3/6/2020 Basics of Share Market

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Share Market Basics

What is Stock Exchange ?

This is a share market in which securities (Shares and F&O) can be traded (bought or sold). There are four major stock exchanges in India for share market

National Stock Exchange (NSE) and

Bombay Stock Exchange (BSE)- Shares and F&O of companies can be traded here for share market.

Multi Commodity Exchange (MCX) – Future Contracts of Metal (Aluminum, Copper, Lead, Nickel, Zinc), Bullion (Gold and Silver), Agro Commodities (Carda
i.e. CPO, Kapas, Mentha Oil) and Energy Commodities (Brent Crude Oil, Crude Oil and Natural Gas) can be traded here. I trade mainly in this Stock Excha

National Commodity and Derivative Exchange (NCDEX) – Futures Contracts of Agriculture Products, Metals, Energy and Precious Metals can be traded he

Websites of these Stock Exchanges are as per the following :-

NSE – www.nseindia.com

BSE – www.bseindia.com

MCX – www.mcxindia.com

NCDEX – www.ncdex.com

What are World Share Market Timing in Indian Time (Indian Standard Time)

European share market

Index Country Opening Time (IST) Closing Time (IST)

FTSE 100 (Footsie) England 01:30 pm 10:00 pm
CAC 40 France 01:30 pm 10:00 pm
DAX Germany 01:30 pm 10:00 pm

American share market

Index Country Opening Time (IST) Closing Time (IST)

(1) Dow Jones Industrial

USA 08:00 pm 02:30 am
Average and (2) Nasdaq

Asian share market

Index Country Opening Time (IST) Closing Time (IST)

Australia 200 Australia 04:00 am 10:30 am
Shanghai Composite
China 07:00 am 12:30 pm
Index
Hang Seng Hong Kong 07:00 am 1:30 pm
Nikkei Japan 05:30 am, 09:00 am 7:30 am, 11:30 am

Countries and Commodities

On the basis of this information, we can know that news from which country is important for which commodity

1. Sl. No. 1. Commodity 1. Top Reserves 1.

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1 Aluminium Africa, Oceana(USA), Latin America China, Russia, Canad

2 Copper Africa, Oceana(USA), Latin America Chili, China, Peru
3 Lead Australia, China, Russia China, Australia, USD
4 Nickel Australia, New Caledonia (France), Brazil Philippines, Russia, C
5 Zinc Australia, China, Peru China, Peru, Australia
6 Gold Australia, Russia, South Africa China, Australia, Russ
7 Silver Peru, Australia, Poland Mexico, China, Peru
8 Crude oil Venezuela, Saudi Arabia, Canada Saudi Arabia, USA, R
9 Natural gas Russia, Iran, Qatar USA, Russia, Iran

Who is Stock Broker ?

In stock exchanges (share market) we cannot trade directly but through Broker only. Stock Broker is middleman between Traders and Stock Exchanges.

What is Brokerage Charges ?

Stock Broker charges some amount of money when we trade in stock market through then. This amount differs Broker to Broker. Some of the brokers are –

What is DEMAT Account ?

Shares and Securities are held electronically in DEMAT account, instead of the investor taking physical possession of certificates. Stock Brokers open DEM
using DEMAT account we are required to transfer the money into trading account. By using this money orders to sell or buy shares/securities can be p
account is linked with bank account of the investor and amount of money between these accounts can be transferred very easily.

When can we trade in MCX Trading Timings?

We can trade in MCX only on working days and working hours of MCX. MCX remains closed on Saturday and Sunday. Working hours of MCX are 10:00 am
days MCX opens only in evening sessions i.e. 5:00 pm to 11:30/11:50 pm.

What is Square Off ?

It means selling if you have bought or buying if you have sold a MCX Commodity Future Contract. It is called exiting from a running trade.

Why do we Square Off ?

If we want to book profit or loss, then we have to square off our position. We can square of our position partially also. Let�s say an investor having 5 Lots
square off 1,2,3,4 or 5 Lots at a time. Partial square off is done to book profit or loss partially. On expiry date square off will happen automatically.

Long Trade and Short Trade (or Short Selling)

When a trader buys something, it is called Long Trade and when a trader sell something without buying it, then it is called Short Trade (or Short Selling).

Stop Loss Order

Stop Loss Order is a buy or sell order, which is placed to limit the loss. It is placed in opposite direction of our position. If a trader is having long trade then
trader is having short trade then buy order will be placed. This order is placed at a trigger price. As the spot price become equal to this trigger price, Stop L
trader will be out from his position. Let us say spot price of a commodity is ? 100 and we are planning to take risk of 5% then there will be two cases, in firs
trade then he will place a Stop Loss Order at ? 95 and in second case say trader is having short trade then he will place a Stop Loss Order at 105. The
called trigger prices.

What is a �Lot� ?

Lot is a bunch of some quantity of a commodity. Let us take example; mega contract of MCX Aluminum contains 5000kg quantity. This 5000 kg quantity is
for this Aluminum Future Contract. In this �kg� is called Base Value for this Future Contract. The price of commodity we see in market is for this Base
price of Aluminum ? 105, it means this is the price of 1kg (i.e. Base Value) quantity of Aluminum. If trader wants to trade commodity then he can only tra
4500kg of Aluminium in Stock Market; we have to trade in multiples of Lot Size only. There are different Lot Size and Base Values for different Commodity
Lot Size and Base Value of Commodity Future Contracts you can follow the link.

Is there commodity of only single Lot Size ?

No, there are generally two types of Future Contracts for each commodity according to the Lot Size, Mini and Mega Future Contracts. Like for Aluminium M
of 1000 kg. To know the Lot Size of Mini and Mega Future Contracts you can follow the link.

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Is there Future Contracts with only single expiry date ?

No, there are generally four types of Future Contracts for each commodity. Like if we see on 1st October 2016, there will be four Future Contracts with Oct
Jan 2017 expiry dates. The Future Contract of closest expiry date has more volatility (i.e. more buyers and sellers at a time). I trade closest expiry da
execute fast.

What is NRML ?

NRML means Normal. It is a type of a product of Commodity Future Contracts. If we trade this product then our trades or positions will be carrying forwa
expiry date of the contract. We can square it off before expiry date at any time.

What is MIS ?

MIS means Margin Intraday Square off, it is a type of product of Commodity Future Contracts. If we trade this product then our trades or positions shall be
us or it will be automatically squared off by the Exchange. It means trades of these products cannot be carry forwarded to the next day.

Advantages and disadvantages of less margin requirements ?

Let us say a trader is having ? 3 lakh in his Trading Account and he decides to buy Crude Oil at ? 3009. With this amount of money he can buy 13 Lots (am
required =300000/22778=13 Lots). The value of these 13 lots is ? 39, 00,000(approx.). Now, assume after some days price of Crude Oil increase by 10%.
39, 00, 00 i.e. ? 3, 90,000. It means by this he gets profit of 130% on his investment. This is the magic of paying only margin amount.

If the price falls by 10%, then he will suffer with loss of ? 3, 90,000. This is the disadvantage i.e. this is very risky.

How do I avoid this risk ?

I avoid risk by taking more accurate trades and limiting my position size. My Unique Trading System (UTS) generates less trading signals but more accurate
to calculate permitted maximum number of Lots can be traded. This is developed on the basis of some factors of commodities price fluctuations. In my
enter only the amount I want to invest. To see the calculator you can follow the link.

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