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TWO MINUTES TO UNDERSTAND DAY TRADING

What Is Day Trading?
         Day trading is the practice of buying and selling financial instruments
throughout the day. As the day progresses, prices will
rise and fall in value, creating both the opportunity for gain and the possibility
of loss.
         At 10:15am, a day trader might buy 1,000 shares of tcs
stocks just as the price begins to rise on good news, and then sell it at
10:25am, when it's up by 10 rs per share. In this example, the day trader makes 10000, minus commission. With today's cheap commissions of 10 paise or less per share , that's a quick 9900 in
10 minutes!
         When traded strategically, the trends and fluctuations in the markets allow
for quick profits to be made in brief periods of time.Keep in mind, however, that day trading is specifically designed to result in smaller earnings on a regular basis; it is NOT designed to result in
huge fortunes through a single trade. Day trading can be very profitable, but it isn’t a get-rich-quick scheme(though many seminars convincingly sell it as such). Nor is day trading a
sure road to immeasurable wealth and success (as some hyped-up websites
would have you believe).
         Quite simply, day trading is just like any other business venture: in order
to be successful at it, you need to have a PLAN. It would be very risky to
dive in head-first without looking. However, with the right tools – and
with the knowledge to use those tools efficiently and effectively – the
risks of day trading can be greatly reduced. With perseverance and commitment,
you CAN find trading success

TEN REASONS WHY DAY TRADING

Day Trading
In my opinion, it’s the perfect way to become wealthy. Here are ten reasons
why:
1.) It’s the total “equal opportunity” job
Your race doesn’t matter. Your skin color doesn’t matter.
Your education doesn’t matter, whether you’re a Ph.D. or a
college drop-out. Your sex doesn’t matter. Your origin
doesn’t matter. Your age doesn’t matter. Your background
and history don’t matter. Even if you’ve been in jail for
years, you could still make money with trading. Your language
doesn’t matter. Your looks don’t matter. And your social
status doesn’t matter, as long as you have sufficient
funds to trade.
2.) No employees to hire
You don’t have to hire any employees, which means you
don’t have to worry about job interviews, payroll, employee
evaluations, holidays, sick days, or employee performance.
Your only “team member” is your broker, and if he doesn’t
perform, there are 10 others waiting in line for your business.
3.) No inventory, office space, or other equipment (besides
your phone and your computer)
You don’t have to buy or rent expensive office space, and
you don’t have to stock any products, which means you
don’t have to worry about expiration dates, damaged goods,
shipping, handling, insurance, or displays and promotions of
goods.
4.) No vendors, no customers, no invoices, and no accounts
receivable
You won’t have to deal with any face-to-face contact. You
don’t need any vendors, you don’t need to satisfy any customers, you don’t need to provide any customer support, and
you don’t need to worry about any invoices, bounced checks,
fraudulent credit card charges, returns, or charge-backs.
5.) The time required is minimal
Whether you have a regular job or run your own business,
the chances are that you’re working at least 40 hours per
week. With day trading, you can trade either part-time or
full-time. You can start trading for as little as one hour per
week, or you can go for the maximum of 2 hours per day.
It’s your choice.
6.) Low capital requirement
You don’t need a lot of money to get started. This is not like
buying property, for example, where you’re on the hook for
a monthly mortgage and other cash-draining expenses. 

7.) Returns are almost instantaneous
I'm talking "fast cash" in the sense that trading allows for
quick liquidation. You can convert trades for cash within
seconds. Where else in the world can you make money this
fast and comfortably? You can buy and sell and buy again in
minutes. You don’t have to wait to see your profits. Try this
with real estate or physical goods, where you might have to
wait weeks, or even months.
8.) Low transaction cost
You pay less transaction in trading. Compare
that to real estate transactions, in which you have to pay several
thousand of bugs in closing costs, not to mention a 3-6%
commission to your realtor.
9.) It's simple to learn how to make money with day trading
You don’t have to go to college for years. And unlike most
other professions, years of experience are not necessary either.
After teaching hundreds of people how to make money
with day trading, I firmly believe that everybody can learn
how to become a successful trader.
10.) You don’t need much to get started
In fact, there are only six things that you DO need:
a.) A computer
b.) An Internet connection
c.) A charting software
d.) A broker
e.) A properly funded trading account
f.) A good trading strategy

SMART WAY TO TRADE

Smart Trader

Basic Terminology

BTL – Buy Trigger Level

STL – Sell Trigger Level

RISK – It is the percentage risk involved in the trade.

