Tag: profit

PENNY STOCKS

DEFINITION:

“Penny stocks are those that trade at a very low price, have very low market capitalization, are mostly illiquid, and are usually listed on a smaller exchange. Penny stocks in the Indian stock market can have prices below Rs.10/-. These stocks are very speculative in nature and are considered highly risky because of lack of liquidity, smaller number of shareholders, large bid-ask spreads and limited disclosure of information.”

The concept of Penny stocks originated in the USA and derived from the unit of currency called “penny”. Penny is equivalent to one hundredth of USD. Penny stocks or penny shares as they are referred to are stocks which trade at a low prices and have extremely low market caps. In India, usually stocks which are priced below Rs.10/- are commonly known as penny stocks.

However, it is important to note that not all stocks which are priced low are penny stocks. Some great companies and businesses may also be trading at single or double digit prices due to smaller face values but they are essentially large companies with large capital structures and market capitalization and not essentially penny stocks. Therefore it is very important to distinguish between penny stocks and penny business.

5 things you must know before investing in penny stocks in India:

1) Don’t look at the share price, but look at the value:

Penny stocks are available at a relatively low share price. Share price would tempt investors to buy in such stocks. For example, Infosys stock price is Rs.2,180/- per share. On the other hand, one of the penny stocks like GV Films is Rs.0.58/- per share. Now if you have Rs.10,000/- to invest, you would get only 4 Infosys Shares, while on the other hand you would get 17,240 shares of GV Films. Here one should not think how many shares they are getting, but what value these stocks offer. I am not saying this penny stock is good or bad, but an investor should assess how good such a stock is before investing in such stocks.

2) Low volumes means low liquidity:

Several Penny stocks generally trade at low volume. Means if you want to sell and come out, there might not be any buyers. Hence invest in penny stocks that have high volume so that you can liquidate if required. E.g. Odyssey Corp share price is Rs.4.23/- and avg. trading volume is 24,200 shares only. The maximum amount traded is only Rs.1 Lakh. Such stocks have less liquidity as it would depend on demand from buyers.

3) Upper circuit and lower circuits:

Penny stocks have upper circuit and lower circuit. Upper circuit means a stock price cannot increase beyond a predetermined percentage move. Generally it would be 5% to 10%. Lower circuit on the other hand means a stock price cannot reduce by specified percentage. As an investor, you should know that you cannot double your money in a short span, just because a stock has been locked in the upper circuit for a couple of days. Penny stocks may see the upper circuit for a few days and can see the lower circuit by a few days based on demand from buyers.

4) Brokers / Promoters can manipulate share prices:

Since penny stocks have low volume, share prices for such stocks can be easily manipulated by market participants, stock brokers or promoters of the company. If a penny stock price is reaching the upper circuit every day without any news about the company, it clearly indicates that someone is manipulating the share price. As an investor if you hear positive news about the company and think the future prospects are good, you can invest in a company irrespective of whether it is hitting the upper circuit or not.

5) Ignore success stories:

Many stock brokers, websites, blogs, etc. indicate a success story about penny stocks. While these look good, no one wants to talk about hidden stories about investors losing money on penny stocks. Many brokers charge high fees, giving penny stock recommendations indicating a success story saying a penny stock raised by 100% or 500%. Investors fall for that trap, invests and loses money. As an investor, you should understand why a penny stock price has gone up, the reasons behind that and future prospects. If you are convinced by this, you can adopt similar strategies for other penny stocks and invest based on such strategies.

Here are the some List of Penny Stocks:

