Stock Market Tips

One doesn’t have to be rich to invest in a share market. Apply caution, patience and learn the basics for accumulating wealth. Use good sense and study market behavior. The first and most important stock market tips is to be wise. Making market is not for those who want to get rich fast. There is plenty of temptation to invest without doing a little homework. It’s possible to make money trading shares, even during bear market; nonetheless it takes good research, basic understanding of group dynamics of share markets and human nature and discipline. One thing to keep in mind about trading stocks is that you don’t have to be right all of the time. Here are some investing ideas for prospective investors.

Volatility is Your Friend

Stock market or Volatile stock is one whose price moves drastically up or down on regular basis. Being volatile doesn’t indicate a stock is moving up or down; however just that it is moving relatively large amounts up or down frequently. And since big moves up or down is what a nimble trader makes money on, volatility is indeed your friend.

Trading Oversold or Overbought Stocks

Trading stocks isn’t rocket science. It’s about taking benefit of stock movement patterns. And while often, it isn’t obvious why stock will move up or down; at times it is largely predictable and quite obvious that a share is about to move in particular direction. Trading oversold or overbought stocks is one such condition. The key is to identify the oversold or overbought stock market and precisely predicting when it will start correct to fair value.

Preventing Big Losses and Protecting your Gains

Consider preventing big losses and protecting your gains by placing trailing stop order 10-50 percent below or above buying price of your positions.

Study, Practice and Learn to Increase Income

Practice by developing watch lists. Internet provides a number of websites where novice investors can enter favorite stocks in a portfolio and watch what happens over a period of time – 6 months is a good period of time, however the longer the better.

Read and listen what experts say, but don’t bet with any single one. Look for consensus. Experts make lots of bad investments. When traders are wealthy, they can take risk more readily as compared to average traders.

Know the fundamentals of stock being considered. Read about a firm and study its history as an investment. Use Internet for the most recent research. Learn the most fundamental terms which investors use for evaluating stocks including EPS, PE, beta and more.

Keep up with the portfolio. Set aside some time regularly to read about factors which might affect the market in portfolio and general stocks specifically.

Traders pay commissions to purchase and sell a stock. In general, online firms will provide stocks at lower commissions unlike stock brokers. Commissions which are fixed regardless of the size of purchase are preferable. Still, don’t purchase such small amount of stock that the commission is large percentage of investment.

Most people want to get into stock market. There is money to be made; nonetheless it takes a little awareness and knowledge of market behavior and risks. Traders should know about terminology and particularly about shares they plan to purchase. Don’t speculate and develop a strategy which works.

Hedging And Its Use For Mitigating Risk

Hedging is often considered an advanced investing strategy, but the principles of hedging are fairly simple. With the accompanying criticism and popularity of hedge funds, the practice of hedging is becoming more widespread.

A hedge is an investment position intended to counterbalance potential gains/losses, which might be incurred by a companion investment. In simple terms, hedging is used for reducing any substantial gains/losses suffered by an organization or an individual. It can be constructed from different kinds of financial instruments such as stocks, options, exchange traded funds, swaps, forward contracts, insurance and many kinds of futures contracts and derivative and over-the-counter products. Public futures contracts were founded in 19^th century to enable efficient, standardized and transparent hedging of agro commodity prices; since then they have expanded to include futures contracts to hedge values of interest rate fluctuations, energy, foreign currency and precious metals.

Hedging is basically a practice of taking position in one market to balance and offset against the risk adopted by assuming a position in contrary or opposing investment or market. Hedging is often considered to be a sophisticated investing strategy; however the principles of hedging are fairly simple. With accompanying criticism and popularity of hedge funds, the hedging practice is becoming more widespread. In spite of this, it isn’t yet widely understood. Hedging basically means controlling or reducing risk and this is done by taking position in futures market, which is opposite to one in cash market (physical market) with the aim of limiting or reducing risks associated with price changes.

Hedging is 2-step process. A loss or gain in physical position because of price level changes will be countered by changes in futures position value. For example, the rice grower can market rice futures for protecting the value of his crop before investing. If the price of the rice falls, the loss in physical market position will be countered by gain in futures position. In this kind of transaction, the hedger tries to fix the price at a certain level with the aim of ensuring certainty in the revenue of sale and cost of production. Futures market has substantial participation by speculators who take positions based on price movement. There are also arbitrageurs who use this market for pocketing profits, whenever there are inefficiencies in the prices.

Example – Automotive Industry

An automobile manufacturing company buys huge quantities of steel as raw material for the production of vehicles. It enters into contractual agreement for exporting automobiles 3 months, therefore to dealers in East European Market. This assumes that contractual obligation has been fixed at the time of signing contractual agreement for exports. The automobile manufacturing company is now exposed to risk in the form of rising steel prices. In order to hedge against price risk, the automaker can purchase steel futures contracts that would mature 3 months. In case of decreasing and increasing steel prices, the automaker is protected.

