Professional Documents
Culture Documents
TRAD IN G
GUID E
TRADER'S_SPOT
SRIRAM | ASHWIN
CONTENTS
01
Introduction
Types of trading
25
CONTENTS
what is a Trendline ?
33
About us
65
The End 70
DUCTION
INTRO
Welcome to this eBook, brought to you by Trader's_Spot.
You took this decision to read this ebook because you are
serious about becoming a successful trader. And we
assure you, that's what you will learn in this ebook. Trading
stocks, futures, options and currencies are not actually
complicated anyone can learn this.
01
IN G IS THE
WH Y TR AD S ?
T BU SINE S
F IN ES
There are many things why the trading is finest business in
the world, here are some major top reasons,
No inventory
Instant returns
Minimal time required
No customers
Any one can do it
No employees to hire
Gives you financial freedom
Anyone can easily scale up
Recession free business
02
time needs to master the art of trading to the best of your
ability.
03
IS THE
WHAT RKET ?
STOCK MA
WHAT IS STOCK MARKET ?
The stock market is the place where buying and selling of a
company's stock or share take place.
04
STOCK BROKER - A broker is an intermediary ( person
or a firm) that executes buy and sell orders for investors in
return for a fee or a commission.
05
Once the subscription period is over, the shares are
allotted to the bidders.
Quarterly/annual reports,
Balance sheets,
Income statements,
06
SECONDARY
PRIMARY COMPANY ISSUES SHARES
MARKET
MARKET LIST IPO DISTRIBUTED
TRADING BEGINS
Your broker passes on your buy order for shares to the stock
exchange. The stock exchange searches for a sell order for the
same share.
07
Meanwhile, the stock exchange also confirms the details of the
buyers and the sellers of shares to ensure the parties don’t
default.
Earlier, it used to take weeks to settle stock trades. But now, this
has been brought down to T+2 days.
08
WHA T ARE
STOC KS ?
09
EM AT AN D
W HA T IS D N T ?
IN G A CCO U
TRA D
WHAT IS DEMAT ACCOUNT ?
Demat Account or dematerialised account provides facility of
holding shares and securities in electronic format. During
online trading, shares are bought and held in a Demat account,
thus facilitating easy trade for the users.
10
A trading account links the Demat account and the bank account
of an investor. You can place an order to buy shares through your
trading account.
MONEY TRANSFERS
FROM BANK ACCOUNT
TO TRADING ACCOUNT BUYS\SELLS STOCKS FROM
AND VICEVERSA STOCK MARKET
BANK ACCOUNT
11
A RE STOCK
T
WHA INDICES ?
MARK ET
WHAT ARE STOCK INDICES ?
A stock market index is a statistical measure which shows
changes taking place in the stock market. To create an index, a
few similar kinds of stocks are chosen from amongst the
securities already listed on the exchange and grouped together.
12
The basic difference between Sensex and Nifty is the number of
companies that are grouped as a sample.
50/30 COMPANIES
Both Nifty and Sensex are the Index that helps the stock
marketers determine the overall performance trend of the stock
market.
13
PHARMA
FINANCIAL AUTOMOBILE
SERVICES TELECOM
IT
FERTILIZERS &
2.11%
PESTICIDES
11.24% 0.56%
METALS
ENERGY
CONSTRUCTION SERVICES
CEMENT
CONSUMER
GOODS
14
INTR O TO
O CK CH ART
ST
A chart is a graphical representation of price and volume
movements of a stock over a certain period of time. In the
graphical chart, the X-axis represents the time period and the Y-
axis represents the price movement.
The time period can vary from intra-day to even a few months or
more.
TYPES OF CHARTS
Technical analysts use a variety of charts based on the
information they seek. However, there are three types of charts
that are most commonly used. They are:
LINE CHART
A line chart is probably the most common type of chart. This
chart tracks the closing prices of the stock over a specific
period.
15
While it is considered to be quite simplistic (compared to other
chart types), a line chart helps traders to spot trends in the
price movement. However, since it tracks closing prices, it does
not offer much information regarding intraday price
movements.
CANDLESTICK CHART
Candlestick charts are very popular among technical analysts.
They offer a great deal of information in a very precise manner.
As the name suggests, the price movements for each day are
represented in the shape of a candlestick.
16
In addition, the candlesticks come in different colours based on
the price movements.
17
T OR
MARKE ASES
CHART PH
WHAT IS MARKET CYCLE ?
While asset prices may appear to move randomly up and down,
shows that there are distinct repetitive cycles that occur. These
are predominantly driven by the market moves made by large
institutional investors, and in order to trade successfully,
individual traders should watch these market moves, or market
cycles, closely.