SERIAL NUMBER	STOCK SYMBOL (NSE)	PRICE (IN INDIAN RUPEES)
1	3IINFOTECH	2.3
2	3PLAND	6.15
3	A2ZINFRA	8.45
4	AKSHOPTFBR	6.95
5	ANDHRACEMT	2.05
6	ANIKINDS	8.3
7	ANSALAPI	5.25
8	ASHIMASYN	7.25
9	ATLANTA	6.35
10	BAJAJHIND	6.95
11	BHANDARI	1.3
12	BILENERGY	1.05
13	BKMINDST	0.7
14	BLBLIMITED	4.1
15	BLKASHYAP	9.2
16	BSELINFRA	1.05
17	BURNPUR	1.5
18	CELEBRITY	6.9
19	CENTEXT	2.5
20	CHROMATIC	0.5
21	CINEVISTA	8.15
22	CKFSL	0.45
23	CNOVAPETRO	7.85
24	COMPUSOFT	7.8
25	COUNCODOS	1.65
26	DHARSUGAR	8.05
27	DIGISPICE	5.05
28	DPSCLTD	9.05
29	DUCON	5.25
30	ENERGYDEV	6.4
31	ESSARSHPNG	6.7
32	FCSSOFT	0.25
33	GAL	2.3
34	GENUSPAPER	5.2
35	GINNIFILA	8.25
36	GISOLUTION	2.55
37	GLOBOFFS	5.35
38	GOLDTECH	8.4
39	GTL	1.6
40	GTLINFRA	0.4
41	GTNIND	6.25
42	GVKPIL	3.95
43	HCL-INSYS	7.3
44	HINDMOTORS	5.9
45	HOTELEELA	5.9
46	IDEA	6.1
47	IFCI	6.7
48	INDBANK	7.1
49	INDOWIND	3
50	INDSWFTLTD	3.1
51	ISMTLTD	4.5
52	IVC	4.1
53	JAYNECOIND	3.6
54	JBFIND	7.25
55	JISLDVREQS	8.6
56	JISLJALEQS	9.1
57	JMTAUTOLTD	1.25
58	JPASSOCIAT	2
59	JPINFRATEC	1.35
60	JPPOWER	1.7
61	KMSUGAR	8.05
62	LGBFORGE	3.7
63	LPDC	1.6
64	LSIL	0.55
65	LYPSAGEMS	4
66	MADHUCON	3.75
67	MAGNUM	3.65
68	MANAKALUCO	4.45
69	MANAKCOAT	4.25
70	MBLINFRA	4.45
71	MCLEODRUSS	4.55
72	MEGASOFT	7.35
73	MERCATOR	0.85
74	METALFORGE	4.85
75	MIRCELECTR	8.6
76	MOHITIND	4.3
77	MOHOTAIND	8.85
78	MSPL	7.35
79	MTNL	9.9
80	NAGREEKCAP	7.6
81	NATNLSTEEL	2.25
82	NECCLTD	5.45
83	NEXTMEDIA	9.7
84	NIBL	6.6
85	NILAINFRA	4.5
86	NILASPACES	1.15
87	NOIDATOLL	3.45
88	OISL	3.15
89	OMKARCHEM	4.85
90	ONELIFECAP	6.75
91	OPTOCIRCUI	2.95
92	OSWALAGRO	5.7
93	PARACABLES	8.5
94	PENINLAND	4.05
95	PILITA	5.6
96	PRAENG	6.05
97	PRAKASHSTL	0.25
98	PROSEED	0.3
99	PSL	0.55
100	RADAAN	1.05
101	RENUKA	9.2
102	RHFL	2.85
103	RKDL	5.4
104	ROLLT	1.85
105	RPOWER	3.5
106	RTNPOWER	2.1
107	SABEVENTS	0.65
108	SABTN	1.25
109	SAKHTISUG	9.25
110	SAKUMA	6.75
111	SALSTEEL	2.75
112	SAMBHAAV	2.55
113	SANWARIA	1.7
114	SCAPDVR	0.2
115	SEPOWER	2.7
116	SETUINFRA	0.85
117	SGL	6.05
118	SHAHALLOYS	8.55
119	SHIRPUR-G	8.15
120	SHREERAMA	5.2
121	SHRIRAMEPC	5.1
122	SHYAMCENT	3.05
123	SIMBHALS	6.95
124	SOMATEX	3.5
125	SREINFRA	9.8
126	STAMPEDE	0.45
127	STINDIA	4.6
128	SUBEX	6.15
129	SUNDARAM	1.3
130	SUPREMEINF	9.65
131	SURANASOL	6.35
132	SURANAT&P	3.55
133	SUZLON	2.7
134	SYNCOM	0.9
135	TALWALKARS	3.7
136	TALWGYM	3.45
137	TCIFINANCE	8.45
138	TECHIN	3.1
139	TGBHOTELS	3.6
140	TIJARIA	7.25
141	TREEHOUSE	5.35
142	TRIDENT	6.75
143	TRIL	7.7
144	TTML	2.35
145	TVVISION	1.2
146	UJAAS	4
147	UMESLTD	1.05
148	UNIPLY	8.95
149	UNITEDBNK	8.85
150	UTTAMSTL	8.4
151	UVSL	0.15
152	VASWANI	5.3
153	VIJIFIN	0.45
154	VIKASECO	2.9
155	VIKASMCORP	3.2
156	VIKASPROP	7
157	VIKASWSP	8.8
158	VIPCLOTHNG	8.45
159	VISASTEEL	5.05
160	WSI	0.85
161	ZENITHBIR	0.5

28 October, 2020

MOVING AVERAGE
Definition:

              “ A moving average is simply the average value of data over a specified time period, and it’s used to figure out whether the price of a stock or a commodity is trending up or down. Although simple to construct, moving averages are dynamic tools, because you can choose which data points and time periods to use to build them. For instance, you can choose to use the open, high, low, close or midpoint of a trading range and then study that moving average over a time period, ranging from tick data to monthly price data or longer.”

          Moving Average (MA) is a stock indicator that is commonly used in technical analysis. Technical Analysis is more important than Fundamental Analysis. Moving Average is one of the most popular techniques. moving averages that are used in timing a financial market. These averages are employed to detect the direction of the stock price trend and identify turning points in the trend in real time.

                  Moving Average smooth the price data to form a trend- following Indicator. They do not predict price direction, but rather define the current direction with a lag. Moving Average is primarily the summary of momentum & trend. Moving average reduces the noise in the price and also helps to follow trends.