Understanding the meaning of long/buying hedge

A long hedge is also known as buying hedge. Long hedge means purchasing futures contract for hedging cash position. Fabricators, consumers, dealers etc who have taken or planning to take exposure in cash market and want to lock-in prices, use the long hedge strategy.

Advantages of Long Hedge Strategy:

To protect uncovered forward sale of finished products

To replace inventory at lower prevailing cost

The aim of entering into long hedge is to protect the purchaser against price increase of commodity in spot market, which has already been marketed at specific price; however not yet purchased. It’s quite common amongst importers and exporters for selling commodities at an agreed price for forward delivery. Long hedgers are processors and traders who have made formal commitments for delivering a specified quantity of processed goods or raw material at price agreed upon, who don’t have raw material stocks essential for fulfilling their forward commitment and at later date.

Understanding the meaning of short/selling hedge

Short hedge is also known as selling hedge. Short hedge means selling futures contract to hedge.

Advantages of Short Hedge Strategy:

To protect inventory not covered by forward sales

To cover finished products price

To cover prices of estimated production of finished products

Selling hedgers are processors and merchants who simultaneously market an equivalent amount or less in futures market and who need inventories of commodity in spot market. In this case, hedgers are said to be short in their futures transactions and long in spot transactions.

Understanding the basis

Typically, in the business of purchasing and selling a commodity, the spot price is different from the price quoted in futures market. Futures price is a spot price adjusted for costs including handling, freight, quality and storage, together with impact of demand and supply factors. The price difference between futures and spot keeps on changing frequently. This price difference is called the basis and risk arising out of the difference is called basis risk. A condition in which the difference between futures and spot prices reduces is called narrowing of basis. Nonetheless, if the difference between futures and spot prices increases, it’s defined as widening of basis.

How Do Investors Hedge?

Generally, hedging techniques involve the use of complex financial instruments called derivatives, the 2 most common of which are futures and options. We are not going to get into fundamentals of explaining how these instruments work, but for now just remember that with these instruments you can develop trading plans where a loss in one investment is offset by gain in derivative.

Stock Market Profits Calls & Tips

BTST/STBT TIPS 20TH MAR 2013 AMBUJA CEMENT FUT CMP–177.7 TAKE FULL PROFTIS ON OUR STBT CALL GIVEN AT 179.55 LEVELS.

EQUITY FUTURE TRADING TIPS 20TH MAR 2013 IFCI CMP–27.65 TAKE FUT PROFITS ON OUR SHORT CALL GIVEN AT 28 LEVELS.

EQUITY FUTURE TRADING TIPS 20TH MAR 2013 AMBUJA CEMENT FUT CMP–178.1 TAKE FULL PROFITS ON OUR SHORT CALL GIVEN AT 180.5 LEVELS. BPP DONE AT 178.2 LEVELS.

EQUITY FUTURE TRADING TIPS 20TH MAR 2013 MC DOWELL CMP–1905.25 TRAKE FULL PROFITS ON OUR SHORT CALL GIVEN AT 1943 LEVELS, BPP DONE AT 1922 LEVELS

EQUITY FUTURE TRADING TIPS 20TH MAR 2013 LUPIN FUT CMP–629.75 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 619 LEVELS, BPP DONE AT 626.6 LEVELS

ACE EQUITY TIPS 20TH MAR 2013 SBIN FUT CMP–2169 TAKE FULL PROFITS ON OUR SHORT CALL GIVEN AT 2195 LEVELS, CURRENT PROFIT OF RS 13000/- CALL IS CHARGEABLE.

ACE EQUITY TIPS 20TH MAR 2013  ITC FUT CMP–309.3 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 307 LEVELS, CURRENT PROFIT OF RS 9200/- CALL IS CHARGEABLE.

ACE EQUITY TIPS 20TH MAR 2013 REL CAP 340 CALL CMP–11.35 TAKE FULL PROFITS ON OUR SHORT CALL GIVEN AT 14.65 LEVELS, CURRENT PROFIT OF RS 6600/- CALL IS NOT CHARGEABLE.

 STOCK OPTIONS TIPS 20TH MAR 2013 SAIL 65 CALL CMP–3.40 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 2.25 LEVELS

STOCK OPTIONS TIPS 20TH MAR 2013 REL CAP 340 CALL CMP–11.2 TAKE FULL PROFITS ON OUR SHORT CALL GIVEN AT 15 LEVELS.

STOCK OPTIONS TIPS 20TH MAR 2013  ITC 340 CALL CMP–9.5 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 8 LEVELS.

Stock Market Tips

BTST/STBT TIPS 11^TH MAR 2013 FED BANK FUT CMP–500.85 TAKE FULL PROFITS ON OUR BTST CALL GIVEN AT 496.75 LEVELS.

EQUITY FUTURE TRADING TIPS 11^TH MAR 2013 GAIL FUT CMP 344.25 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 339.85 LEVELS.

