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Education.

GENERAL FUNDAMENTAL
ANALYSIS
SEASONS
TRADING &
GUIDILINES
TECHNICAL ANALYSIS GOLD
SILVER OIL

General:

1. What are Futures Markets?

Futures
Markets
Markets that trade contracts for any
assets/index/commodity/currency/stocks that will be
bought or sold for a specific price on a specific date
(also know as expiration date) in the future.


2. What is called Long and Shorts?

Long Means the trader expects the price to go up.

Short Means the trader expects the price to go down.


3. What is Market or Limit Order?

Market
Order
is to simply buy or sell at the current market price .
Limit
Order
is to specify a price what the trader wants to buy or
sell.

4. What are Stops (stop loss)?

Stop Are order types which helps manage risks by
minimising the losses.
If you are not using stops, you will be at the mercy of
the market as u don’t have any control on the
downside.

Stop loss Is to limit the loss in a existing position or protecting a
profit.

5. What are Spot Markets?

Spot
Markets
is one in where goods are sold for cash for cash and
delivered immediately
is also called as cash market or physical market.

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6. What is Intraday or Day trading?

Intraday or
Day trading
Is a short term trade where the trades are held from
few seconds to few hours, generally the trade is closed
in the same day.
Uses price momentum, news, patterns and other
strategies to trade.


7. What is Leverage?

Leverage Is a financial tool that allows an individual to increase
their market exposure to a point that exceeds actual
investment?
In simple words it can be said doing more with less.
is the ability to use something small to control big.
Keeping your leverage lower protects your capital
when you make trading mistakes.
The use of leverage in trading is likened to a double-
edged sword, since it magnifies gains and losses.


7. What is Volatility?

Volatility Is a measure of price variation? The price might move
up and down in a short term.
Terms like erratic market behaviour, choppy, whipsaw
are commonly used to refer Volatility
Volatile market might has wild price fluctuations and
volumes. Though there would be good trading
opportunities, beginners to stay away from highly
volatile market condition.


8. What is Open Interest?

Open
Interest
is the total number of outstanding futures contract
that are held by market participants at the end of each
day.
Higher open interest means more interest on that
period.

Market
strong
Open interest high
Market weak Open interest Low
Bullish Open interest and price Increases
Bearish Open interest increases and price decreases




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9. What is Price Action?

Price Action Refers to day to day fluctuation in the price of a
commodity.
Is monitored by patterns and indicators in the technical
analysis by technical traders.



10. What is Liquidity?

Liquidity Level of buying and selling volume available at any
given time for a asset.
The higher the liquidity, the easier to buy and sell. This
also explains about the market interest.


11. What is Trend?

Trend Is the direction of the market.
has 3 directions, Upward, Downward and Side wards
Trend is your friend
Never buckle the trend
Always trade in the direction of trend



12. What are Price gaps?

Price Gaps are simple areas where trading has not taken place.



13. Is there any link between dollar and commodities?

Link Generally rise in dollar value has depressing effect in
commodities value (price).


14. What are the other factors that should considered in entering a trade?.

Factors Brokerage
Other fees if any
Taxes if any






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Trading and Guidelines:

1. What is Commodity trading?

Commodity
Trading
is to build cash in the trading account by buying and
selling futures contracts.
Trading is slightly different from investing, it not about
buying assets.
The returns and losses are very high when compared
any other form of investments.


2. Who are Market Participants?

Market
Participants
Traders
Speculators
Hedgers
Institutions
Merchant
Fund Managers
Dealers

3. What is Money Management?.

Money
Management
Means properly usage of money on each trade
Don’t risk more than 2% of the money in each trade.
Skills are required for the trader to be successful.
Long term success depends on proper money
management.
Money management is a very important strategy in
trading plan.

Only Risk the capital that one can lose.


4. What human factors affects trader during trading?

Human
Factors
Fear, doubt, greed, anxiety, excitement, pride are the
human factors that could affects trading decision.
Lack of confidence can affect your performance.
Understand your emotions before you place any trade.
Fear of losing can cause traders take bad decisions.