Popular Time Period Of Moving Average:
1. 10 Period MA
2. 20 Period MA
3. 50 Period MA
4. 200 Period MA
Moving Average COMBINATION:

This is the main calculation

Sr.No. DAILY WEEKLY

1 10 SMA 2 SMA

2 50 SMA 10 SMA

3 100 SMA 20 SMA

4 200 SAM

MOVING AVERAGE SETUP FOR:

DAILY INCOME TRADING (DIT)
1. I put 10 EMA, 21/20 SMA & 50 SMA on the daily chart.
2. If 10 below 20/21 below 50 I consider that stock is trading in the down trend & I focus on short trades.
3. If 50 below 20/21 below 10 I consider that stock is trading in the up trend & I focus on long traders.
4. Apply your strategy & take your trade accordingly.
TYPES OF MOVING AVERAGE:

The most popular type of moving averages are Simple moving average & Exponential moving average. These moving average uses for identifying the trend of the market.

a. SIMPLE MOVING AVERAGE

                   SMA is the easiest moving average to construct. The Simple Moving Average (SMA) is calculated by adding the price of an instrument over a number of time periods and then dividing the sum by the number of time periods. The SMA is basically the average price of the given time period, with equal weighting given to the price of each period. Most moving averages are based on closing prices

CALCULATING SIMPLE MOVING AVERAGE

                              If you plotted a 5 period simple moving average on 1hour chart, you would add up the closing prices for the last 5 hours, then divide that number by 5.

Example:

A 5-day simple moving average is calculated by adding the closing prices for the last 5 days and dividing the total by 5. 10+ 11 + 12 + 13 + 14 = 60 (60 / 5) = 12

b. Exponential moving average

                          Exponential Moving Average can be specified in two ways- as a percent based EMA or as a period based EMA. A percent based EMA has a percentage as its single parameter. A period based EMA has parameters that represent the duration of the EMA.

CALCULATING EXPONENTIAL MOVING AVERAGE

EMA = K * (Current Price – Previous EMA) + Previous EMA

K: The weighting factor the EMA

K = 2/(n+1)

Where:

n = the selected time period
16 October, 2020
Stock Broker
Stock brokers play a most important role in the Brokerage Firm. Stock Brokers are the Middleman between the stock exchange and trader/client/customers. Stock Brokers are a Professional trader. They buy & sell shares on behalf of clients and their standing instructions. The stock broker may also be known as a registered representative or an investment advisor.
Stock brokers maintains the number of transactions of individual clients of institutional customers. Brokerage firms & Broker dealers are sometimes referred to as stockbrokers. This includes both full service brokers & Discount brokers.
As a representative of his clients, a stock broker seeks the best deals to buy and sell stock. They usually deal in all types of securities and also handle derivatives, such as Commodity Futures, Currency Market, Option Market, Future Market. They also advise their clients about when to make transactions and guide them about what to look for in market dealings.
Stock brokers are paid in form of commissions which usually consist of a percentage of a value of the trade transaction in a stock market. Brokerage firms are also known as discount brokers as they offer trade transactions at a single price.
A stock broker provides advisory services for investing in a stock market and in return an investor pays a fixed fee to them. Margin interest payments are charged to investors for borrowing against the brokerage account for investment in a stock market. They also take service charges from their clients for performing administrative tasks, such as for handling Individual Retirement Account (IRA) and for mailing stocks in the form of certificates.

Stockbroker Pros and Cons

The job of a stockbroker is not without its challenges. Here are some of the pros and cons of becoming a stockbroker:

Pros:
- Great career option for people who have in-depth knowledge of the stock market.
- Offers high commission-based income potential
- Good fit for ambitious individuals with strong selling skills
Cons:
- Must be able to handle rejection.
- Extremely competitive work environment.
- May require excessively long work hours.
- May have difficulty building a significant client base due to availability of online trading.
6 September, 2020
Study of Candlestick Chart

“The Beginning Is Most Important.”

            Candlestick is the most popular & most usable chart in trading. Even most of the successful traders also advise to use this charts for trade. Candlestick chart is invented by MUNEHISA HOMMA.

This charts were developed in the 18th century by Munehisa Homma, a Japanese rice trader. He is considered as the father of the candlestick chart. He is one of the most successful trader in History. The Candlestick trading Bible is one of the most powerful trading systems in history. This trading system is based on Japanese candlestick patterns in combination with technical analysis. Learning Japanese candlestick is like learning a new language. We have to understand the psychology behind the candle formation, understand the candle pattern & most important thing is to understand the trends.

CANDLESTICKS BODY

     Candlesticks have different colors and body size.

The most trading platforms were using White & Black color refers to Bullish & Bearish candlestick charts. But, at present it has been upgraded with colorful charts where white candle is denoted by Green Color & Black candle is denoted by Red color. Filled part of the candlestick is called the Real Body. Thin lines poking above & below the body are called Shadows/Tail.

              If the candle closes above the open price, it indicates the market forms a bullish candlestick. Bullish candles always display as Green color. And if the candle closes below the open price, it indicates the market forms a bearish candlestick. Bearish candles always display as Red color.

But the color doesn’t matters, you can use whatever color you want.

Long v/s Short

Long bodies of candles shows strong buying & selling pressure. Bullish long candle indicates that buyers are more stronger than sellers and they are taking control of the market during this period of time. Conversely, a bearish long candle indicates that sellers are stronger than buyers & they are taking control of the market during this period of time.

Short & small bodies indicate a little buying & selling activity.Upper & lower shadows give us important information about the trading session. Candlestick with long shadows show that trading action occurred well past the open & close. Japanese candlesticks with short shadows indicates that most of the trading actions are confined near the open & close.

         If a candlestick has a longer upper shadow, and short lower shadow, this means that buyers flexed their muscles and bid price higher. But for one reason or another, sellers comes in and drove the price back down to end the session back near its open price.

