We care for you - Please check before you invest

This article was posted on Jun 11, 2008 It is imperative for the investors to follow the Dos and Dont in general while dealing in the stock market. As there are attendant risks associated with it. Given below are the Dos and Donts in general for investors who are dealing in Stock markets. Dos Always deal with the market intermediaries registered with SEBI / Exchanges. Give clear and unambiguous instructions to your broker / agent / depository participant. Always insist on contract notes from your Broker. In case of doubt of the transactions, verify the genuineness of the same on the Exchange website. Always settle the dues through the normal banking channels with the market intermediaries. Before placing an order with the market intermediaries please check about the credentials of the companies, its management, its fundamentals and recent announcements made by them and various other disclosures made under various Regulations. The sources of information are the websites of Exchanges and companies, databases of data vendor, business magazines etc. Adopt trading / investment strategies commensurate with your Risk bearing capacity as all investments carry risk, the degree of which varies according to the investment strategy adopted. Please carry out due-diligence before registering as client with any Intermediary. Further, the investors are requested to carefully read and understand the contents stated in the Risk Disclosure Document, which forms part of investor registration requirement for dealing through brokers in Stock Market. Be cautious about stocks, which show a sudden spurt in price or trading activity, especially low price stocks. Please be informed that there are no guaranteed returns on investment in stock markets. Donts Dont deal with unregistered brokers / sub-brokers, intermediaries.

Dont deal based on rumours . Dont fall prey to promises of guaranteed returns. Dont get misled by companies showing approvals / registrations from Government agencies as the approvals could be for certain other purposes and not for the securities you are buying. Dont leave the custody of your Demat Transaction slip book in the hands of any Intermediary. Dont get carried away with onslaught of advertisements about the financial performance of Companies in print and electronic media. Dont blindly follow media reports on corporate developments, as they could be misleading. Dont blindly imitate investment decisions of others who may have profited from their investment decisions.

What is Trend Trading?

This article was posted on Jun 11, 2008 Q.What is Trend Trading? A.Trend trading is one of the most effective and easy to use methods for making money in the market. Trend trading success depends on identifying and catching the trend after it has started and getting out of the trend as soon as possible after the trend reverses. Trend Trading involves taking a position in the markets with a view of holding that position for weeks to months for larger than normal gains. Trend traders or investors generally trade the long term or secular trends and are not concerned with the day to day market volatility.

Swing Trading?
A.Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend. Swing trading combines the best of two worlds the slower pace of investing and the increased potential gains of day trading. Swing traders hold stocks for 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. By rolling your money over rapidly through short term gains you can quickly build up your equity. Q.How does Swing Trading work? A.The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete. Strongly trending stocks often make a quick move after completing its correction which one can profit from. One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels. In brief a Swing Traders goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques.

What is Day Trading?

This article was posted on Jun 11, 2008 Q.What is Day Trading? A.The term day trading is a widely misused and misunderstood term. Real day trading means not holding on to your stock positions beyond the current trading day; in other words, not holding any position overnight. This is really the safest way to do day trading because you are not exposed to the potential losses that can occur when the stock market is closed due to news that can affect the prices of your stocks. Unfortunately, many people who claim to be day trading, hold stocks overnight because of fear or greed, thus setting themselves up for the catastrophic elimination of their capital. When day trading currencies, the term day trading changes slightly. Since currencies can be traded 24-hours-a-day, there is no such thing as overnight trading. Thus, you can have open positions for longer than a day with active stop losses that can be activated at any time. Day trading can be further subdivided into 2 styles, including: 1.Scalpers: This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes. The objective is to earn a small per share profit on each transaction while minimizing the risk.

2.Momentum Traders: This style of day trading involves identifying and trading stocks that are in a moving pattern during the day, in an attempt to buy such stocks at bottoms and sell at tops.

What is Open Interest?