EQUITY FUTURE TRADING TIPS 11^TH MAR 2013 CENT TEXT FUT CMP 335.4 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 331.1 LEVELS.

ACE EQUITY TIPS 11^TH MAR 2013 COAL INDIA 320 CALL CMP 6.35 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 3.9 LEVELS, CURRENT PROFIT OF RS 7350/- CALL IS NOT CHARGEABLE.

ACE EQUITY TIPS 11^TH MAR 2013  FED BANK FUT CMP 502.10 TAKE FULL PROFITS ON OUR LONG CALL GIVEN AT 498.50 LEVELS, CURRENT PROFIT OF RS 3600/- CALL IS NOT CHARGEABLE

 STOCK OPTIONS TIPS 11^TH MAR 2013 HINDUNILVR 440 PUT SMP 7.30 TAKE FULL PROFITS ON OUR SHORT CALL GIVEN AT 9.2 LEVELS

ACE MCX BASE METALS TIPS 11^TH MAR 2013  ZINC CMP 106.05 TAKE FULL PROFITS ON OUR SHORT CALL GIVEN AT 106.8 LEVELS, CURRENT PROFIT OF RS 7500/- CALL IS CHARGEABLE.

Nifty likely to scale new highs on strong fund flows

Betting in the options market indicates that the broader S&P CNX Nifty is poised to scale new highs soon, as global fund flows accelerate to get higher returns.

Maximum open interest in Call options has been in 6500 Calls, which has added more than 7.2 million units, also suggests that it could be a resistance level. The Nifty’s all-time high was 6357.10 on January 8, 2008.

“We expect the Nifty to trade in the range of 6200-6450 in the short term, with futures maintaining a premium of 15-20 points consistently ,” said Manoj Murlidharan, AVP-derivatives , IIFL PReMIA.

Trading has been in the range of the 6,000-6200 level and may move up even as those sceptical of sharp gains raise their bets. Over 4.5 million units in open interest were built in the past one week at 6300 Put options. This is despite options concentration in Puts continues to be highest at 6000 levels, adding around 7.3 million units in open interest.

“On Tuesday, 6300 Put options added more than 1.59 million units in open interest, which is reasonable enough to suggest that the trading range is expected to move higher ,” said Shshank Mehta, derivatives strategist, Nirmal Bang. If the Nifty manages to breach 6325 on the upside, 6300 will act as a very strong support zone, he said.

Foreign institutional investors have been buying options-based hedging in at-the-money Puts (equal to current market price) to prevent losses in their physical holdings of Nifty constituents.

Analysts say that this strategy is expected to give handsome returns to institutional investors as the delta of 6300 Put is currently around 0.7. This indicates that for every 100-point fall in the Nifty, the premium of the options will increase by 70 points.

Implied volatilities are expected to decline in the absence of any major significant development. The India–VIX , a traders measure of immediate volatility, closed at 18.75%, down 4.39% from a day earlier. It has been moving in lower end of the range at 19-23 .

Get an idea about today’s SENSEX and NIFTY

Everyone wants to know about markets and most of us are so curious that we want to know the road ahead for the markets before investing our money into it. So here is a brief report about the road ahead for the SENSEX and the NIFTY.

SENSEX:

The SENSEX has witnessed a minor pullback during yesterday’s session. We believe that any dips towards the 20700 levels should be viewed as a good buying opportunity. Sustenance above the 20700 levels or above its near term EMA will see the index heading towards the 21200 levels. We expect the SENSEX to trade broadly in a range of 20700—21200 levels. A break below this level will trigger a pullback to the 20500 levels.

The IT, Consumer durables and Banking indices closed the session with cuts of over 1%. The Health care index closed the session with a gain of 0.65%.

We had recommended buying Prism Cement at `59.50 to the subscribers of our product Delivery calls section. The stock saw a smart rally during yesterday’s session of trade to register a high of `64.40. We   booked part profits at `64 levels, generating a handsome return of 7.5% to our clients.  We are still bullish on Prism and holding our positions for the target of `69/70 levels.

Today’s supports for the SENSEX are placed at the 20750 and 20600 levels whereas resistances are placed at the 21000 and 21200 levels.

NIFTY:

The NIFTY has witnessed a minor pullback during yesterday’s session. We believe that any dips towards the 6230–6200 levels should be viewed as a good buying opportunity. Sustenance above the 6200 levels or above its near term EMA will see the index heading towards the 6350 levels. We expect the NIFTY to trade broadly in a range of 6250—6350 levels. A break below this level will trigger a pullback to the 6150–6180 levels.

We had recommended buying Pun Lloyd to our clients in our product Equity Intraday stock calls section at `128.10 levels. We booked full profits at `130.40 levels fetching a profit of `4600/- per lot to our subscribers of the above product.

We recommend subscribing to our Product Equity Intraday stock Calls section to avail more profitable trading calls.

Today’s supports for the NIFTY are placed at the 6200 and 6230 levels whereas resistances are placed at the 6350 and 6375 levels.

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