DISTRIBUTION
MARKUP
MARKDOWN
ACCUMULATION
18
emotion than seeing incremental gains, which is what we
expect an investment to do over time.
ACCUMULATION
Accumulation is when investors – thinking that the worst
is over, that markets have “bottomed out” and that
prospects for the economy look good – begin buying
again. Essentially, prices are low and value is high.
MARKUP
Markup or uptrend is the second wave of buying, when
the market is more stable. This stage is easier to identify,
with media and news outlets highlighting the upward
trend and investors putting their money back into the
markets.
DISTRIBUTION
Distribution is the phase at which prices are at their peak.
The “Bull market” that was pushing prices higher slowly
begins to level off, and a relatively equal amount of
buying and selling is seen across the markets.
19
MARKDOWN
Downtrend, sometimes called the “markdown,” is the
final stage – triggered by widespread selling, as investors
try to lock in profits and avoid major financial losses. A
prolonged downtrend phase becomes a “Bear market.”
DISTRIBUTION PHASE
ACCUMULATION PHASE
20
L VS BEAR
BUL KET
MAR
In the investing world, the terms "bull" and "bear" are
frequently used to refer to market conditions. These terms
describe how stock markets are doing in general—that is,
whether they are appreciating or depreciating in value. And as
an investor, the direction of the market is a major force that has
a huge impact on your portfolio. So, it's important to
understand how each of these market conditions may impact
your investments.
BULL MARKET
A bull market is a market that is on the rise and where the
conditions of the economy are generally favorable. A bear
market exists in an economy that is receding and where most
stocks are declining in value.
21
Because the financial markets are greatly influenced by
investors' attitudes, these terms also denote how investors feel
about the market and the ensuing economic trends.
BEAR MARKET
A bear market is one that is in decline. A market is usually not
considered a true "bear" market unless it has fallen 20% or
more from recent highs. In a bear market, share prices are
continuously dropping. This results in a downward trend that
investors believe will continue; this belief, in turn, perpetuates
the downward spiral.
22
During a bear market, the economy slows down and
unemployment rises as companies begin laying off workers.
23
UALLY THE
T ACT
WHA TRADING IS ?
STOC K
Stock trading involves buying and selling stocks frequently in
an attempt to time the market. The goal of stock traders is to
capitalize on short-term market events to sell stocks for a profit,
or buy stocks at a low.
24
S
TYPE G OF
TRA DIN
Primarily, there are five types of share trading. These are –
25
ranging from a dozen to a hundred profits in a single
market day.
26
Traders technically analyse the stocks to gauge the
movement patterns they are following for proper execution
of their investment objectives.
27
DA M ENT AL
FU N
VS YSIS
IC AL A NA L
TEC HN
28
FUNDAMENTAL ANALYSIS
The primary distinction between fundamental and technical
analysis is that the former involves the process of
understanding a stock’s intrinsic or inherent value through the
analysis of various factors. In this regard, analysts study
elements that can make an impact on the security’s integral
value.
29
Furthermore, the method also makes use of several
qualitative and quantitative metrics to determine the well-
being of the company in question. This is another key
difference between fundamental and technical analysis.
TECHNICAL ANALYSIS
While a fundamental analysis of security accounts for an array
of factors, technical analysis solely takes historical data directly
related to the particular stock into account. That is the primary
difference between fundamental analysis and technical
analysis.
30
Furthermore, such analysts base their results on the
assumption that all other fundamentals have already been
factored into the stock’s price, and they remain
unchanged.
31
Also, technical analysis requires experience as well as
knowledge of advanced concepts of stock markets. It is
more suited for traders who are looking for short term
gains, rather than novice investors or individuals who want
to invest in a security based on its long term wealth
creation.
32
WHA T IS A
END LI NE ?
TR
Trendlines are a key part of delving into technical analysis and
trading off of charts. When used correctly, they're a helpful,
clear, and relatively simple tool for traders. Used improperly,
however, trendlines become ineffective and even
counterproductive. Knowing how to use trend lines can be the
difference between winning and losing trades.
BASICS OF TRENDLINE
Trendlines are simply diagonal lines that highlight a trend or
price range. These lines follow the price movement in an
attempt to give traders a general sense of how high or low the
price might go in a given timeframe. When the price rises, the
trendline rises accordingly. When the price falls, the trendline
falls.
33
When prices are rising, connecting the lows with a line results
in an ascending trendline—an "uptrend." A trendline can also
be drawn along the highs of the trend. This shows the angle of
ascent, the strength of the price move, and the relative strength
of the trend.