This article was posted on Jun 11, 2008 Meaning Open Interest also know as OI, is the total number of options and futures contracts that are not closed on a particular day. As you might be aware of volume in a particular stock in equity market, option trading involves the creation of a new option contract when a trade is placed. Open interest will tell you the total number of option contracts that are currently open. Open Interest is mostly used to confirm a trend for a particular futures contract, For eg, lets look at Reliance 1000 May CALL, the open interest might tell us that there have been 5 options open in the month of May, a trader might then wonder does this refer to the number of contracts bought or sold. Working When a trader buys or sells an option, the transaction needs to be entered as either an opening or a closing transaction. If he buys 5 RELIANCE May 1000 CALL, he is buying the calls to open, i.e he is opening his position in a futures contract, which causes the Open interest to rise by 5, and then after sometime(within) the month he decides to sell his contract i.e close his position in a particular contract, then he is causing the open interest to go down by 5. Open interest applies primarily to the futures market, it helps the measure the flow of money into the futures Market. For each seller of a futures contract (eg RELIANCE 1000 CALL) there must be a buyer of that contract. Thus a seller and a buyer combine to create only one contract. A rise in open interest in a futures contract along with its price indicates bullishness, which means investors are creating long positions and vice versa. The open interest position that is reported each day represents the increase or decrease in the number of contracts for that day, and it is shown as a positive or negative number. Advantages of monitoring Open Interest Changes in the Open Interst as mentioned earlier can help a trader interpret the future trend of a particular contract. Open Interest RISING -> Indicates that the present trend (up, down, flat) will continue

Open Interest FALLING-> Indicates that the prest trend(up, down, flat) is likely to change or is coming to and end Contract Price Rising Rising Falling Falling Open Interest (%) Rising Falling Rising Falling Future Trend(predicts) The Contract is likely to trade strong in the coming days The Contract is likely to see some downside in the coming days The Contract should not be entered as of now The Contract can be entered, as its likely to go up

What is DMA (Simple moving average) in stock market ?

This article was posted on Jun 25, 2009 Simple moving average or DMA frequently used in technical analysis showing the average value of a securitys price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance. Stocks trading above its 30,50,150 or 200 DMA are considered as those stocks that are above their resistance and are likely to go up, on the other hand Stocks trading below their 30,50,150 or 200 DMA considered as those stocks that are below their support levels and are likely to come down. NOTE: This is not only a single factor that should be taken into account while purchasing or selling a stock, it largely depends on the market conditions

Difference between Trading and Investing

This article was posted on Jun 25, 2009 A Large number of people are confused with what is trading and what is Investing. Investing on one hand is like buying a asset (a bunch of stocks is Stock market) and holding it for a long time say 10 or more years. Many Investors buy stocks for long run and then sell them off in huge profit. Some big investors such as Warren Buffet have made more money in Long Term Investing or Investing rather that in Trading (Intraday). Trading on the other hand it like buy a stocks for 2-4 Days or Intraday trading. In these volatile markets its very difficult to make good profits in Intraday trading, some traders intenend to buy stocks for short term and then sell them off in profits

The Stock I BUY goes down!!!

This article was posted on Jan 25, 2010 and is filed under Stock Views Most people think that after they buy a stock, that stock tends to move down rather than moving up. This always anticipates them to think before purchasing any stock or share that they are likely to loose money in a script invested in. I have heard people say that luck & patience plays a very important role for Stock Market players and Investors. This is very true, irrespective if the concerned person is a trader or a investor. But, one should also remember that thinking positive for the money invested in any investment actually tends to give huge profits. In other words, a Short term trader should start thinking that after purchasing say a Stock named A(Always invest after studding the company fundamentally personally), the price of the Stock should easily increase by 100% in Short term rather than thinking what will happen if it manages to go down. This is what most of the successful Investors till date have followed and earned huge profits over the time. It is very important to have positive beliefs & attitudes. This is not something that I say and use, but this should be rule followed by all the traders and investors. Warren Buffett quoted I always knew I was going to be rich. I dont think I ever doubted it for a minute . This statement clearly states that Buffett wanted to be rich, and his mind us always thinking about being rich, being rich, being rich, being rich all the time. Our subconscious minds control most of our behavior, and when you have such strong conviction of being rich, it is difficult not to be rich eventually. Your thinking should note be That whenever I purchase a script, I dream of it to be a Multibagger. instead your thinking should be That whenever I purchase a script, I Believed it to be a Multibagger. Theres no harm in thinking that the investment you made in quality stocks will fetch very good returns, In-fact this shall actually help you to earn more in the Long run, this is worth a try

What is Technical Analysis ? How is it different from Fundamental Analysis ?

This article was posted on Jun 25, 2009 The stock market used to be filled with technical analysts deciding what to buy and sell, until it was decided that their success rate is no better than chance. Now technical stock analysis is virtually non-existent.