         If a Japanese candlestick has a long lower shadow and short upper shadow, this means that sellers flashed their washboard abs and forced the price lower. But for one reason or another a buyer comes in and drove prices back up to end the session back near its open price.

CANDLESTICK PATTERNS

Candlestick patterns are one of the most powerful trading concepts, they are simple, easy to identify, & very profitable setups. Candlestick patterns are the language of the market. Here are some of the candlestick patterns that will help us in the market:

1. THE DOJI CANDLESTICK PATTERN

Doji is the most important Japanese Candlestick Pattern. When this candlestick forms, it tells us that the market Opens & Close at the same price which means that there is equality & indecision between buyers & sellers there is no one in control of the market. If the closing & opening prices are same, that means candle is giving us a single, that market is not able to decide which direction to take. The above chart shows how the market has changed the direction after the formation of the Doji candle pattern. If Doji forms in uptrend it gives a signal, that the buyers are failing to keep the price up & sellers are pushing the price back to the opening price. When Doji form in downtrend that indicates the market is ready to go up side & it gives a reversal signal.

2.THE DRAGONFLY DOJI PATTERN

Dragonfly Doji is a Bullish candlestick Pattern. Dragonfly Doji is formed when the open, high & close are the same & it has no upper shadow. An important identification of dragonfly doji is its long lower shadow. Indecision & trend reversal are indicators of the dragonfly Doji. The long lower tail suggests that the force of supply & demand are nearing a balance & that the direction of the trend may be nearing a major turning point.

The above chart shows how the downtrend market changes the direction of the market toward uptrend. The formation of dragonfly Doji with long lower tails shows us that there is a high buying pressure in the area. The war between Bull & Bear, attempted by the bear towards pushing price down, but here buyers are stronger than sellers.

3.THE GRAVESTONE DOJI

The gravestone doji is the Bearish version of the dragonfly doji. It is a bearish reversal candlestick which mostly occurs at the top of uptrends. The formation of the long upper tail is an indication that the market is testing a powerful supply or resistance area.

The image above is a perfect gravestone Doji. This pattern indicates that while buyers were able to push prices well above the open. Later in the day, sellers overwhelmed the market pushing the price back down. This is interpreted as a sign that bulls are losing their momentum and the market is ready for a reversal.

4.THE BEARISH ENGULFING BAR CANDLESTICK PATTERN

The bearish engulfing is one of the most important candlestick patterns. Engulfing bar is formed when it fully engulfs the previous candle.

The first candlestick shows that the bulls were in charge of the market, while the second shows that bearish pressure pushed the market price lower. The second period will open higher than the previous day but finish significantly lower.

The engulfing bar can engulf more than one previous candle, but to be considered an engulfing bar, at least one candle must be fully consumed. When this pattern occurs at the end of an Uptrend, this indicates that buyers are engulfed by sellers which signals a trend Reversal.

The pattern is also a sign for those in a long position to consider closing their trade.

5.THE BULLISH ENGULFING BAR PATTERN

A bullish engulfing pattern is the opposite of a bearish engulfing pattern. Many traders use this candlestick pattern to identify price reversals and continuations to support their trading strategies.

The bullish engulfing bar consists of two candlesticks, the first one is the small body, & the second is the engulfing candle. When a bullish engulfing candle forms at the end of downtrend the reversal is much more powerful as it represents a capitulation bottom. The color of the body is not important, what’s important is that the smaller one is totally engulfed by the second candlestick.

6.MORNING STAR CANDLESTICK

  The Morning Star Pattern is considered as a BULLISH REVERSAL PATTERN. A morning star candlestick pattern can successfully predict or explain trends in price movements in the case of equity, currency trading or financial derivatives. This pattern occurs at the bottom of Downtrend near a support level, it is interpreted as a powerful trend Reversal Signal. The first candlestick is bearish. The second candle is small & this can be Bullish Or bearish. Second one produces indecision in the market, second candle could be a DOJI or any other CANDLE. The Third candle is a bullish candlestick that gapped up on the open & closed above midpoint of the body of the first day, this candlestick holds a significant trend reversal signal.

7.THE EVENING STAR PATTERN

The Evening Star Pattern is the opposite of the Morning star pattern. The evening star pattern is considered as a Bearish Reversal Pattern. This pattern occurs at the top of an Uptrend. The First candle is a Bullish candle. The second candle is a small candlestick, it can be bullish or bearish or it can be a DOJI or any other Candles. The third candle is a large bearish candle. In general the evening star pattern is the bearish version of the morning star pattern. Third candlestick gaping lower than the previous candlestick indicating a confirmation of the reversal & the beginning of new trend down.

8.HAMMER (BIN BAR)

The hammer is a reversal candlestick pattern when it occurs at the bottom of a Downtrend. Long lower shadow that indicates a bullish rejection from buyers & their intention to push the market.

Understand the psychology behind the formation of patterns , here sellers forcefully push the price down but that time of period buyers are more powerful than sellers which result in trend reversal.

9.SHOOTING STAR (BEARISH PIN BAR)

Shooting star is the Bearish version of the hammer. This candle is characterized by a small body. And long upper shadow. Shadow should be twice the length of the real body. This pattern occurs in an uptrend. It indicates a bearish reversal pattern.

It is one of the most powerful signals.