5. How important is timing in futures trading?

Timing Timing is everything in futures market. One can be
right in the direction but still lose the trade if the
timing is incorrect.
A buy signal on the bigger time frame can be a sell
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signal on lower time frame. This could be conflicting
each other. Proper care and trading plan should be in
place to overcome these conflicts
Fundamentals rarely change on hour to hour or day to
day basis but price move in ranges.
Since trading futures involves margin and leverage,
timing is very important for trade entry and exit.
The most dangerous time for any trader is after a
major loss.


6. Do India markets follow international markets?

Relation
with Intl.
markets
Yes, Local commodity markets get referenced or
follows international market however Dollar - Rupee
equation could affect the price direction also.


7. Does buy and hold strategy hold good in futures market?

Buy & Hold
Strategy
Holds good only for larger account sizes and not for
small equity accounts.
Traders with small account size leveraging themselves
adopting the buy and hold strategy could prove
counter productive.
The market swings and bounces can cause severe
losses to small sized accounts.


8. Why do traders fail?

Reasons for
Failure
Improper Money Management.
Poor Focus and more Emotional.
More Greed than Need.
Don’t invest time in Education and Knowledge.
Those who fail to plan, plan to fail.
Using Excessive Leverage.
Over Trading trying to make up a loss.
Lack of Strategy and Discipline



9. List Some Interesting Trading Guidelines.

Trading
Guidelines
The market is always correct.
Let Profit run and cut short the losses.
Apply Money Management Principles Strictly.
In Uptrend, buy the dips and in Downtrends, sell the
bounces.
Use Stop loss to limit losses.
Don’t trade impulsively. Have a trading plan.
Keep it simple.
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Never add to losing positions.
Add only to winning positions.
When you lose many consecutive trades, stay out of
the market and re-enter latter.
As you trade, learn analyse and adjust the strategy and
fine tune.
Expect the trades to go wrong. No trader is correct
always. Prepare yourself.
The market does not follow any rule, fundamental or
technical; it might remain irrational and meaning less
for longer times.
Just you watch the market does not mean u need to
trade, trade only good opportunities.


10. What are the important factors that has to be considered before entering
any trade?

Factors to
consider
before
entering a
trade
Knowing how much to risk in a trade will limit the
losses and would help in taking a better decision.
Look for sufficient liquidity in the market.
How to Protect the Capital when market turns against
you.
How and when to take or book profits.
How much to buy or sell when you get a signal


11. What are the qualities of successful traders?

Qualities Self Discipline Emotional Control and ability to change
minds according to the flow of markets.
Proper Money Management, Methodology and
Rational thinking.
Know your strengths as well as your limitations.
Keep calm and work under stress
Persistence and ability to take to quick decisions.



12. How often does the Market trend?

Trending The market trends only 15-30% of the time. In all the
remaining time, the market trades directionless and in
ranges.







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Fundamental Analysis:

1. What is Fundamental Analysis?

Fundamental
Analysis
is a type of market analysis which involves studying law
of supply and demand that causes price to rise and fall
basically it uses underlying economic conditions.
Factors like economic indicators, polices, interest rate,
war, drought, flood, politics, inflation are influencing
factor in fundamental analysis.



2. What are the key factors that are to be considered in fundamental
analysis’s?.

Key
Factors
Gross Domestic Product(GDP)
Interest Rates/Polices
Consumer Price Index ( CPI)
Producer Price Index(PPI)
Unemployment
Political and social stability
Capital flows etc..


3. How News affects trading?

News The anticipation of bullish news can support the
market for weeks and even months. This is same for
bearish news, it can push the market down.
In some instances, pending news can push the market
farther than the reported news.
Buy the Rumour and sell the fact.
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If everyone knows the news, the market has already
priced or discounted the news.




4. What is the difference between News and Fundamental Analysis?

Difference Fundamental analysis predicts the price direction and
news follows price direction.


































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Technical Analysis:

1. What is Technical Analysis?

Technical
Analysis
is a study of market action and price movements
basically uses historical prices to predict the price
movement.
Considers various assumptions like fundamental
factors of supply and demand are reflected on price
movements, price moves in trends and market
patterns are repetitive in nature.
One advantage of technical analysis is forecasting can
done in different time frames, hours, weeks and
months.


2. What does technical and fundamental analyst does?

Analyst
function
The fundamentalist studies the cause of market
movement and technical analysis technician studies it’s
effect.