Research and examination of the market and securities as it relates to their supply and demand in the marketplace. The technician uses charts and computer programs to identify and project price trends. The analysis includes studying price movements and trading volumes to determine patterns such as Head and Shoulder Formations and W Formations. Other indicators include support and resistance levels, and moving averages. In contrast to fundamental analysis, technical analysis does not consider a corporations financial data. Technical analysts study trading histories to identify price trends in particular stocks, mutual funds, commodities, or options in specific market sectors or in the overall financial markets. They use their findings to predict probable, often short-term, trading patterns in the investments that they study. The speed (and advocates would say the accuracy) with which the analysts do their work depends on the development of increasingly sophisticated computer programs. Technical Analysis supposes markets have memory.If so, past prices, or the current price momentum, can give an idea of the future price evolution. Technical Analysis is a tool to detect if a trend (and thus the investors behavior) will persist or break. It gives some results but can be deceptive as it relies mostly on graphic signals that are often intertwined, unclear or belated. It might become a source of representiveness heuristic (spotting patterns where there are none) Technical analysis has become increasingly popular over the past several years, as more and more people believe that the historical performance of a stock is a strong indication of future performance. The use of past performance should come as no surprise. People using fundamental analysis have always looked at the past performance of companies by comparing fiscal data from previous quarters and years to determine future growth. The difference lies in the technical analysts belief that securities move according to very predictable trends and patterns. These trends continue until something happens to change the trend, and until this change occurs, price levels are predictable. There are many instances of investors successfully trading a security using only their knowledge of the securitys chart, without even understanding what the company does. However, although technical analysis is a terrific tool, most agree it is much more effective when used in combination with fundamental analysis. Fundamental Analysis Fundamental analysis looks at a shares market price in light of the companys underlying business proposition and financial situation. It involves making both quantitative and qualitative judgments about a company. Fundamental analysis can be contrasted with technical analysis, which seeks to make judgements about the performance of a share based solely on its historic price behavior and without reference to the underlying business, the sector its in, or the economy as a whole. This is done by tracking and charting the companies stock price, volume of shares traded day to day, both

on the company itself and also on its competitors. In this way investors hope to build up a picture of future price movements.

What is Open Offer ?

This article was posted on Jun 25, 2009 Open Offer: Perhaps the most above board of takeover bids, in which the bidder makes its intention known through an open advertisement, followed by letters of offer to shareholders, to buy the shares of the target company at a stated price, usually quite above the ruling market price. The bidder may thus acquire a sufficiently larger number of shares to have a controlling interest in he target company, paving the way for a merger.

Seven dumbest investment mistakes

This article was posted on Aug 11, 2009 By Scott Woolley Emotions can be expensive, especially when you start making investing decisions with your gut instead of your brain. Fortunately, there are ways to avoidor at least limitthe mistakes that we oh-so-human investors tend to make. Daniel Kahneman won the Nobel prize in economics seven years ago for his work on how irrational humans systematically make mistakes. Since then, research in the field of behavioural finance has exploded. Given the recent market turmoil what common, and costly, mistakes should investors be especially vigilant to avoid making today? One is a direct result of the stock market plunge. People who bailed out of stocks after losing as much as half of their investments are now anxiously sitting out the market recovery, says Amy Barrett, a fee-only financial adviser and director of investments at Savant Capital. Those people have anchored themselves to the value of the stock market at its trough, where they bailed out. Theyre having a hard time accepting the fact that stocks might really be good values at their new, higher levels. In the past that behaviour has been a sure recipe for missing a market rebound, says Barrett. Id like to shake these people and tell them to get out of their rut, she says. Emotional Investors Seven Dumbest Mistakes

Here are descriptions of the most common cognitive errors investors makeand some tips for getting your rational mind to override your potentially costly emotions.

7 ways to shortlist the right stocks

This article was posted on May 17, 2009 Equity as an asset class outperforms all other asset classes in the long run. True. But, how do you pick the right company? Its always important to spend time in knowing a company, its business, financial health and prospects. But do you have the time, resources and energy to study about 1,400 companies listed on the National Stock Exchange (NSE) and about 4,900 on the Bombay Stock Exchange (BSE) before selecting the one to invest? If these numbers make you uncomfortable, sample these: the market capitalisation of these companies ranges from a few lakhs to over Rs 2 lakh crore and the prices of shares from less than a rupee to over Rs 12,000 per share. So, how and where do you make a start? We give you seven basic screening criteria, which will help you shortlist companies that are worth researching in the first place. 1. Is the companys market cap more than Rs 250 crore (Rs 2.50 billion)? Setting a minimum market cap floor really helps it eliminates very small companies, or penny stocks. Generally, small companies have a small revenue base and they do not spend too much on investor relations. This makes tracking them difficult. At Outlook Money, we do not look at companies that have a market cap of less than Rs 250 crore. About 500 companies at NSE pass this criteria. 2. Are the companys trading volumes high? The company should have a reasonable trading volume at least a few thousand shares per day. If you buy into a stock that has low volume, it can become difficult to get out when the markets fall. Both rise and fall is sharp in stocks with low volume. Also, the impact cost is high. For example, MMTC, a state-owned company, has a market cap of over Rs 62,000 crore (Rs 620 billion), but its trading volume is very thin. The 30-day average trading volume of this stock is just about 338 shares and the stock is trading at Rs 12,400 per share. It is always advisable to avoid these kinds of stocks. 3. Does the company make quality disclosures? The company should have good quality disclosures. This is an easy test. All you have to do is visit the company website and see press releases and results for the last few