How is the Risk calculated?

 If the stock is currently trading between the buy & sell trigger levels. The

difference between the STL & BTL is displayed as the risk in percent.

Here’s the logic: If you place a short trade when the stock crosses STL,

BTL would be your stop-loss. And if you place a long trade when the stock

crosses BTL, STL would be your stop-loss. So, the maximum risk

assuming your stop-loss gets hit is the difference between the STL & BTL.

 If the stock has already crossed above BTL and is currently trading at say

Rs. X. Then placing a long trade at the current price (X) with STL as stoploss

would incur a maximum loss of (X-STL), if the stop-loss gets hit.

Hence the risk involved in the trade is X-STL in terms of a percentage.

 If the stock has already crossed below STL and is currently trading at say

Rs. X. Then placing a short trade at the current price(X) with BTL as stoploss

would incur a maximum loss of (BTL-X) if the stop-loss gets hit.

Hence the risk involved in the trade is BTL-X in terms of a percentage.

Understanding The Smart Trader! Interface

The Smart Trader! Interface is divided into three zones:

1. Stocks which have triggered their buy trigger level(BTL)s. (Upper Zone)

2. Stocks trading in between their buy & sell trigger levels. (Middle Zone)

3. Stocks which have triggered their sell trigger level(STL)s. (Lower Zone)

Basic Trading Philosophy

 Watch the stocks trading between the BTL and STL levels. These are

displayed in between the headings, “BUY IF CROSSES ABOVE THIS

LEVEL” & “SELL IF CROSSES BELOW THIS LEVEL”. Keep a close watch

on these stocks. Let us call this zone “Middle Zone”.

 The closer a stock is to the “BUY IF CROSSES ABOVE THIS LEVEL”

heading, the closer it is to its BTL.

 The closer a stock is to the “SELL IF CROSSES BELOW THIS LEVEL”

heading, the closer it is to its STL.

 The above display makes for easier spotting of upcoming trading

opportunities.

 Buy a stock when it crosses above its BTL. Place a stop-loss order at STL

immediately. These stocks are now in Upper Zone.

 Sell a stock when it crosses below its STL. Place a stop-loss order at BTL

immediately. These stocks are now in Lower Zone.

Managing The Positions

 When the system spots that a continuation of the present move is likely, it

continuously keeps revising the BTL & STL levels. Please change your

stop-loss orders immediately to the BTL & STL level depending on whether

you are holding a short or long position respectively. The associated risk

immediately comes down.

 If the risk involved in the trade keeps going up and the system does not

change the BTL or STL levels, we recommend booking profits on every

rise.

A Hypothetical Example

ZEETELE – LTP At 195. BTL at 196.05. STL at 194.

 ZEETELE is now in the middle zone i.e. a don’t trade zone.

 Let us say, ZEETELE now crosses 196.05. Buy the stock immediately &

place a stop-loss at 194. The stock is now displayed above the “BUY IF

CROSSES ABOVE THIS LEVEL” heading. I.e. Upper Zone.

 First Scenario: After a few minutes, the stock is now trading at 202. The

system did not revise the BTL & STL levels. The risk(202-194=8) has gone

up very much. Hence, this position may be closed slowly in equal small

quantities.

 Second Scenario: Here the stock is trading at 202. The system has revised

the BTL & STL to 200 & 204 respectively. The stock has now fallen back

into the middle zone. Modify your stop-loss to 200, thereby locking your

profits and hold on to your existing position. If the stock now crosses 204,

further buy(long) positions may be taken with 200 as stop-loss. Warning:

When adding to existing positions please add in small quantities. This

procedure may be continued as stock keeps going up and if the levels are

revised each time.

 In either of the above scenarios, if the stop-loss placed at STL gets hits

and the positions are squared-off. We advise reversing the trade

immediately.

 For instance, if the stop-loss of 194(in scenario 1) or 200(in scenario 2)

gets hits. Place a fresh sell order immediately with a stop-loss of

196.05(in scenario 1) or 204(in scenario 2) respectively.

 The same procedure as described above may be used when trading on the

short(sell) side.

