COGITO ERGO SUM

:: Lipika's ( Stop And Reverse )::
NIFTY(S.A.R.) & BANKNIFTY(S.A.R)

Saturday, August 11, 2007

Daytrading Techniques


Techniques

There are six common basic strategies by which day traders attempt to make a profit: Trend following, playing news events, range trading, scalping, technical trading, and covering spreads.

1. Trend following

Trend following, a strategy used in all trading time frames, assumes that stocks which have been rising steadily will continue to rise, and vice versa. The trend follower buys a stock which has been rising, or short-sells a falling stock, in the expectation that the trend will continue.

2. Playing News

Playing news is primarily the realm of the day trader. The basic strategy is to buy a stock which has just announced good news, or short-sell on bad news. Such events provide enormous volatility in a stock and therefore the greatest chance for quick profits (or losses).

3. Range Trading

A range trader watches a stock that has been rising off a support price and falling off a resistance price. That is, every time the stock hits a high, it falls back to the low, and vice versa. Such a stock is said to be "trading in a range". The range trader therefore buys the stock at or near the low price, and sells (and possibly short sells) at the high.

4. Scalping

Scalping originally referred to spread trading. Today it has come to mean any extremely quick trade for a small profit.

5. Technical analysis

A method of evaluating securities, stocks, bonds, forex, futures, options, indexes, currencies and commodities. or any item that has a price and a market by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts to identify patterns that can suggest future activity.

Technical analysts believe that the historical performance of stocks and markets are indications of future performance.

In a shopping mall, a fundamental analyst would go to each store, study the product that was being sold, and then decide whether to buy it or not. By contrast, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, his or her decision would be based on the patterns or activity of people going into each store.
  • Introduction
The methods used to analyze and predict the performance of a company's stock fall into two broad categories: fundamental and technical analysis. Those who use technical analysis look for peaks, bottoms, trends, patterns and other factors affecting a stocks,bonds, forex, futures, options, indexes, currencies and commodities price movement and then make buy/sell decisions based on those factors. It is a technique many people attempt, but few are truly successful at it.

The world of technical analysis is huge today. There are literally hundreds of different patterns and indicators that investors and traders claim to have success with. There are various technical analysis tools available to
investors.
  • Technical Analysis - What Is Technical Analysis?
Technical analysis is a method of evaluating the markets value by analyzing statistics generated by market activity, past prices and volume. Technical analysts do not attempt to measure a vehicle's intrinsic value; instead they look at charts for patterns and indicators that will determine future performance.

Technical analysis has become increasingly popular over the past several years, as more and more people believe that the historical performance is a strong indication of future performance. The use of past performance should come as no surprise. People using fundamental analysis have always looked at the past performance of companies by comparing fiscal data from previous quarters and years to determine future growth. The difference lies in the technical analyst's belief that securities move according to very predictable trends and patterns. These trends continue until something happens to change the trend, and until this change occurs, price levels are predictable.

There are many instances of investors successfully trading a security using only their knowledge of the security's chart, without even understanding what the company does. However, although technical analysis is a terrific tool, most agree it is much more effective when used in combination with proper money management.

Technical analysis or formula traders use mathematical formulae to decide when a stock is going to rise or fall. Most traders use technical indicators, although more experienced traders tend to use fewer of them. (In fact, some very long-time veterans do not even use charts, but buy and sell just from "reading the tape", that is, watching the bid, ask, trade, and volume numbers from a Level II screen.)

6. Covering Spreads

Playing the spread involves buying at the Bid price and selling at the Ask price. The numerical difference between these two prices is known as the spread. The bigger the spread, the more inefficient the market for that particular stock, and the more potential for profit. This spread is the mechanism that some large firms use to make most of their money (as opposed to trade commissions) since the advent of online discount brokerages.

To make the spread means to simply buy at the Bid price and sell at the Ask price. This procedure allows for profit even when the bid and ask don't move at all.

About 75% of all trades are to the upside -- that is, the trader buys an issue hoping its price will rise -- because of the stock market's historical tendency to rise and because there are no technical limitations on it. About 25% of equity trades, however, are short sales. The trader borrows stock from his broker and sells the borrowed stock, hoping that the price will fall and he will be able to purchase the shares at a lower price. There are several technical problems with short sales: the broker may not have shares to lend in a specific issue, some short sales can only be made if the stock price or bid has just risen (known as an "uptick"), and the broker can call for return of its shares at any time.

When the typical online investor places a market order to buy a stock, his broker submits this order to a market maker (MM), who then fulfills the order at the Ask price. In other words, the Ask price is the price the MM is asking for the stock. When the typical online investor places a market order to sell a stock, the broker submits the order to a MM and sells at the Bid price, i.e. what the MM is bidding for the stock.