quarters. In the results part, you need not get into numbers in detail as of now, but do see how the developments of last quarter have been explained. For example, see if cost has increased, or margins have declined, and whether there is an explanation for it. Large companies, especially in the information technology sector, are generally good at this. Tata Consultancy Services [Get Quote], Indias largest IT company by revenue, has a transcript of analyst conference call on its website, which possibly answers all the questions that investors have. Availability of information makes tracking easy and decision-making becomes quicker while you are invested in the company. 4. Does the company have operating profits? Sometimes, companies raise money from the equity markets in their initial stages and hope to cover the costs by generating profits from operations later. Actually, they are in a stage when they spend money for, say, setting up plants, or research and development facilities. These businesses sound exciting, but can be risky. It is advisable to avoid such companies. New projects involve a lot of regulatory approvals and can get delayed, which can escalate cost. Also, stock prices of such companies are the first to fall during any broader market correction, as there are no earnings to support the prices. This is exactly what happened with Reliance Power, which does not have any of its plants in operation. Its public issue got heavily oversubscribed (73 times) due to general euphoria in the market, but sentiments changed between issue and listing. The issue went on to become one of the biggest disasters in the markets. Therefore, it is always safer to be in companies that generate profits from their operations. 5. Does the company generate constant cash flows? At times, fast-growing companies may show profits without generating cash. These companies are in their expansion stage. They have to generate cash eventually and create value for the shareholders. Companies with a negative cash flow may have to seek additional capital, either through debt or equity. Debt will increase the risk while equity will dilute the earnings, which will get reflected in the share prices also. 6. Is its return to equity (RTE) constantly above 10 per cent?

RTE is the profit a company generates with the shareholders money and is calculated by dividing net profits with shareholders equity. It indicates how well a company has deployed investors money. The RTE is generally low in case of manufacturing companies and is higher for services companies as the cost of setting infrastructure is low in services companies. Use 10 per cent as the minimum limit for companies to qualify. There are just about 400 companies listed on NSE with a market cap above Rs 250 crore that generated return on equity above 10 per cent in the financial year 2007-08. 7. Is the earnings growth constant or cyclical? Cyclical earnings implies that profits move up or down depending on the business cycle. Businesses generally move in cycles. This is commonly seen in commodity companies, where a shortage or sudden rise in demand helps prices to move up, resulting in super normal profits for a while. Sugar is a classic example of cyclical earnings. Bajaj Hindustan , the largest sugar company in India, saw its share prices soaring from Rs 200 in November 2005 to Rs 550 in April 2006 on the back of rising sugar prices; net sales for the company went up Rs 394 crore (Rs 3.94 billion) in the March 2006 quarter compared to Rs 282 crore (Rs 2.82 billion) in the September 2005 quarter. But by the end of the December quarter, net sales went down to Rs 286.64 crore (Rs 2.86 billion) and the share price to Rs 140. The biggest risk in investing in cyclical or commodity stocks is that you could enter at the wrong time. Once the cycle is reversed, it becomes difficult to get out. Commodity prices are interlinked globally, and any demand-supply mismatch in one corner of the world can disturb prices all over. Companies in the pharma and FMCG space have stable growth in the long term as demand in these sectors depends on the business cycle and macroeconomic movements. The services sector also has stable earnings growth compared to commodity stocks. If you carry out these seven checks, you will, by and large, be able to eliminate companies that are not worth investing. However, investors must note that these conditions are not fool-proof and there can always be exceptions.