We wish you great success in your trading endeavours.

basics of equity investment

Investing in Equities
Q. What is Equity Investment? Is it the same as investing into stocks or shares?
Ans. Equity Investment means investing in shares of the company, which are listed in the stock market.
Yes the word equity, stocks and shares are synonymous and investing into equity also means as investing in stocks or shares of the company.


Q. What is a Company? And what are the different types of Companies in whose shares investments can be made?
Ans. The Joint Stock Company is a legal entity whose capital is contributed by various stake holders into that company in lieu of shares allotted to them. According to the Companies Act broadly there are Private Limited, Public Ltd., and Listed Public Ltd Companies., In first 2 categories public is not widely invited to invest into the shares of the company and hence they are closely owned company. While in third case only public is widely invited to own the shares of the company, by way of initial public offer and then they are listed on the recognized stock exchanges like Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Say for example company comes with an initial public offering of 1 crore shares of Rs.10/- each out of which an investor is allotted Rs. One lakh shares of Rs.10/- each on application being made by him in an IPO offering and hence now an investor is owning 1% of the company’s capital ie. Rs.10 lakhs.
Q. What is a Primary market and what is a Secondary Market?
Ans. Any company who wants to raise its capital for its business approaches the public at large with an offer to issue and allot certain number of shares at certain prices. This is called as an initial public offering by the company in the Primary market.
Once these shares are allotted they get listed in the recognized stock exchanges where trading in the value of the shares take place in free market place by large number of buyers and sellers. This market place is called as a Secondary market. Currently on a nationwide basis BSE and NSE provides an on line trading platform to trade in Secondary market.


Q. How one can invest in Shares?
Ans. (i) Direct Route: One can open an account with any BSE or NSE Broker and buy and sell shares in BSE or NSE directly. Investing directly calls for a bit of knowledge about the company and its business. One can also depend on research based advice given by his broker. Further one should have enough time to track his investment regularly. If you do not have these essentials it is advisable to opt for a professional to manage your investments via Portfolio Management Services (PMS) offered by any Investment Advisory Companies.
(ii) Indirect Route: One can invest into Mutual Fund which in turn invest into the stock market. Mutual Fund collects the money from the large number of small to big investors and then invests that money in equity shares. They possess requisite skills and expertise to do this job for which nominal asset Management fees is charged by them on total corpus. Those who don’t possess requisite skills and time. Mutual Fund is ideally suited for them.


Q. Who should invest in Stocks and in how much proportion?
Ans. Generally younger people are considered ideal candidate for investing in shares since they have more risk taking capabilities than elder one. The thumb rule is to deduct your age from 100. Ideally your equity exposure should be that figure. For example, if you are 30, your equity exposure should be 70 (100 – 30). One should reduce equity exposure with advancing age, however, lately because of increase life expectancy and cost of living experts advise to have at least some exposure to equity in all ages.


Q. What is a Right of the equity share holder of a Company?
Ans. As an equity share holder one is entitled to a dividend if declared by the company. One is also entitled to the rights or bonus, shares declared by the company. Besides that, one has the right to cast his vote in a General Meeting on a various resolutions.


Q. How easy is it to make money from investment in shares?
Ans. It is not very easy to make consistent money from investing in the shares as there are lots of risks and uncertainties involved in that. That is why it is very important to pick the right stock at a right time matching your investment objective. Generally if you are buying shares of the company with a strong track record and good Management will always give decent return in the longer run. As already mentioned one should exercise due care and diligence in selecting particular stock.
One can also make money by trading into stocks and derivates. However, here again most stringent trading and money Management skill is required. For those who have articulated art of trading and investment investing in shares is very rewarding.


Q. How to analyse Stocks for investment and trading?
Ans. Broadly there is 2 methods to analyse stock
(i) Fundamental analysis and
(ii) Technical analysis
Generally for taking an investment decision of medium to long term horizon, fundamental analysis is widely followed. While for short term trading decisions Technical analysis is widely followed.
Fundamental Analysis involves evaluating companies value by evaluating companies business model, demand and supply of its product, its relative strengths and weakness in the industry in which it operates., the position of the industry, the sales and profit growth, return on equity, growth in earnings per share etc., value so arrived at is then compared with the on going market prices. If it is found that the market price is significantly lower than that, then it is advisable to buy the shares of that Company expecting that market will revalue the shares in future thereby offering capital appreciation in the value of the shares.
Technical Analysis on the other hand focuses on the market price movement of the share in the past mainly through graphs or price and traded volumes in order to judge further performance. Short term traders generally looking for a trading opportunity tries to capture the price trend for short term money making opportunities.
Although these two are widely followed and more rational approach for buying and selling decisions they are not infallible and hence are not full proof.


