Pric e Consolidatio n Range Bound Market/Bracketed Market Days
• Bull Market (Bullish) – If you believe that the stock prices are likely to go up then you are said to be bullish on the stock price. From a broader perspective, if the stock market index is going up during a particular time period, then it is referred to as the bull market. • Bear Market (Bearish) – If you believe that the stock prices are likely to go down then you are said to be bearish on the stock price. From a broader perspective, if the stock market index is going down during a particular time period, then it is referred to as the bear market.
Market Trend• Trend – The term ‘trend’ usually refers to the general market direction, and its associated strength. For example, if the market is declining fast, the trend is said to be bearish. If the market is trading flat with no movement then the trend is said to be sideways. FINtastic Women Program Primary Trend (8-12 years) Intermediate Trend (5-8 months) Secondary Trend Daily (Intraday Moves) International College of Financial Planning
Advance and Declines FINtastic Women Program International College of Financial Planning
9888.70
Top Gainers / Top Loser International College of Financial Planning • A security that increases in price during the course of a single trading day is called a gainer. • A top gainer is a security that has a highest % increase in price. • A security that loses value during the course of a single trading day is called a loser. A loser is a security with a high price at the open or at the start of a trading day versus its price at the end of the trading day. FINtastic Women Program
Long and Short Trades • A long trade is initiated by purchasing with the expectation to sell at a higher price in the future and realize a profit. Profit= Selling > Buying Price • When a day trader₹ is in a long trade, they have purchased an asset and are waiting to sell when the price goes up. Day traders often will use the terms \"buy\" and \"long\" interchangeably. • Traders often say they are \"going long\" or \"go long\" to indicate their interest in buying a particular asset. • If you go long on 1,000 shares of Idea stock at ₹10, the transaction costs you ₹10,000. If you are able to sell the shares at ₹10.50, you will receive ₹10,500, and net a ₹500 profit, minus commissions. This is the desired result when going long.
Pric Buy Value = 1000*100 = ₹100,000 Profit = e +20000 Sell Value = 1000*120 = ₹Pr1o2fi0t,=00S0ell Value > Buy Value Profit = 120,000>100,000 Share - Sell Trade - 1000 ₹120 Long Trade - Days ₹100
• A short trade is initiated by selling, before buying, with the intent to repurchase the stock at a lower price and realize a profit. Profit= Selling > Buying Price • When a day trader is in a short trade, they have sold an asset and are waiting to buy when the price goes down. Day traders often will use the terms “Short\" and “short sell\" interchangeably. • Traders often say they are \"going short\" or \"go short\" to indicate their interest in buying a particular asset. • If you go short on 1,000 shares of Idea stock at ₹10, amount received ₹10,000. If you are able to buy the shares at ₹8.00, you will pay ₹8,000 and net a ₹2000 profit, minus commissions. This is the desired result when going short.
Pric Profit = Sell Value = 1000*120 = e +20000 ₹B1uy20Va,0lu0e0= 1000*100 = ₹Pr1o0f0it,=00S0ell Value > Buy Value Borrow 1000 Profit = 120,000>100,000 Shares Buy back 1000 And short - ₹ 120 ₹120, and return shares back. Days
**Short Selling -
Insider Trading FINtastic Women Program International College of Financial Planning
Trade Life Cycle and Broking Operation Learning Outcome Statements - 3
Introduction to the Trade Life Cycle • In financial market, “trade” means to buy and or sell securities/financial production. A trade is the conversion of an order placed on the exchange into pay-in and pay-out of funds and securities. Trade ends with the settlement of the order placed. Pre-Trade Post-Trade Event Event
• Trading of securities involves multiple participants like the investors, brokers, exchanges, clearing corporation, Clearing Bank, Depository participants, Custodian etc. • The following stop are involved in a trade’s life cycle. 1. Placing of an order by the investors/clients / broker. 2. Risk management and routing of order though the trading platform. 3. Matching of orders and its conversion into trade. 4. Confirmation for trades. 5. Clearing and settlement of trades. Front- Middle -office Back- office Office.
Place order through broker Receive Trade Fund/ Executed Securities Clearing & Trade Settlement Confirmation/Contra ct Note
Placing of Order. • The broker accepts orders from the client and sends the same of the Exchange after performing the risk management checks. Client Broker • Once the orders are received by the broker, it is confirmed with the clients and then entered into the trading system of the NSE exchange. • An order generally comes with certain conditions which determines whether it is market order, limit order. These specify the terms and condition at which the client want his /her order get executed.
Order Matching and Conversion into Trade • All orders which are entered into the trading system of the exchange are matched with similar; counter orders and are execute., • The order matching in an exchange is done on a “price time priority basis”. • The best price orders are matched first. If more than one order is available at the same price then they are arranged in ascending time order.. • Best buy price is the highest buy price amongst all orders. • Best sell price is the lowest price of all sell orders.
• Once the order is matched, it result into a trade. As soon as the trade is executed a trade confirmation message is sent to the broker who has entered the order. • The broker in turn lets the client know about the trade confirmation through a contract note. • All orders which have not been executed partly or fully can be modified or cancelled during the trading hours.
Contract Note • A contract note is a confirmation of trade done on particular day for and on behalf of a client. • A contract note is issued in format and manner prescribed by the exchange. It establishes a legally enforceable relationship between the stock broker and the client in respect of settlement of trades executed on the exchange as stated in the contract note.