Important terms to check while purchasing a stock

This Short Term Call was posted on Jun 11, 2008 pe 1. P/E:

The P/E ratio (price-to-earnings ratio) of a stock (also called its earnings multiple, or simply multiple, P/E, or PE) is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share.A higher P/E ratio means that investors are paying more for each unit of income. It is a valuation ratio included in other financial ratios.The reciprocal of the P/E ratio is known as the earnings yield. Stock having a P/E less than 30 are said to be good investmets eps 2. EPS: EPS. Total earnings divided by the number of shares outstanding. Companies often use a weighted average of shares outstanding over the reporting term. EPS can be calculated for the previous year (trailing EPS), for the current year (current EPS), or for the coming year (forward EPS). Note that last years EPS would be actual, while current year and forward year EPS would be estimates. dvield 3.DVI (Sividend yield): The yield a company pays out to its shareholders in the form of dividends. It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stocks price. For example, if a stock pays out $2 in dividends over the course of a year and trades at $40, then it has a dividend yield of 5%. Mature, well-established companies tend to have higher dividend yields, while young, growth-oriented companies tend to have lower ones, and most small growing companies dont have a dividend yield at all because they dont pay out dividends This article was posted on Jun 11, 2009 What is an option? An option contract gives the buyer the right, but not the obligation to buy/sell an underlying asset at a pre-determined price on or before a specified time. The option buyer acquires a right, while the option seller takes on an obligation. It is the buyers prerogative to exercise the acquired right. If and when the right is exercised, the seller has to honour it. The underlying asset for option contracts may be stocks, indices, commodity futures, currency or interest rates What are the types of options? Broadly speaking, options can be classified as call options and put options. When you buy a call option, on a stock, you acquire a right to buy the stock. And when you buy a put option, you acquire a right to sell the stock. You can also sell a call option, in which, you will acquire an obligation to deliver the stock. And when you sell a put option, you acquire an obligation to buy the stock. What do you understand by the term option premium?

Option premium is the consideration paid upfront by the option holder (buyer of the option) to the option writer (seller of the option). The option holder gets the right to buy / sell the underlying. What is the strike price or the exercise price of the option? The right or obligation to buy or sell the underlying asset is always at a pre-decided price known as the strike price or exercise price, which is linked to the prevailing price of the underlying asset in the cash market. Usually, option contracts are available on the underlying asset on various strike prices (generally, five or more)-divided equally on either side of its spot price. How does an American option differ from a European option? In European options, a buyer can exercise his option only on the expiration date, that is, the last day of the contract tenure. Whereas in American options, a buyer can exercise his option any day on or before the expiration date.In the Indian equity market context, index options are European style, while stock options are usually American in nature. How do options differ from futures? In futures, both the buyer and the seller are obligated to buy and sell, respectively, the underlying asset-the quid pro quo relationship. In case of options, however, the buyer has the right, but is not obliged to exercise it. Effectively, while buyers and sellers face a : linear payoff profile in futures, its not so in the case of options. An option buyers upside potential is unlimited,while his losses are limited to the premium paid. For the option seller, on the other hand,his maximum profits are limited to the premium received, while his loss potential is unlimited.

Basic Rules for Futures Traders

This article was posted on Jun 11, 2008 Following are some basic rules for Future Traders : 1.Apply money management techniques to your trading. 2.Do not overtrade. 3.Take a position only when you know where your profit goal is and where you are going to get out if the market goes against you. 4.Trade with the trends, rather than trying to pick tops and bottoms. 5.Dont trade many markets with little capital.

6.Dont just trade the volatile contracts. 7Calculate the risk/reward ratio before putting a trade on, then guard against the risk of holding it too long. 8.Establish your trading plans before the market opening to eliminate emotional reactions. 9.Decide on entry points, exit points, and objectives. Subject your decisions to only minor changes during the session. Profits are for those who act, not react. Dont change during the session unless you have a very good reason. 10.Follow your plan. Once a position is established and stops are selected, do not get out unless the stop is reached, or the fundamental reason for taking the position changes. 11.Use technical signals (charts) to maintain discipline the vast majority of traders are not emotionally equipped to stay disciplined without some technical tools. Use discipline to eliminate impulse trading. 12.Have a disciplined, detailed trading plan for each trade; i.e., entry, objective, exit, with no changes unless hard data changes. Disciplined money management means intelligent trading allocation and risk management. The overall objective is end-of-year bottom line, not each individual trade. 13.When you have successful a trade, fight the natural tendency to give some of it back. 14.Use a disciplined trade selection systeman organized, systematic process to eliminate impulse or emotional trading. 15.Trade with a plan not with hope, greed, or fear. Plan where you will get in the market, plan how much you will risk on the trade, and plan where you will take your profits. 16.Cut losses short. Most importantly, cut your losses short, let your profits run. It sounds simple, but it isnt. Lets look at some of the reasons many traders have a hard time cuttings losses short. First, its hard for any of us to admit weve made a mistake. Lets say a position starts going against you, and all your good reasons for putting the position on are still there. You say to yourself, its only a temporary set-back. After all (you reason), the more the position goes against me, the better chance it has to come back the odds will catch up. Also, the reasons for entering the trade are still there. By now youve lost quite a bit; you sell yourself on giving it one more day. Its easy to convince yourself because, by this time, you probably arent thinking very clearly about the position. Besides, youve lost so much already, whats a little more? Panic sets in, and then comes the worst, the most devastating, the most fallacious reasoning of all, when you figure: That contract doesnt expire for a few more months; things; are bound to turn around in the meantime.

