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Things To Remember Before Entering Stock Market
Things To Remember Before Entering Stock Market
Market
Terms Used
Long – buy
Short – Sell
Bulls – buyers
Bears – Sellers
Bullish – Market up (Uptrend)
Bearish – Market Down (Downtrend)
Risk to Reward Ratio: eg 1:3
Candlestick
Red Candle – Bearish Candlestick (Price open at high and
closed up to low)
Green candle – Bullish Candlestick ( Price open at lower
and closed up to high)
Bullish Candlestick
Bearish Candlestick
In Downtrend Situation – when you get signal that
downward trend is weak --- if happens at support level
---- wait for reversal candlestick. ---Your Entry point.
In Uptrend Situation – when you get signal that up
trend is weak --- if happens at resistance level ---- wait
for reversal candlestick. ---Your Entry point.
Types of Trends
Uptrend
- Price Make Higher High (HH) and Higher Low (HL)
Downtrend
- Price make Lower High (LH) and Lower Low. (LL)
1.
2.
Price Channel
For eg. …
Practice Work 1.
- Bullish Pattern
Stop Loss – Same as Symmetrical Triangle
Target –
1:2:3 times the distance.
- Bullish Pattern
- Opposite of Head and Shoulder Pattern
Practice Work 3:
Find 5 Head and Shoulder Pattern and 5 Inverted Head
and Shoulder Pattern
Mention Entry, Stop Loss, Target Point.
Double Bottom Chart Pattern
Triple Bottom
Practice Work 4:
- Find 5 patterns of double top and double bottom.
- Find 1 patterns of triple top and triple bottom.
Candle Stick Pattern
Doji Candlestick
- Bullish Pattern
- Focus On Cup And Handle
- Cup on U Shape And Handle in V Shape
Practice Work – 8
Benefits
- Perfect Entry
- Reduce StopLoss
- Better Risk Reward Ratio
- Pattern Breakout
- Support And Resistance
- CandleStick Pattern
Nothing Else !
TIME FRAME SELECTION FOR INTRADAY AND
POSITIONAL
10600
10500
Nifty @ 10450 --- 100
10300
Strike Price:
Premium: - Instrinic Value (Basic Value) + Time Period
OPTION:-
MOVEMENT
- Budget
- Result
- Buy Back
- Elections
- Big News
FUNDAMENTAL / LONG TERM INVESTMENT
MAIN POINTS
- COMPANY MANAGEMENT
- GROWTH
- QUALITY OF BUSINESS.
Step 1. Find intrinsic value of stock.
Step 2. Find undervalued stock.
Step 3. Check P/E Ratio.
Price to Earning Ratio.
PE = Price of the Stock / Earning per share
Earning per share = Net Income/Total number of Shares
Step 4. Find Growth Rate of Company
- Balance Sheet of Company
- Profit And Loss Statement
- Quarterly Results
Step 5. Use Technical Analysis to perfect entry in stock.
STOCK SELECTION
- Active by Value
- Top Gainer/ Loser
- Volume High
- Open Interest
- Favourite Stock
- Sector Wise Selection
- Moving Avg
- 52 Week / 52 Low
- Breakout
Hedging and Trading Equity using Option Data:-
- What it means?
120 of stock xyz is now acting as a ‘resistance’.
- Similar open interest was seen in PUT option, then what
is means?
- The price is going to stay above 120 because seller is
PUT is confident that price will not fall below 120 and
that they are in Profit.
- Price of 120 is now acting as a ‘support’.
Because this is the beginning of the month, and there are days
left to expiry, the only value you are
seeing is the "Time value."
However, the third PUT option, i.e 250, has both profit and
time value in it.
LOT size is 100, so you'd need only Rs 5500 to buy one lot.
This is the maximum you'll lose, because
you are a buyer, isn't it?
Assuming its trading at 150, how much did you make or lose?
But wait, its not that simple. You also need to subtract your
investment from the profit you made in the
PUT option. Your total investment was 5500 ( 55 rupees x
100 shares )
Cause if you select a strike which is very far away, then that
option won't give you any profit, plus you made a loss in
equity. This doubles your loss instead of cancelling it.
Your loss would have been more than your profit, thus
resulting in a total loss.
And then hedge using your math skills to calculate your profit
and loss at different STRIKE prices.
With a lot size of 100, you need only Rs200 to take a position
here. But would that do any good to you?
What will happen to this PUT at expiry?
This is the reason why you need to study charts. To figure out
the levels of support and resistance.
You already know that if you sell an option, you can make
unlimited loss. However, if the option is covered, meaning
you actually hold the equity, then the loss can be reduced to a
negligible point.
As a buyer of a CALL you are making a loss, but you are the
seller here.
You made a 2 rupee loss in the CALL you sold, but you made
a profit of 5 rupees in the equity.
If the stock would have moved up like we first saw, then this
last PUT option will become zero, isn't it?
Coming back to our question. What if the price fell? Say for
example, at expiry the price was 80 rupees?
You can hold equity for as long as you want, isn't it?
And if you do not sell the equity, then this is what balance
sheet looks like
Calculate for both the cases i.e when stock closed at 92, and
when it closed at 80
Stock closed at 92
1. Sell CALL = 2 rupees loss
2. Profit in equity = 3 rupees
3. Premium lost in PUT = 3 rupees loss
Just because you selected the wrong STRIKE price to buy the
PUT. Instead of making a profit of 3 rupees
per share, you instead made a loss of 2 rupees per share...
Whenever you are buying options, spend only what you are
ready to lose. Do not lose your capital in greed.
REMEMBER THAT POINT
CRUDE INCREASE
SECTOR TO FOCUS
- OFFSHORE COMPANY
- OIL PRODUCER COMPANY
- DRILLING PIPES
- DOLLAR INCREASE