10.HARAMI PATTERN ( INSIDE BAR)

   Harami pattern (Pregnant In Japanese) is considered as a Reversal & Continuation pattern, & it consists of two candlesticks. The first candle is the large candle, it is called the mother candle, followed by a smaller candle which is called the baby. Harami pattern to be valid, the second candle should close outside the previous one. This candlestick is considered as a Bearish Reversal Signal when it occurs at the top of an uptrend, and it is Bullish Signal when it occurs at the bottom of a Downtrend. Smaller body is totally covered by the previous mother candle. Don’t bother yourself with colors, the most important is that the smaller body closes inside of the first bigger.

11.TWEEZERS TOPS & BOTTOMS

   The tweezers top formation is considered as a Bearish Reversal Pattern seen at the top of an Uptrend. The tweezers bottom formation is interpreted as a Bullish Reversal Pattern seen at the bottom of a Downtrend. The first one is a bullish candlestick followed by a bearish candlestick. And the tweezer bottom formation consists of two candlesticks as well. The tweezer bottom happens during a Downtrend.

Note:

The candlestick pattern is more workable in higher time frame (weekly, daily & 4hr.) compare to lower time frame. When candlestick pattern is form in the chart, than wait for confirmation & follow up.

17 May, 2020
BLUE CHIP STOCKS

Definition Of Blue Chip Stocks

“Blue – Chip companies are by definition the companies that have MADE IT BIG. Blue chip stocks are shares of very large and well-recognized companies with a long history of sound financial performance. These stocks are known to have capabilities to endure tough market conditions and give high returns in good market conditions. Blue chip stocks generally cost high, as they have good reputation and are often market leaders in their respective industries.”

WHAT ARE BLUE CHIP STOCKS?

The term Blue Chip stock was coined in 1923 by a Dow Jones employee, Oliver Gingold , referring to some high priced shares of $200 above, at a brokerage firm.

Blue chip Stocks are companies that are often worth billions of dollars, pay dividends & have a long history of reliable operations. This comes from the game of POKER where the blue chip carries the highest value.

It is a stocks of companies which are leading in its sector and are famous at the national level having a record of giving continuous dividend payments and other strong investment qualities. Usually have a great reputation for QM (Quality management), product & services. Generally, blue chip stocks are the safest stocks to invest in.

This stock is usually the market leader or come in the top three companies in its sector and are very well known and also have the market capitalization in billions. Ben Graham in his book The Intelligent Investor has written that an investor should look for a company which has been giving its investors dividends for twenty years or more. This thought gives us an idea of how a such stocks should be.

Blue-chip stocks are synonymous with fewer debts, consistent dividends/returns and goodwill of the company. Such stocks are not only safe but also help investors in mitigating risks. Blue chip stocks have experienced a number of bear phrase, a market downturn, financial troubles, etc., but since they are survived, they are still going strong. When the market corrects blue chip, stocks remain stable. This stability in share price is the biggest benefit of blue chips. If in any situation their price falls, this fall is slower and recovers again soon.

FEATURES OF BLUE CHIP SOCKS:

Large Market Capitalization –

Since blue chip stocks are the leaders in their respective sectors they have a market cap of Rs. 20k Crores.

Risk and returns

Blue Chip Stocks are considered safe investment options as they can endure economic downturns and are not highly volatile. They also present a slow but moderate growth potential. These are typically dividend paying stocks where the payment is made quarterly. It is advisable to diversify your portfolio when investing in individual stocks, to avoid company risk.

Dividend Payments

A solid trend which shows that the company pays dividends to its shareholders in a timely and consistent basis is a great morale booster for a stock owner simply because it acts as a cherry on the cake. It is income over and above your capital appreciation so, for example, a 20% dividend would mean an extra 20% income over and above your investment appreciation in a particular blue-chip company.

Remarkable Performance Even in the Economic Downturns:

When we talk about blue chip stocks, it can be recognized as one of those stocks which perform well even when there is a downfall in the market or economy.

The diversification

Blue chip companies tend to be large corporates with an international portfolio that spans several sectors. For instance, BP is ostensibly an oil and gas company, but it also owns its own petrol stations, a string of convenience stores in the US, as well as the Wild Bean Coffee Company in the UK. This gives the firm some exposure to the retail and consumer markets, in addition to the commodities sector.

ADVANTAGES OF BLUE CHIP STOCKS:

The tax—free benefits

Every blue chip stock is eligible for inclusion within a stocks and shares ISA, which means that all of your returns are protected from taxation. Blue chips can also be held within a lifetime ISA or a self—invested personal pension (SIPP), meaning that you can keep blue chip stocks in your pension portfolio without paying any tax on the interest that you accrue.

Price stability:

Price stability of blue chip stocks in falling market is one of its biggest advantages. It does not mean that price of blue chip stocks does not fall when index is falling. Its price will also fall, but the fall will be slower and recovery will be faster.

Long-Term Returns:

These stocks provide stable returns in the long run.

Regular Dividends:

These stocks are known for providing routine returns in the form of dividends to their shareholders as a result of their efficient dividend policy.

DISADVANTAGES OF BLUE SHIP STOCKS:

This is a wrong assumption. No company can continue to enjoy its prime position forever.Some known examples are: Reliance Communication, DLF, Kodak, Nokia, Lehman Brothers, etc.

High Downside Risk:

There is a considerable market risk associated with the blue chip companies too. The reason being, some of these organizations fail to keep up with the competition, leading to the downfall of their stock prices.