So it goes; so cut those losses short. In fact, many experienced traders say if a position still goes against you the second day in, get out. Cut those losses fast, before the losing position starts to infect you, before you fall in love with it. The easiest way is to inscribe across the front of your brain, Cut my losses fast. Use stop loss orders, aim for a Rs. 5000 per contract loss limitor whatever works for you, but do it. 17.Let profits run. Now to the letting profits run side of the equation. This is even harder because who knows when those profits will stop running? Well, of course, no one does, but there are some things to consider. First of all, be aware that there is an urge in all of us to want to wineven if its only by a narrow margin. Most of us were raised that way. Win even if its only by one touchdown, one point, or one run. Following that philosophy almost assures you of losing in the futures markets because the nature of trading futures usually means that there are more losers than winners. The winners are often big, big, big winners, not one run winners. Here again, you have to fight human nature. Lets say youve had several losses (like most traders), and now one of your positions is developing into a pretty good winner. The temptation to close it out is universally overwhelming. Youre sick about all those losses, and heres a chance to cash in on a pretty good winner. You dont want it to get away. Besides, it gives you a nice warm feeling to close out a winning position and tell yourself (and maybe even your friends) how smart you were (particularly if youre beginning to doubt yourself because of all those past losers). 18.That kind of reasoning and emotionalism have no place in futures trading; therefore, the next time you are about to close out a winning position, ask yourself why. If the cold, calculating, sound reasons you used to put on the position are still there, you should strongly consider staying. Of course, you can use trailing stops to protect your profits, but if you are exiting a winning position out of feardont; out of greeddont; out of ego dont; out of impatiencedont; out of anxietydont; out of sound fundamental and/or technical reasoningdo. You can avoid the emotionalism, the second guessing, the wondering, the agonizing, if you have a sound trading plan (including price objectives, entry points, exit points, riskreward ratios, stops, information about historical price levels, seasonal influences, government reports, prices of related markets, chart analysis, etc.) and follow it. Most traders dont want to bother, they like to wing it. Perhaps they think a plan might take the fun out of it for them. If youre like that and trade futures for the fun of it, fine. If youre trying to make money without a plan forget it. Trading a sound, smart plan is the answer to cutting your losses short and letting your profits run. 19.Do not overstay a good market. If you do, you are bound to overstay a bad one also. 20.Take your lumps. Just be sure they are little lumps. Very successful traders generally have more losing trades than winning trades. Its just that they dont leave any hang-ups about admitting theyre wrong, and have the ability to close out losing positions quickly.

21.Trade all positions in futures on a performance basis. The position must give a profit by the end of the second day after the position is taken, or else get out. 22.Program your mind to accept many small losses. Program your mind to sit still for a few large gains. 23.Learn to trade from the short side. Most people would rather own something (go long) than owe something (go short). Markets can (and should) also be traded frown the short side. 24.Watch for divergences in related markets is one market making a new high and another not following? 25.Recognize that fear, greed, ignorance, generosity, stupidity, impatience, self-delusion, etc., can cost you a lot more money than the market(s) going against you, and that there is no fundamental method to recognize these factors. 26.Learn the basics of futures trading. Its amazing how many people simply dont know what theyre doing. Theyre bound to lose, unless they have a strong broker to guide them and keep them out of trouble. 27.Standing aside is a position. Patience is important. 28.Client and broker must have rapport. Chemistry between account executive and client is very important; the odds of picking the right Account Executive (AE) the first time are remote. Pick a broker who will protect you from yourselfgreed, ego, fear, subconscious desire to lose (actually true with some traders). Ask someone who trades if they know a good futures broker. If you find one who has room for you, give him your account. 29.Sometimes, when things arent going well and youre thinking about changing brokerage firms, think about just changing AEs instead. Phone the manager of the local office, let him describe some of the other AEs in the office, and see if any of them seem right enough to have a first meeting with. Dont worry about getting your account executive in trouble; the office certainly would rather have you switch AEs than to lose your business altogether. 30.Broker/client psychology must be in tune, or else the broker and client should part company early in the program. Client and broker should be in touch repeatedly, so when the time comes, both parties are mentally programmed to take the necessary action without delay. 31.Most people do not have the time or the experience to trade futures profitably, so choosing a broker is the most important step to profitable futures trading.