When the price falls, the highs fall. Connecting these falling
highs results in a descending trendline—a "downtrend." A
trendline can also be drawn along the lows to highlight the
angle of descentand the strength of the downward price
movement.
DOWNTREND
UPTREND
MULTIPLE TRENDLINE
Typically, you would have more than just one trendline in play.
At any given moment you could draw many trendlines, all
showing the price movement over various periods of time.
34
Drawing trendlines whenever possible and on multiple time
frames can aid new traders in spotting the overall trend, small
trends, and corrections within those small trends.
ADJUSTING TRENDLINE
Once drawn, trendlines often need to be adjusted. Prices rarely
move uniformly for a prolonged period. This means that any
acceleration or deceleration of the trend requires adjustments
to the trendline.
35
Keep in mind, adjusting a trendline doesn't mean the trend has
changed. An uptrend is characterized by higher highs and
higher lows, and as long as that keeps happening, it's still an
uptrend. You may find that you adjust your trend lines several
times within a single uptrend.
TRENDLINE AS A GUIDE
while you can use trendlines as a guide, you must use more
precise criteria for determining when to enter or exit a trade.
These criteria could include a certain size move back in the
trending direction, a trigger based on an engulfing pattern
(where the next bar is larger than the previous one, engulfing
it), or another type of indicator that adjusts more precisely and
quickly to changes in volatility.
37
LAGGING INDICATOR - Lagging indicators are
indicators which follow a trend then predicting price
reversals. It follows an event.These indicators work well
when the prices move in long trends.
IMPORTANT INDICATORS
Important indicators used by traders in the stock market
MOVING AVERAGES
VOLUME
INDICATORS
OSCILLATORS
38
MOVING AVERAGES
The price of a stock changes many times each and every single
day. As a result, it can be quite tough to identify a trend by
simply looking at the stock price. Moving average is a very
common indicator used by traders to find out the trend in the
price movement of a stock.
39
VOLUME INDICATORS
Volume is a major consideration when making a trade in a
security. For example, high volume means that there is a lot of
interest in the stock in the market and there could be significant
price movement.
OSCILLATORS
Moving averages help identify trends in the stocks. But what if
the stock is neither trending upwards or downwards?
40
At such times, oscillators are quite useful for technical
analysts. They indicate the momentum in the market or a
particular stock with respect to specific reference points.
41
WHAT IS PRICE ACTION ?
Price action trading is a methodology for financial market
speculation which consists of the analysis of basic price
movement across time. It’s used by many retail traders and
often by institutional traders and hedge fund managers to make
predictions on the future direction of the price of a security or
financial market.
42
There are many different price action strategies you can use,
such as candlesticks and breakouts.
BREAKOUT
43
CANDLESTICK - Candlesticks are graphical
representations on a chart that show the trend, open,
close, high, and low price of an asset.
UPTREND DOWNTREND
44
SUPPORT AND RESISTANCE - Related to all of the
above, traders use price support and price resistance
regions to identify good trading opportunities.
RESISTANCE
SUPPORT
45
Related to all of the above, traders use price support and
price resistance regions to identify good trading
opportunities. Indicators don’t add or take away anything
from the price information you see in your candlesticks –
they just process the information in a different way. This
will become more apparent in the next points.
As you can see, both use past price information and are,
thus, ‘lagging,’ if you want to call it that. To overcome the
lagging component, you would have to set your indicator
to a shorter time setting or only use a handful of past
candlesticks to make your analysis. However, the analysis
becomes less and less significant the fewer information
you include.
46
Price action is simple and better for beginners - Is it?
In trading, it’s rarely true that one thing is better than the
other and it usually comes down to how you use your tool.
It’s like saying that a hammer is better than a screwdriver;
both tools work very well if you understand when and how
to use them, but neither will help you if you don’t know
what to do with it.
48
There is no better or worse when it comes to price action
vs. indicator trading. It all comes down to how the trader
utilizes his trading tools to make trading decisions.
49
WH AT IS
SE LL ING ?
SHORT
Short Selling occurs when an investor sells all the shares that
he does not own at the time of a trade. In short, a trader buys
shares from the owner with the help of brokerage and sells
them at a current market price with the hope that prices will
surge.
When the stock price falls, the seller buys the shares and books
a profit. However, short Selling comes with a high risk to reward
ratio, and traders can either book profit from short Selling or
incur huge losses from it.