Due to the liquidity of the modern market, orders are constantly flowing. Many times, a MM will buy a stock just to turn around and sell it to a particular broker. In fact, one of the primary purposes of the MM is to maintain liquidity in the market (among other things). Through this transaction, the MM will profit anywhere from a few cents to a whole dollar per share, in average circumstances. Over the course of a single day, a MM may fill orders for hundreds of thousands or millions of shares.

intresting sites of indian stock market

live Indian stock market news of trusted sites:

http://www.thehindubusinessline.com/iw/index.htm
http://www.capitalmarket.com/
http://www.financialexpress.com/listing.php
http://moneycontrol.com/
http://myiris.com/
http://news.google.com/news?ned=us&topic=b
http://www.livemint.com/TodaysPaper.aspx?type=c
http://www.domain-b.com/index.htm


www.indianstocknews.blogspot.com
http://brokersreport.blogspot.com/



http://www.indiabears.com/5dynamites.aspx
http://poweryourtrade.moneycontrol.com/plus/login
http://deadpresident.blogspot.com/
http://sagecapital.wordpress.com/
http://www.marketkraft.com/
http://short-term-calls.blogspot.com/


http://www.moneytree.org.in/
http://www.valuestockplus.net/

http://indiaearnings.moneycontrol.com/


http://content.icicidirect.com/market/market.asp
http://www.jigga.eu/search/bulk-deals-in-indian-stock-market



Intraday tips

http://indian-share-tips.blogspot.com/
http://www.sharegyan.com/
http://indian-share-tips.blogspot.com/
http://stocktips.in/
http://investinshare.com/
http://teamintraday.blogspot.com/

Subprime?

What is Subprime?
In the US subprime Lending is primarily advanced to cusomter who typically have low credit scores and histories of payment defaults or bankruptcies. According to S&P subprime originations totaled $421 billion in 2006. Due to a big plunge in the housing market from the last 18 months subprime lenders felt the heat as most of the customers failed to meet the payments ending in foreclosures.

How is subprime connected to Financial Companies,Hedge Funds and Investment Bankers?
Majority of the Top notch Investment Bankers, Hedge funds and Financial Companies in the US, Austrailia, Europe and even Chinese Banks(unconfirmed reports say Bank of China might take the hit) as part of their diversification strategies invest in subprime mortgage based companies either directly or indirectly. The extent of investments are completely left to the individual companies. The downturn has indeed affected every one in the industry. While the biggies are likely to absorb the hit the small and medium sized companies with greater exposure to subprime are likely to collapse.

How does this impact India/Indian Stock Markets?
Luckily Indian Companies/Banks have almost no exposure to the subprime market except for a few IT companies like IGate Global and Tavant(unlisted) having clients in the sector. The only major direct impact we foresee is the FII sell off. India is a hot destination and considered safest among the emerging markets by the FII's. It would be a last resort on the behalf of an FII to sell his holdings in the emerging markets. Recently we mentioned that BSMA might sell some of its holdings and we proved right. The fund slowly started liquidating few positions atleast. Luckily the selling is absorbed with out any pain by other major funds. The extent of the subprime trouble is a mystery. Majority believe this as a disaster but how far is definitely not any body's guess. We believe though Indian Markets will not take a direct hit the credit tightening in the US will lead to a decent sized correction in our markets giving just an awesome oppurtunity for the investors to re-enter. Crude in the coming days will supplement subprime keeping the bulls at bay. We do not see the subprime fading away from the picture till the end of the year so do the bears in the Indian Markets.

Which India based big FII's has exposure to subprime
Goldman Sachs, Bear Stearns(a potential victim or a buy out might happen), Morgan Stanely, Merryl Lynch,Citigroup, BNP Paribas. Of these funds we are only skeptical on Bear Stearns while others are likely to absorb any kind of hit.

Sunday, August 5, 2007

volotile trading ?

Some stability appears on the horizon with most global markets posting gains overnight and Asian markets too holding their ground. The bulls failed to hold on to their gains on Thursday amid continuing worries about the impact of global meltdown on the local market. The rally also lacked conviction due to the lower traded volumes. This probably implies that it was more of a short covering than fresh buying. The market breadth was also marginally positive. It would be wise to wait for the current weak phase to pass before taking a fresh call. Avoid fresh long positions.

The outlook for today is positive at open, but avoid fresh buying unless you are taking position for the long term. Defensive stocks like HLL and potential doublers like RPL could be accumulated for the long haul.

Though, the subprime woes in the US and trouble in the credit markets are unlikely to have a direct bearing on India, indirectly, it may affect foreign inflows. So, the writing is on the wall: Keep a close watch on the trend in FII inflows. A sharp reversal in fund flows to emerging markets could lead to a fresh carnage worldwide. Though India is insulated due to its local-centric economy, the growing integration with the global markets will ensure some pain in the short term.

Players with weak hearts and equally weak portfolio should be careful while long-term investors should cash in on the opportunity. Give yourself a much needed break after a rollercoaster ride. In fact, the movie 'Cash' opens in theaters today. It is a story of a bunch of thieves who pull off a daring heist involving priceless diamonds. As investors, take your time identifying priceless stocks you could add to your portfolio. Avoid the 'daring' part for the time being.

Car makers like Maruti, Tata Motors and M&M may come under some pressure amid reports that the Urban Development Ministry has sought a special tax on four-wheelers, citing lack of adequate infrastructure. Deccan Aviation will also be in action as SEBI has sought details on funding from the UB Group. Petronet LNG is also likely to be in focus as the company will move the Supreme Court to vacate the stay given by the Ahmedabad High Court restraining it from adopting a new pricing formula. TV18 could also gain amid reports that it proposes to buy 50% in MTV Networks India for Rs2bn.

lipika