Older Companies

As a younger investor, you have a significant advantage over older stock buyers. You very likely have an understanding and knowledge of the hot new products in sectors like technology and retail. These products are often sold by newer, hipper companies that will not be on anybody’s blue chip stock list. Any money invested in an older, boring, established blue chip company is money you do not have to purchase stocks of companies that are on the cutting edge of what is happening in the economy.

Slower Growth:

In most cases this is true. As Blue chip companies are all matured, large companies, hence their future growth is not as fast. If we will compare potential returns of a good “growth stocks” verses a blue chip stock, the latter cannot win. Hence, it is essential to estimate ones investment goal accurately. If objective is faster capital appreciation in long term, growth stocks are better.

22 October, 2019

EXCHANGE TRADING FUND (ETF)

DEFINITION:

“ETFs or Exchange Traded funds are similar to index mutual funds. However, they trade just like stocks.”

MEANING:

In 1990 the world’s first ETF was created in Canada, transforming the investment landscape & offering the advantages of pooled investing & trading flexibility. Demand continues to grow as both retail & institutional investors depend on ETFs. The first ETF in the United States was Launched in 1993.

ETF stands for Exchange Traded Fund, & just like a Stock, it is traded on stock exchanges such as NYSE & NASDAQ. But unlike a stock, which focuses on one company, an ETF tracks an index, a commodity, bonds, or a basket of securities. ETFs were started in 2001 in India.

ETFs are securities that closely resemble index funds, but can be bought and sold during the day just like common stocks. These investment vehicles allow investors a convenient way to purchase a broad basket of securities in a single transaction. Essentially, ETFs offer the convenience of a stock along with the diversification of a mutual fund.

An exchange-traded fund is a marketable security, meaning it has an associated price that allows it to be easily bought and sold. ETF combine the range of a diversified portfolio with the simplicity of trading a single stock.

ADAVNTAGES OF ETFs

There are numerous advantages to ETFs, especially when compared to their mutual fund cousins.

Diversification

Diversification is another key benefit that an investor derives from ETF investments. Firstly, one can potentially choose from a wide range of ETFs which mainly differ on the basis of the underlying asset such as gold, equity or index funds. Further, certain ETFs such as an equity ETF will save you from concentration risk as it would invest its funds in a diversified portfolio of equity stocks. An ETF can track a broader range of stocks, or even attempt to mimic the returns of a country or a group of countries.

Cost Efficient

ETF is a cost-efficient product and often considered unique because of the low expense ratio. A lower fund management fee can generate incremental savings and therefore, increase payouts in the long term. ETF shareholders don’t need to pay a manager and a team of analysts and brokers to buy and sell funds on their behalf, nor to manage fund inflows and outflows, exchange traded funds typically have much lower expense ratios than traditional mutual funds.

Flexibility

Speaking of flexibility, like an equity, ETFs trade throughout market hours. ETFs can be sold short or on margin, and prices are continuously updated during the trading day. In other words ETFs trade just like equities on the stock market.

Lower Fees

ETFs, which are passively managed, have much lower expense ratios compared to actively managed funds, which mutual funds tend to be. What drives up a mutual fund’s expense ratio? Costs such as a management fee, shareholder accounting expenses at the fund level, service fees like marketing, paying a board of directors, and load fees for sale and distribution.

Can Be Purchased in Small Amounts:

Since ETFs trade like stocks there are advantages for position sizing. Small positions can be purchased (no minimum investment) to scale in or scale out of a position, or take a single small position in a particular ETF.

DISADVATAGES OF ETFs

Investors need to have a demat & a trading account. Mainly holds large capitalization stocks. Attract longer term investors; Intraday trading is not required. For larger corporations, direct investment in an index can be a perfect substitute for an ETF. Alternatively, an investor may have a lower cost & lower taxes.

They have to pay a brokerage (usually around 0.35% to 0.99%). This is considered high for a new short-term investor.

Intraday Pricing Might Be Overkill

Longer-term investors could have a time horizon of 10 to 15 years, so they may not benefit from the intraday pricing changes. Some investors may trade more due to these lagged swings in hourly price. A high swing over a couple hours could induce a trade where pricing at the end of the day could keep irrational fears from distorting an investment objective.

TAX IMPLICATIONS

For ETFs which invest beyond the traditionally popular asset classes of equities and fixed income, investors need to exercise caution as apart from an increased tracking error, tax implications may be high at best or unclear at worst, which may have a sizable impact on returns.

Over Diversification

Many ETFs participate in over diversification. ETFs are generally not actively managed, but are programmed to follow a specific index. The index, and therefore the ETF, may not own the very best stocks.

It may be more advantageous to buy a limited number of the best companies rather than own the entire index. This would be particularly true with ETFs that track indices with a small universe of stocks such as a specific sector or industry.

Intraday Pricing Might Be Overkill

STEPS OF BUYING ETFs ONLINE:

You have to find a good online broker. Then open Demate A/C & Trading A/C. And decide which ETFs you want to buy. Then place an order with Broker.
Broker enters the order to be filled in the market
Order is filled in the market .
Broker deliver ETF shares to the Investor. Monitor your ETF position regularly.