3. Why majority of the traders prefer technical analysis?.

Preference It is relatively easy to study technical analysis than
fundamental analysis.
As the fundamentals are reflected on the market price,
the study of fundamentals is not felt important.
The reading of charts becomes indirect reference of
reading fundamental analysis.
Fundamental analysis does not study the price action.
So majority of the traders prefer technical analysis over
fundamental analysis.
Also chart reading is much easier than reading
fundamentals.
Care should be taken while trading technical analysis as
most of the traders look at the same chart and would
take action accordingly.


4. Disadvantages of technical analysis?.

Disadvantages Two analysts applying the same method to the same
set of market data may arrive at entirely different
conclusions.
Many times the analyst starts interpreting the
indicator where it will go and not analyses where the
market will go.
There are too many indicators and ways of
interpretation of technical analysis which might lead
to more confusion.
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Expecting the market to behave based on certain
formulas in the indicator could be counterproductive.
Traders always search for better indicators instead of
developing a strategy.
Most of the technical indicators are inherently slow.
Losing trades are often blamed on technical
indicators.



5. How does Technical Analysis tool help?

Tools helps you identify possible entry, exit and stop loss
points.
is used to find new trading opportunities. Charts can
only tell us where the market has gone and it can’t tell
us where it is going to go next.
This analysis and forecasting has to be done by the
technician based on various tools.


6. What is Moving Averages?

Moving
Average
It is the average of certain period of data. If a 10 day
average of closing period is desired, the prices for 10
days are added and divided by 10.
The moving average is widely used technical indicator.
The moving average is trend following. Its purpose is to
track the trend.
The moving average is a follower and not a leader. It
only reacts to price changes and never anticipates.
The moving average lags the market action. By
averaging, a smoother line is produced.


7. How Moving Averages are used for Buy and Sell Signals?

Double
average
crossover
Double cross over method is used to identify buy and
sell signals.
A buy signal is produced when the shorter average
cross the longer average. The most popular are the 5
and 20 day averages and 10 and 20 day averages.

Buy Signal A buy signal occurs when the 5 day average crosses
above the 20 day average
Sell Signal sell signal occurs when the 5 day average crosses
below the 20 day average


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8. What is Bollinger Bands?

Bollinger
Bands
Two bands (standard deviation) are basically placed
above the moving averages usually 20 days.

Overbought The upper band or envelope is considered as over
bought
Oversold the lower band or envelope is considered as over sold.




9. Explain MACD?

MACD It is 2 line moving average convergence divergence
systems.
The first line (MACD) is the difference between two
exponential moving averages usually 12 or 26 period of
closing price.
The second line (signal) is the 12 period exponential
moving average of the first line. When the lines cross, a
signal is generated.
When the lines cross, a signal is generated.


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10. Explain Relative Strength Index?

RSI is plotted on a vertical scale of 0-100.
Normally use 7 or 14 days periods.

Overbought Generally values above 70 are considered as over
Oversold values below 30 are considered as over sold



11. Explain Oscillators?

Oscillators Oscillators generally are used to figure out whether is
market is overbought or overbought.
The oscillator is extremely useful in non trending
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markets trading in ranges.
Oscillators signal’s that the trend is losing momentum
before the situation is reflected on the price action
itself
The oscillator is a secondary indicator for the basic
trend analysis. The concept of momentum is the most
basic application of oscillator.
Momentum measures the velocity of price changes
apposed to the actual price themselves.
Oscillators work great when the market trades in
ranges or side wards


12. What is Elliot wave analysis?

Elliot wave It is a study of market analysis’s based on wave
patterns and Fibonacci sequence.
Ideally the wave pattern will have 5 waves advance
and 3 waves’ decline.
There are 2 modes of wave development.
a) Motive - 5 Waves
b) Corrective – 3 Waves
Motive or
Impulse
wave
A larger trend developing on the 5 wave pattern.

Corrective
Wave
A reaction to the larger trend moving in 3 wave
pattern.