32.When you go stale, get out of the markets for a while. Trading futures is demanding, and can be draining especially when youre losing. Step back; get away from it all to recharge your batteries. 33.Thrill seekers usually lose. If youre in futures simply for the thrill of gambling, youll probably lose because, chances are, the money does not mean as much to you as the excitement. Just knowing this about yourself may cause you to be more prudent, which could improve your trading record. Have a business-like approach to the markets. 34.Anyone who is inclined to speculate in futures should look at speculation as a business, and treat it as such. Do not regard it as a pure gamble, as so many people do. If speculation is a business, anyone in that business should learn and understand it to the best of his ability. 35.Approach the markets with a reasonable time goal. When you open an account with a broker, dont just decide on the amount of money, decide on the length of time you should trade. This approach helps you conserve your equity, and helps avoid the Las Vegas approach of Well, Ill trade till my stake runs out. Experience shows that many who have been at it over a long period of time end up making money. 36.Dont trade on rumors. If you have, ask yourself this: Over the long run, have I made money or lost money trading on rumors? O.K. then, stop it. 37.Dont trade unless youre well financedso that market action, not financial condition, dictates your entry and exit from the market. If you dont start with enough money, you may not be able to hang in there if the market temporarily turns against you. 38.Be more careful if youre extra smart. Smart people very often put on a position a little too early. They see the potential for a price movement before it becomes actual. They become worn out or tapped out, and arent around when a big move finally gets under way. They were too busy trading to make money. 39.Never add to a losing position. Stay out of trouble, your first loss is your smallest loss. 40.Analyze your losses. Learn from your losses. Theyre expensive lessons; you paid for them. Most traders dont learn from their mistakes because they dont like to think about them. 41.Survive! In futures trading, the ones who stay around long enough to be there when those big moves come along are often successful. 42.If youre just getting into the markets, be a small trader for at least a year, then analyze your good trades and your bad ones. You can really learn more from your bad ones. 43.Carry a notebook with you, and jot down interesting market information. Write down the market openings, price ranges, your fills, stop orders, and your own personal

observations. Re-read your notes from time to time; use them to help analyze your performance. Rome was not built in a day, and no real movement of importance ends in one day. A speculator should have enough excess margin in his account to provide staying power so he can participate in big moves. 44.Take windfall profits (profits that have no sound reasons for occurring). 45.Periodically redefine the kind of capital you have in the markets. If your personal financial situation changes and the risk capital becomes necessary capital, dont wait for just one more day or one more price tick, get out right away. If you dont, youll most likely start trading with your heart instead of your head, and then youll surely lose. 46.Always use stop orders, alwaysalways always

Dos And Donts For Intraday Traders

This article was posted on Jun 11, 2008 If index is in minus then one should look to short stocks which are minus and not stocks which are in plus. It is not necessary that a stock which is weak today during intraday trading might be weak tomorrow also, simultaneously if a stock is strong today might not be strong tomorrow Being a contrarians is very important while trading intraday. If index is in positive from yesterday and the share you are holding is in minus then it should be cut and if intraday trend of index is in buy then one should buy a stock in which is in plus. If US Markets have gone up overnight, the markets here in all probability will open strong, so one should be quite careful when buying stocks as the general psychology of public is to buy when good news is there. Stop loss is a must while trading intraday. Always trade in very liquid stocks i.e. which have very high volume because as entry and exit can be very fast in such stocks. Keep your volume constant e.g.: if you trade in five lots of nifty future then trade in five lots only. This position can be increased only when you are satisfied with your trading for a month. It should not be that one day you buy five lots and next day you trade in ten lots and third day you get a loss and stop trading for two days.

Do paper trading before you actually start trading so that when you start making paper profits, then shift to actual trading. Fear and Greed are at maximum levels while trading intraday so always have less position when you are new to intraday trading as otherwise you will be mostly under tension.

What is Arbitrage Trading ?