Types of Limit Order • Three major compOonrednet orf an order. Market Pric Order e Stop Loss Time Quantity
CMP - Above CMP (105) – Stop Loss 100 Order BUY At CMP (100) – Market Order CMP - Below CMP (95) – Limit 100 Order SEL Above CMP (105) – Limit L At CMP (100) – Market Order Below CMP (95) – Stop Loss
Market Order • A market Order is where a trader purchases or sells their security at the best market price available. • In Market order there is no need to specify the price at which trader wants to buy or sell.
Buy Quantity Buy Price Sell Price Sell Quantity 1606 1000 Pric 1300 100.55 100.60 1190 e 3830 1840 100.50 100.65 1,86,054 1,30,050 100.45 101.70 Total Quantity 100 CMP-100 – Market Order
Limit Order • Buying at lower price or selling at higher price. • Limit order involve setting the entry or exit price and then aiming to buy at below the market price or above it.
Pric Limit Order e Above CMP – 100 – Limit Order Sell 110 CMP- 108 100 Below CMP – 100 – Limit Order Buy
Stop Loss Order • Stop loss is used when a trader wants to buy at a higher price than market price or wants to sell at lower price than current price.
Pric e Above CMP – 105 – SL buy Buy Price - 106 order Trigger Price - 105 Days
Clearing and Settlement • The clearing function of the clearing corporation is designed to work out- a) what members are due to deliver and b) what members are due to receive on the settlement date. • Settlement is a two way process which involves transfer of funds and securities on the settlement date. • Clearing is the process of determination of obligations, after which the obligations are discharged by settlement.
What happens when you buy a stock? Day 1 – The trade (T Day), Monday • Assume on 22nd June 2020 (Monday) you buy 100 shares of Reliance Industries at Rs.1,000/- per share. • The total buy value is Rs.100,000/- (100 * 1000). The day you make the transaction is referred to as the trade date, represented as ‘T Day’. • By the end of trade day, your broker will debit Rs.100,000/- and the applicable charges towards your purchase.
Day 2 – Trade Day + 1 (T+ day, Tuesday) • The day after you made the transaction is called the T+1 day. On T+1 day you can sell the stock that you purchased the previous day. • If you do so, you are basically doing a quick trade called “Buy Today, Sell Tomorrow” (BTST). • From your perspective, nothing happens on T+1 day. However, in the background, the money required to purchase the shares is collected by the exchange along with the exchange transaction charges and Security transaction tax.
Day 3 – Trade Day + 2 (T+2 day, Wednesday) • On day 3 or the T+2 day, around 11 AM shares are debited from the person who sold you the shares and credited to the brokerage with whom you are trading, who will in turn credit it to your DEMAT account by end of the day. Similarly, money that was debited from you is credited to the person who sold the shares. • The shares will now start reflecting in the DEMAT account indicating that you own 100 shares of Reliance. • So for all practical purposes, if you buy a share on day T Day, you can expect to receive the shares in your DEMAT account only by end of T+2 day. The shares are available for a transaction on T+3 day.
What happens when you sell a stock? • The day you sell the stocks is again called the trade day, represented as ‘T Day’. The moment you sell the stock from your DEMAT account, the stock gets blocked. • Before the T+2 day, the blocked shares are given to the exchange. • On T+2 day you would receive the funds from the sale which will be credited to your trading account after deduction of all applicable charges.
Brokers Traditional Brokers or Full Service Broker Discount Brokers • Traditional Brokers or Full Service Broker – They are offline brokers where clients can visit branch, sit trade use broker advisory services, they offer almost all kind of investment plan. • Discount Broker – in India is basically Online broker where client open trading account online, use there online trading platform and trade him self.
• The discount brokerage firms are getting popular among the traders owing to their low, fixed brokerage plans wherein they charge a fixed brokerage fee irrespective of the trade value. • For example, Zerodha charges a brokerage fee of ₹20 per order on equity intraday. So whether your trade value is ₹10,000 or ₹10 lakhs, the brokerage charged will be the same. Advantages and Disadvantages of Discount Brokers (Pros and Cons) Advantages Disadvantages •Offer low brokerage charges compared to full-service •No research advisory and other investment services brokers. •No branch services •Brokerage plan is fixed for all trader types- low volume or high •No RM support volume. •Low transaction costs
Evaluating Companies and Share Performance Learning Outcome Statements - 4 FINtastic Women Program International College of Financial Planning
Valuation of Shares Fundamental Technical Analysis Analysis Generally Long Generally Short TermFINtastic Women Program TermInternational College of Financial Planning
Overview of Fundamental Analysis • Fundamental Analysis (FA) is a holistic approach to study a business. Investor wishes to For 5-8 it becomes extremely essential Invest in Company X years or to understand the business from various perspectives. more Over the long term, the stock prices of a fundamentally strong company tend to appreciate, thereby creating wealth for its investors. FINtastic Women Program International College of Financial Planning
Such examples in the Indian Market FINtastic Women Program International College of Financial Planning
PE Analysis PE Ratio = Price to Earning Ratio PE Ratio = Market Price Per Share/ Earning Per Share. EPS = Net Income / No of Outstanding Share. Example - Net Income is 20,00,000 EPS = 20,00,000/1,00,000 Total no of Shares are = 1,00,0000 EPS = 20 Current Price = 400 PE Ratio = 400/20 = 20 FINtastic Women Program International College of Financial Planning
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