50
buy stocks and hope to rise in the future, while short-sellers
measure the price situation and profit from falling prices. There
are two primary reasons why investors would be involved in
short-selling of shares:
In this case, the investor buys the shares and sells them at
a higher price and then when the price falls, the investor
repurchases them at the lower price and returns them to
the lender and books profits due to the price difference.
51
O REWARD
RISK T
RATIO
The risk/reward ratio is used to assess the profit potential
SEBI - Sec
(reward) of a trade relative to its potential loss (risk). Both the
of stock m
risk and reward of a trade are based on lines that the trader
in India wo
sets.
the interes
undue adv
Risk is figured out using a stop-loss order. It is the price
difference between the entry point of the trade and the stop-
loss order. A profit target is used to set an exit point should the
trade move favorably. The potential profit for the trade is the
price difference between the profit target and the entry price.
52
risk and the reward. Both these levels are set by the trader.
If the ratio is great than 1.0, the potential risk is greater than the
potential reward on the trade. If the ratio is less than 1.0, the
potential profit is greater than the potential loss.
54
A reward-to-risk ratio of 1.5 is fairly conservative and
reflective of the opportunities that occur each day in the
stock market.
The win rate is how many times you win a trade, divided by the
total number of trades.2 If a strategy wins 60 out of 100 trades,
then it has a win rate of 60 divided by 100, equaling 60%.
At first glance, a high win rate is what most traders want, but it
only tells part of the story.3 If you have a very high win rate, but
your winners are much smaller than your losing trades, you still
won't be profitable.
55
5 PER CE NT
WHY 9 IL ?
A DE RS FA
TR
95% sounds like a pretty high number and sometimes people
don’t believe it. So here, read this.. the CEO of Zerodha, Nitin
Kamath, has publicly shared that over 1 year, over 99% of the
traders lose money, 0.99!!
So, the question is: What’s going on? Where are these traders
going wrong? How can a beginner avoid making these
mistakes?
So, let me tell you from my experience the top 7 reasons why
most Indian traders fail and what you can do to survive in this
market.
56
Professional traders, on the other hand, use time-tested
strategies that are based on the behaviour of the market
and the market participants; something that gives them an
edge over other traders.
57
What I have realized is that trading should become as
boring and as rule-based as possible so that your
emotions can never take over your rational brain.
58
Communications, Unitech etc, – all the stocks that are
making news for the wrong reason or are penny stocks.
60
A K IN G T HE
BR E AD ING
Y TH S IN TR
M
It is no secret that well-planned investments in the stock market
can greatly contribute to your efforts in wealth creation.
However, traditionally, India has been a country in which people
have approached the share market with caution and much
hesitation. A major reason for this is that there are various
myths and misconceptions about the share market that have
made their way into the public consciousness. These myths
tend to keep potential investors away from the market, thereby
losing out on a great opportunity for their finances.
If you too are considering investing in the stock market but are
held back by one of the many myths about the market, here is a
look at how these myths are actually false:
MYTH #1
Stock Market Investing is Essentially Much Like Gambling:
This myth about the stock market is often spread in the form of
61
well-intentioned but misguided advice. Concerned by a few
stories of loss, people might consider it best to advise you
against the odds of the stock market. However, the comparison
of the stock market to gambling could not be further from the
truth.
MYTH #2
The Stock Market is Exclusively for Experts :
Another myth that concerns several potential investors is that
investing in the share market is a closed game and is reserved
exclusively for a select group of people. However, this is a
complete misconception as anyone can participate in the stock
market and make the most of its benefits for wealth creation.
62
MYTH #3
You Can Only Make Money By Investing A Lot of Money :
A myth that discourages new investors in the share market is
that it is only an ideal investment for the wealthy. This myth
stems from the belief that to make profit, one must have a lot of
financing to survive the various losses along the way. However,
this is entirely misguided.
MYTH #4
High Risk Means High Returns in the Stock Market :
It is true that certain high-risk investments in the stock market
prove favourable to certain traders. However, not all high-risk
investments equal high returns all of the time. If this cause and
effect relationship were true, investors would only be trading in
high-risk investments.
64
ABOUT US
65
MARKET STRUCTURE :
Trend Identification
Trending and Ranging markets
How to take trend based trades ?
PATTERN CHEATSHEET:
Volume profile
Golden fibonacci rule 0.618
Relative strength index
Moving Average(9 ma, 20ma, 50ma)
PROFITABLE STRATEGIES :
RISK MANAGEMENT :
position sizing
Risk/Reward
67
OUR SERVICES :
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and we also update our contents based on market
conditions.
Lifetime access to our Discord server.
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service is for lifetime.
You can clear your doubts through discord private chat or
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68
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WITH US
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69
THE END
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