This article was posted on Jun 29, 2008 Arbitrage trading is simply the trading of securities when the opportunity exists during the trading day to take advantage of differences in value between the markets the trades are made within. Arbitrage trading takes place all day long on most days that the markets are active. Arbritrage is legally allowed. In fact arbitrage is responsible for a large part of the daily volumes on the NSE & BSE exchanges. What mainly takes place in India is called Market Arbitrage Market Arbitrage involves purchasing and selling the same security at the same time in different markets (BSE & NSE) to take advantage of a price difference between the two separate markets. A market arbitrageur would short sell the higher priced stock and buy the lower priced one. The profit is the spread between the two assets. Here is a simple example: Suppose you own 600 shares of RPL. One trading day you notice that RPL is trading at 150 on the BSE and 145 on the NSE. You sell your 600 shares on the BSE at 150 and simultaneously buy back the 600 shares on the NSE at 145. You profit in this case is 600*5.00 = 3000.00 less brokerages if any.

IPO Basics: What Is An IPO?

This article was posted on Jun 11, 2008 Selling Stock An initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, its known as an IPO. Companies fall into two broad categories: private and public. A privately held company has fewer shareholders and its owners dont have to disclose much information about the company. Anybody can go out and incorporate a company:

just put in some money, file the right legal documents and follow the reporting rules of your jurisdiction. Most small businesses are privately held. But large companies can be private too. Did you know that IKEA, Dominos Pizza and Hallmark Cards are all privately held? It usually isnt possible to buy shares in a private company. You can approach the owners about investing, but theyre not obligated to sell you anything. Public companies, on the other hand, have sold at least a portion of themselves to the public and trade on a stock exchange. This is why doing an IPO is also referred to as going public. Public companies have thousands of shareholders and are subject to strict rules and regulations. They must have a board of directors and they must report financial information every quarter. In the United States, public companies report to the Securities and Exchange Commission (SEC). In other countries, public companies are overseen by governing bodies similar to the SEC. From an investors standpoint, the most exciting thing about a public company is that the stock is traded in the open market, like any other commodity. If you have the cash, you can invest. The CEO could hate your guts, but theres nothing he or she could do to stop you from buying stock. Why Go Public? Going public raises cash, and usually a lot of it. Being publicly traded also opens many financial doors: Because of the increased scrutiny, public companies can usually get better rates when they issue debt. As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal. Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent. The internet boom changed all this. Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller startups seeking to expand their businesses. Theres nothing wrong with wanting to expand, but most of these firms had never made a profit and didnt plan on being profitable any time soon. Founded on venture capital funding, they spent like Texans trying to generate enough excitement to make it to the market before burning through all their cash. In cases like this, companies might be suspected of doing an IPO just to make the founders rich. This is known as an exit strategy, implying that theres no desire to stick around and create value for shareholders. The IPO then becomes the end of the road rather than the beginning. How can this happen? Remember: an IPO is just selling stock. Its all about the sales job. If you can convince people to buy stock in your company, you can raise a lot of money.

What is Stock Jobbing ?

This article was posted on Oct 7, 2008

The buying and selling of securities with the intent of generating quick profits. While most investors seek value through long-term investments, stock jobbing takes on a more speculative short-term tone. The term stock jobbing is largely used in reference to the South Sea Bubble - an 18thcentury stock that literally wiped out the savings of many British citizens.

IPOs- How to make money

This article was posted on Jun 11, 2008 Like all investments, IPOs are also not risk free. However you can manage the risk by carrying out due diligence and planning. Never follow the herd mentality. Be yourself. Remember how much effort you make while making purchase decisions for your other needs. Investment in IPOs is no different. Remember to limit your investment within Rs. 100000/- if you want to be called as retail investor. There are quotas available for retail investors and which are not available for high net worth investors. So do your calculations correctly. Also remember that not all shares you are bidding for would be allotted to you. Share allotment is based on proportionate allotment system depending upon the number of persons who have bid for that number of shares in which category you fall. In case of good issues, you may get far less number of shares than what you have bid for. If you believe that adequate disclosures were not made by the company, you can make a complaint to the lead manager to the issue or SEBI against the company for misleading investors. During bull run, a number of fly by night companies tend to take investors for a ride. Beware. Remember we are in disclosure based regime and not merit based regime. This means that any company which meets the requirements can come out with a public issue provided adequate disclosures are made. So be careful about such operators. Plan for a long term investment. Good investment for a longer period of time will give decent returns. Not all issues coming with huge premiums are good and not all issues coming with low premiums are inexpensive. Pricing is an important factor and need to be considered carefully.