Q. What are the dos and don’t to be followed while investing into equity?
Ans. (i) Do not buy on rumours, debts. Remember investing in equity is not like a gambling, it involves skill and knowledge.
(ii) Always buy shares of companies whose business you understand. Consider investing in that stocks/industry with which you had an opportunity to work or may is a company manufacturing a popular product which you yourself use.
(iii) Study company thoroughly with whatever available information. Talk to people to whom you can trust to give you unbiased information about the company, read newspapers/ magazines to find leaders in various businesses.
(iv) For relative safety and better chances of appreciation buy shares for longer term, buy the shares as if you are buying business.
(v) Never buy in haste. If you are buying a good business for a longer term it is good buy irrespective of time.
(vi) Always diversify in 8 to 12 stocks since these are number of companies one can track regularly with proper focus. Too less a diversification makes a portfolio more risky at the same time too much of a diversification results in to loss of focus.
(vii) Never be impatient and panic. A short term ups and downs in the share prices resulting into paper profit or loss should not bother you much.
(viii) A good company with a good business and Management will always remain good investment in long term.
(ix) Do not buy the shares from borrowed capital. Borrowed money involves paying regular interest and returning capital at a predefined time since investment in the shares involves risks and requires patience of a long term nature, the time horizon and cost involved of the borrowed money some time may not match with the investment period.


Q. When the stocks should be sold for maximum profit?
Ans. There is nothing called right time to sell. Ideally one should sell the stock when the company stops posting growth, one can also sell when desired profit percentage is achieved. However, one should be realistic in his desire. It is widely believed that booking profit regularly is best way to maximize profits.


Q. Where my complaints relating to equity investments can be redressed?
Ans. Following are the addresses of the authorities where any complaints against companies or market intermediaries can be sent:
Securities and Exchange Board of India
Mittal Court ‘B’ wing, First Floor,
224, Nariman Point,
Mumbai – 400 021.
Phone: 2850451-56, 2880962-70
Besides both the BSE and NSE, has its own Grievance Cell to attend to investor complaints of companies listed on their exchange.


Q. What is meant by ‘Investing’ and how is it different from ‘Savings’?
Ans. 'Investing' means building up to meet future consumption demand with the intention of making profits while 'Saving' is not consuming everything today and leaving something for tomorrow. When we 'invest', we forego our present consumption or do it out of our surplus. In other words, 'savings' again supports 'investment'. When you invest your savings it has morphed into Risk Capital which can be eroded. Risk can be minimized by choosing to invest in low risk investments. The risk associated with each investment changes with time, and must be monitored carefully.


Q. What is a Share?
Ans. A share is a single unit of ownership in a company, mutual fund or limited partnership. When you purchase shares, you become part owner of a company. As an owner, you are usually entitled to voting rights and to a share of the company's profits, a portion of which are distributed in the form of cash dividends. Dividends are not guaranteed. They may be increased if the company performs well, but they may also be reduced or eliminated if the company performs poorly.


Q. Should we invest in Stock Markets?
Ans. The answer to this question is a definite yes. Although past performance cannot guarantee future market results, stocks historically have outperformed all other long-term financial assets. It is the only financial asset that has significantly outpaced inflation over time. The only important factor to be kept in mind is that investment should always be made with an objective in mind and we should not be too greedy while investing.


Q. What follow-up steps to take after investment in shares?
Ans. It is necessary to review your financial position regularly, at least once a fortnight. Re-evaluate your portfolio to find whether you are making the best of the money you save and invest? Are you happy that you are getting the best possible return from them? Do they fit in with your current "risk profile" - should you, if you are getting closer to retirement, be thinking about reducing the level of risk in your portfolio of investments or should you actually be thinking about taking a few more risks if you have plenty of time in which to build up an investment?
Are your short-term investment giving you the desired rate of return or are you trapped by buying the stock at its peak? Book losses on these shares and try to invest in shares where you can make up for the losses.

In case of long term investment, track news on the stocks regularly. If there is a change in business environment, management or future profitability, the valuation of stocks will change accordingly, and hence the target price will also change.