DIFFERENCE BETWEEN MUTUAL FUND AND ETF

The biggest difference between mutual fund & ETF is that Mutual Funds trade at the end of the day, while ETFs trade intraday Stock orders can be made with ETFs but not with mutual funds. ETFs often have lower expenses ratio than mutual funds.

MUTUAL FUND	ETFs
Professionally managed investment vehicle, where the resources from multiple investors are collected and traded is known as Mutual Fund.	The ETF is a investment scheme that tracks the index, and are listed & traded on a stock exchange.
Mutual Fund have varying operating expenses.	ETF has lower operating expenses.
Mutual Fund have more tax liabilities than ETFs.	ETFs offer tax benefits to the investors due to the manner of its creation & redemption
Doesn’t need Demat account.	Needs Demat account.
Can buy or sell the shares only once a day, i.e. after closing the trade.	Can buy or sell shares at any time from anywhere & as much times as you want.
Pricing based on closing NAV.	Intraday pricing.
Potentially higher capital gain distributions due to fund structure.	Generally lower to no capital gain distributions.
No traded options available	Ability to trade options sometimes.
Transactions take place between the investors & the fund itself.	Traded on exchange.

Also Read | What is MACD in Stock Market

19 October, 2019

VWAP INDICATOR
DEFINITION:

“Volume Weighted Average Price (VWAP) is a technical analysis tool used to measure the average price weighted by Volume. VWAP is typically used with intraday charts as away to determine the general direction of intraday prices. VWAP is similar to a moving average in that when price is above VWAP, prices are rising & when price is below VWAP, prices are falling VWAP is primarily used by technical analysts to identify market trend.”

Full form of VWAP is Volume Weight Average Price. The average price weighted by volume. VWAP is a trading tool calculated by taking the number of shares bought times the share price & dividing by total shares.

Volume Weighted Average Price is an Indicator, or used for Intraday trading. VWAP equals the dollar value of all trading periods divided by the total trading volume of the current day.

The VWAP appears as a single line on intraday chart (1min,5min,15min & so on), similar to how a moving average looks. The calculation starts when trading opens & when it closes. Because it is good for the current trading day only , intraday periods & data are used in the calculation.

HOW TO CALCULATE VWAP:

VWAP is calculated through the following steps:
1. For each period, calculate the typical price, which is equal to the sum of the high, low, and close price divided by three [(H+L+C)/3]. One bar or candlestick is equal to one period. What this period is set at is up to the trader’s discretion (e.g., 5-minute, 30-minute, etc.).
2. Take the typical price (TP) and multiply by the volume (V), giving a value TP*V.
3. Keep a running tabulation of the TP*V totals as well as a running tally of volume totals. These are additive and aggregate over the course of the day.
4. VWAP is calculated by the formula: cumulative TP*V / cumulative volume
This calculation, when run on every period, will produce a volume weighted average price for each data point. This information will be overlaid on the price chart and form a line, similar to the first image in this article.

Moving VWAP is simply adding up various end-of-day VWAP figures and averaging them out over a user-specified number of periods.

VWAP will be calculated automatically in one’s charting software. There should be no mathematical or numerical variables that need adjustment. On the moving VWAP indicator, one will need to set the desired number of periods.

HOW TO ANALYSIS VWAP:

VWAP initiate at the opening price level, & will move up or down with price movement & volume as the session continues. It can help to eliminate a lot of the noise within a stock throughout the day, even more so than a moving average would. It is compared at time to a moving average, & though it shares similarities, they are not the same.

It’s said when price is below the indicators, the stock is in downtrend or there is a downtrend bias to the day and when price is above the indicator, the stock is a uptrend.

Find the average price the stock traded at over the first five-minute period of the day. To do this, add the high, low, and close, then divide by three. Multiply this by the volume for that period. Record the result in a spreadsheet, under column PV.

Divide PV by the volume for that period. This will give the VWAP value.

To maintain the VWAP value throughout the day, continue to add the PV value from each period to the prior values. Divide this total by total volume up to that point. To make this easier in a spreadsheet, create columns for cumulative PV and cumulative volume. Both these cumulative values are divided by each other to produce VWAP.

VWAP Pullback Entry:

Entry Option 1 – Aggressive Traders

Wait for a break of the VWAP and then look at the tape action on the time and sales.

You will need to identify when the selling pressure is spiking, and the tape is going crazy.

This, my friend, is more art than science and will require you to practice reading the tape.

The goal is to identify when the selling pressure is likely to subside and then enter the trade.

This approach will break most entry rules found on the web of simply buying on the test of the VWAP. The problem with this approach is you don’t know if the price will breach the VWAP by 1% or 4%.

I learned the hard way, and if the VWAP were at $10, I would place my limit order at $10. At times there were traders who couldn’t care less about the VWAP, and it would slice through the indicator with such swiftness, the lasting sting to my psyche persists until this day.

This technique of using the tape is not easy to illustrate looking at the end of day chart. You will need to practice this approach using Tradingsim to assess how close you can come to calling the turning point based on order flow.

VWAP Breakout Entry:

Entry Option 2 – Risk Averse Traders

This is what I would recommend to traders that are new to the VWAP indicator.

Essentially, you wait for the stock to test the VWAP to the downside. Next, you will want to look for the stock to close above the VWAP.

You will then place your buy order above the high of the candle that closed above the VWAP.

While this is a more conservative approach for trade entry, it will open you up to more risk as you will likely be a few percentage points off the low.

