such as Kellogg g, may be concerned that in the next three months the price of corn will go up , and it will have to pay more than the current price . To protect against this , Kellogg can buy future contracts at the current price . In three months Kellogg can fulfil its obligations under the contracts by taking delivery of the corn . This guarantees the regardless of how the price moves in the next three months , Kellogg will pay no more than the current price for its corn .
In addition to agricultural commodities , there are futures for financial instruments and intangibles such as currencies , bonds and stock market indexes . Each future market has producers and consumers who need to hedge their risk from the future price changes . The speculators , who did not actually deal in the physical commodities , are there to provide liquidity . This maintains an orderly market where price changes from one trade to the next are small . Rather than taking delivery or making delivery , the speculator merely offsets his position at some time before the date set for future delivery . If the price has moved in the right direction , he will profit . If not , he will lose .
In addition to reducing the costs of production , marketing and processing , future markets provide continuos , accurate , well-publicized price information and continuos liquid markets . Futures trading is beneficial to the public which ultimately consumes the goods traded in the future markets . Without the speculator futures markets could not function .Since the speculators perform the valuable functions of providing liquidity and assuming the risk of the price fluctuation , they can earn substantial returns . The potentially large profits are available precisely because there is also a risk of substantial loss .
As An Investment Vehicle :
There are many inherent advantages of commodity futures as an investment vehicle investment over other alternatives such as savings account , stocks , bonds , options , real estate and collectibles . The primary attraction , of course , is the potential for the large profits in a short period of time . The reason that future trading can be so profitable is leverage . While profits can be large in commodity trading , it is not easy to make consistently correct decisions about what and when to buy and sell .Commodity speculation offers an important advantage over such illiquid vehicles as real estate and collectibles . The balance in your account is always available If you maintain sufficient margin , you can even spend your current profit on a trade without closing out the position . With stocks , bonds and real estate , you can’t spend your gains until you actually sell the investment .
As you will see , commodity trading is not particularly complicated . Unlike the stock market where there are over ten thousand potential stocks and mutual funds , there are only about forty viable future markets to trade . Those markets cover the gamut of market sectors , however o you can diversify throughout important segments of the world economy . In futures trading , it is as easy to sell as it is to buy . By choosing correctly , you can make money whether prices go up or down . Therefore , trading a diversified portfolio of the futures markets offers the opportunity to profit from any potential economic scenario . Regardless of whether we have inflation or deflation , boom or depression , hurricanes droughts, famines or freezes, there is always the potential for profit trading commodities.
There are even tax advantages to making your money from futures trading. Regardless of the actual holding period , commodity profits are automatically taxed as sixty percent long-term capital gains and forty percent short-term capital gains . The current maximum capital gains rate is thirty-three percent , somewhat less than maximum rate of ordinary income . To extent that capital gains tax rates are reduced in the future , commodity traders will benefit . If the distinction is re-establishes so that the taxes on long-term gains are lower than on short-term gains , commodity traders will benefit .
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