13. What is Pivot Point Analysis?

Pivot Point The pivot point number is high, low and close divided
by 3 of a day or period. This can be applied on any
time frames.
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Pivot points are leading indicators and not lagging.
The support and resistances values indicate the next
potential targets in a said time frame.
It is also used to identify break out points based on
support and resistance.
Formula Pivot Point P = High+Low+Close/3
Resistance R1 = (P X 2) – L
Resistance R2 = (P + H) - L
Support S1 = (P X 2) – H
Support S2 = (P-H) + L



14. What is Break out trade?

Break Out The market consalditaes itself.
The market trades in tight range.
The market breaks out and extends in one direction for
a strong trending move.
Identify the
direction
The support and resistance acts as a reference to
identify the direction.
The market might re tests its support or resistance
zones several times before it breaks out.
Buy or sell
signal
A buy stop or sell stop order can be placed on above or
below the consolidated zone.
False
breakouts
In this strategy, experiencing false breakouts are quite
often. The breakout will occur and fall back in the same
consolidated zone. This could hit the stop loss and fail
the trade.

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15. What are Fibonnacci retracements?

The primary Fibonacci numbers are the essential
means to accurately gage price action and to identify
trade opportunities.

Primary
numbers
The primary numbers consist of 0.618, 0.786, 1.27, and
1.618.
0.786 is square root of 0.618
Trade set up If the price action bounces of these numbers,
retracements could be expected.




16. What is Stochastic?

Has the definition of a mometum oscillator.
It is a populat tool to dertermine whether the market is
overbought or oversold.
Formula The 2 lines are referred to %K and %D. These are
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plotted on a horizontal axis and the scale of 0-100 in a
vertical axis.
The formula is
%K= ( C - Ln/Hn - Ln ) x 100
C- Closing peroid of current peroid.
Ln- Lowest low of n peroid
Hn- Highest high of n peroid
n- Number of peroids
%D= 100 x ( Hn/Ln) where Hn = c - Ln
Buy Signal When a %K cross above %D, when the reading is below
30%, and both points are point up.
Sell Signal When a %K cross below %D, when the reading is above
70%, and both points are point down.
















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Seasons:

1. What are Seasonal Cycles for Commodities?

Seasons The seasonal cycle refers to the tendency of markets to
move in certain direction in given period of a year.
Most of the commodities for some extent get affected
by seasons. These are only for references.
Copper Uptrend from Jan/Feb and peaks by March/April
Silver Low prices in Jan and high prices on March
Gold Bottoms out in August
Oil Peaks during October and usually stays until winter
































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Gold:

1. Gold and its factors.

Gold historically retains its value due to scarcity and
widely accepted across many countries.
Gold traditionally a physical holding has not
become a tradable commodity.
Gold is considered as currency and sometimes
thought better than cash.
Gold is considered as the only physical financial
asset to keep in hand.
Investors turn to gold to add more stability to
their portfolio.
Central banks across the world tend to buy and hold
gold to add stability to their currency.
Today gold is increasing in popularity.
Few countries want to replace dollar with gold as
international currency.
Factors that
push upwards
Concerns over financial stability.
Dollar (USD) getting weaker.
Geo political unrest.
Countries buying gold.
Physical demand
US printing more dollars (money supply).
Factors that
push
Downward
Profit booking.
Strengthen of Dollar (USD).
Countries selling gold
Disadvantages
No cash flow.
Gold has to be secured from theft.



2. How is gold valued in International market?

Value
Is valued in troy ounces and in US dollar.
A single troy ounce equals 31.1035 grams.



3. What are General assumptions on Gold?

Assumptions
Generally moves in apposite direction of the US
dollar (not always).
is considered as safe heaven commodity during
period of unrest and uncertainty
is considered as hedge for inflation.

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Silver:
1. Silver and its factors.


Silver to also consider as another investment
portfolio which will further increase its
diversification.
In times of uncertainty or crisis, silver often
underperforms due to low industrial demand
while the price of gold often rises due to the fact
that it is used as an insurance asset.

Factors that
push upwards
Silver is strongly driven by industrial demand and
economic growth.

Factors that
push
Downward
Profit taking.
Supply and demand equation.




























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Oil:

1. Oil and its factors.


Oil is one of the world’s basic necessities.
Crude oil is the largest of the global commodity
markets.
Higher oil prices lead to high inflation and
slowing econmocy and vise versa.
Global oil is priced in dollars.










































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Disclaimer:
The above information is only a guide and meant for educational purpose. We would not
be held responsible for any mistakes or action taken from this book.