You will need to determine where you are in your trading journey and your appetite for risk to assess which entry option works best for you.

It goes without saying that while we have covered long trades; these trading rules apply for short trades, just do the inverse.
1 June, 2019
What Is A Stock & Why To Invest In It
DEFINITION:

“A stock is a general term used to describe the ownership certificates of any company. A share, on the other hand reffers to the stock certificate of particular company . Holding a particular company’s share makes you a shareholder.”

The stock (also capital stock) of a corporation is all of the shares into which ownership of the corporation is divided. In American English, the shares are company known as “stocks”.

A stock is an investment. When you purchase a company’s stock, you’re purchasing a small piece of that company called a share.

A stock is a type of investment that represents an ownership share in a company. Investors buy stocks that they think will go up in value over time.

A share of company held by an individual or group. Corporations raise capital by issuing stocks & entitle the stock owners (shareholders) to partial ownership of the corporation. Stocks are bought & sold on what is called an Exchange. There are several types of stocks & the two most typical forms are preferred stock & common stock.

Owning a stock gives you certain rights & those rights can differ depending on the types of stock you own.

There are two main types of stock:
1. COMMON STOCK
2. PREFERRED STOCK
1. COMMON STOCK:

Common stock is a form of corporate equity ownership. It being primarily used in the united states. They are known as equity shares or ordinary shares in the UK.Common stock comes with voting rights; as well as the possibility of dividends & capital appreciation.
Each share of common stock represents a share of ownership in a company. If a company does well or the value of its assets increases, common stock can go up in value. On the other hand, if a company is doing poorly, a common stock can decrease in value. Simply put, common stock allows investors to share in a company’s success over time, which is why they can make great long-term investments.

2. PREFERRED STOCK

“Preferred stock is also known as preference stock. The word “Preferred” refers to the dividends paid by the corporation. Each year, the holders of the preferred stock are to receive their dividends before the common shareholders are to receive any dividend”.Preferred stockholders generally do not have voting rights, though they have a higher claim on assets & earnings that the common stockholders.

Preferred shares can be converted to a fixed number of common shares, but common shares don’t have this benefit.Like bonds, preferred stocks are rated by the major credit rating companies. The rating for preferred stocks is generally lower than for bonds because preferred dividends do not carry the same guarantees as interest payments from bonds & because preferred stock holders claims are junior to those of all creditors.

Some things you need to know about stocks:

a. P/E RATIO –

The price to earnings ratio (P/E ratio) is the ratio for valuing a company that measures its currents share price relative to its pre share earnings (EPS)…. P/E ratios are used by investors & analysts to determine the relative value of a company’s shares in an apple to apples comparison.The ratio is used for valuing companies & to find out whether they are overvalued or undervalued.Earnings are important when valuing company’s stock because investors want to know how profitable a company is & how profitable it will be in the future.

b. CHART –

Chart reading is the single most important investing skill you’ll ever learn. To understand why stock chart are so valuable. Chart tells you a whole story about stocks. The weekly chart helps you see longer term trends. And daily chart helps you spot specific buy & sell signals while daily price fluctuation perspective.

c. Dividend –

If you don’t have time watch the market every day, and you want your stocks to make money without that kind of attention, look for dividends. Dividends are like interest in a savings account. You get paid regardless of the stock price. Dividends of 6% or more are not unheard of in high quality stocks. Before purchasing a stock, look for the dividend rate. If you simply want to park money in the market, invest in stocks with a high dividend. (For more, see Why Dividends Matter.)

d. Taxes Can Take A Bite Out Of Your Profits –

The FANG stocks – Facebook FB +0%, Amazon.com AMZN +0%, Netflix NFLX +0% and Google GOOGL +0% (Alphabet) — had a great run in 2015, with returns ranging from 34% to 134%, but from a tax perspective any investor who bought last year and eyeing the exits wants them to keep climbing. That’s because the one-year mark is a line of demarcation for the tax man.

Selling stocks, you’ve held for less than a year triggers a short-term capital gain, taxed as ordinary income. That could mean kicking back anywhere from 25% to 39.6% to Uncle Sam. But hold those same stocks for at least 12 months and the tax rate drops to 15% for most tax brackets.

WHY TO INVEST IN IT

Investing in the stock is the only way most people have of building real wealth. Stock is just one of many potential places to invest your money. Investing in stock is often risky, which draw attention to huge gains & losses of some investors.
- One of the primary benefits of investing in the stock market is the chance to grow your money. Over time, the stock market tends to rise in value, though the prices of individual stocks rise and fall daily. Investments in stable companies that are able to grow tend to make profits for investors. Likewise, investing in many different stocks will help build your wealth by leveraging growth in different sectors of the economy, resulting in a profit even if some of your individual stocks lose value.
- Stocks are risky This means they don’t have a guaranteed return and sometimes lose money. However, the long-run trend of the stock market has been undeniably upward. Stocks have the highest return of any investment asset over the long term. According to the Federal Reserve, the stock market has grown by an average of more than 10 percent a year over the past 50 years. During this same period, government bonds only grew by 5 percent a year. If you can stomach the market swings, you will see the highest return on your money with the stock market.
Purchasing stocks of companies operating in different sectors as well as segments is possible, which helps in optimizing the asset-allocation and provides diversification.
24 April, 2019