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FAQ's on Stock Market - Part 1

IndianMoney.com Research Team | Posted On Wednesday, April 08,2009, 06:29 PM

FAQ's on Stock Market - Part 1

 

 

1.  I've heard timing systems sound great, but performance figures are based on theoretical models that are tuned to historical data. In reality, they switch too often. And they have to be right twice: getting out of the market and getting back in. And they don't beat buy and hold. Right?
 
Yes, many timing systems are guilty on all counts. Past data are used because it gives us a means to discover patterns and relationships that affect investment performance. The trap is to generalize as much as possible, so that future patterns are recognized when similar to past patterns and adaptable when not.
 
 
Buying and holding is okay in theory but risky in practice. In reality, few investors are capable of buying and holding. Emotions get in the mode of needed analysis and discipline. Panic selling and comfortable buying usually lead to selling low and buying high. Those who criticize time are perhaps "closet" timers themselves. Illustrations include raising cash by money managers, rebalancing portfolios among asset classes, and buying and selling individual stocks, whether based on fundamentals, technical, rumors, tips, or whims.
 
A buy-and-hold strategy can under-perform for longer periods of time. For instance, the stock market lost out to inflation and money markets over the ten years spanned by the 1970s, yet the timing model's standard portfolio more than doubled the market's presentation. It can also destroy portfolios by the end of a severe bear market, particularly if funds need to be withdrawn shortly thereafter. The 20% declines in 1990 and 1998 and the 34% crash in 1987 were followed by reasonably fast recoveries of capital for those who stayed invested. Excluding the 48% grind in 1973-1974 delayed new highs for seven years, as did the 49% 2000-2002 bear market. The nearly three-year pounding starting with the crash in 1929 overwhelmed Dow-based portfolios by some 90%; it then took 25 years for the Dow to regain its former high! The 2007-2008 bear market took the S&P 500 down by 52%. How extensive will it take this Index to recover? 
 
The buy-and-hold mantra popularized during the remarkable super-bull market of the 1980s and 1990s was crushed by the “lost” 2000 decade and its triple bear markets. Holding through severe downhill cycles postpones dreams at best, shatters them at worst.   What is regarding the ulcers? Yet, long term, the stock market is the only game in city that leads to financial well being.
 
The déjà vu markets are more delicate and frustrating when misfortunate points in time are selected. The Dow hit a high of 995 in 1966 and lastly crossed 1000 six years later, with intervening roller-coaster rides of down 22%, up 48%, down 36%, up 73%, and then... the debacle of 1973-74. Once again the Dow sank below 1000... For another six years into 1980. It then seesawed above and below 1000 for a couple more years, bottoming at 777 in August, 1982, and not shooting above 1000 for good until late that year.
 
The behavior of the market over long periods is cyclical, informative sustained up trends lasting months to years, followed by persistent, but shorter, downtrends. The 1966-82 market was a shining instance of cyclical behavior, a timer's dream market. The period 1982-1990 also offered persistent cycles, surrounding an increasing secular (long-term) trend, unlike the flat trend of the former period. The 1990s market was unusually acyclical, with a vertical uptrend. Cyclical behavior is back during the present decade. Markets mirror our human affairs, the push and pull of conflicted greediness and fear. Markets are not accidental walks.
 
The timing model's objective is to distinguish changes in these cycles as they happen. It's not a model that tries to forecast the future level of the S&P weeks or months ahead, a considerably difficult exercise that's been mainly unsuccessful in the literature. Rather, it's a model that tries to recognize cyclical inflection points, the tops and bottoms of primary cycles, the points at which the market changes direction. To be successful, a model does not have to be correct twice, at tops and bottoms, as critics uphold; it "just" Needs to sell higher than its buy points and buy lower than its sell points.
 
If a timing system misses the best x weeks (or days, months) over some investment horizon, its performance drops to about half that of buying and holding, presumptuous its performance is the same as buying and holding over the remaining weeks. Yes, true. But this view is absolutely one-sided and self-serving; they fail to mention what happens if the timing model avoids the nastiest x weeks, which after all, is a capital preservation objective of all timing systems.   Looking at the 1970-2008 time period, investment performance drops by 52% should a timing system miss the 30 best weeks, while remaining invested the rest of the time? If a timing system avoids the 30 nastiest weeks and remains invested the rest of the time, its performance beats buy and hold by 59%. 
 
The question is: Does its use improve my investment performance... and relieve my nerves? The answer is yes, on both counts. 
 
2.  Just what is a bull or bear market? And what’s the difference between cyclical markets and secular markets?
 
Based on the commonly-cited 20% change to define cyclical bull and bear markets, the S&P 500 printed 16 cyclical bear markets and 15 cyclical bull markets (technically, we’re now in the 16th bull market) ever since 1929. The average bear lost 38% over 17 months, with half losing more than 34% in 17 months; the average bull gained 144% over 45 months; half the gains exceeded 101% over 44 months. It’s not a zero-sum game; it does pay to be in the market most (about 70%) of the time.
 
The bull-market elevated in March, 2000 was followed by an 18-month 37% cyclical bear. This low was strictly followed by a lightening cyclical bull market that gained 21% over four months (ending in January, 2002). Another cyclical bear followed into October, 2002, ending a 9-month 34% cyclical bear turn down, very close to the averages. The next cyclical bull market ran five years into October, 2007, yielding a 101% gain. A 13-month bear market followed, axing 52% from the index by November, 2008. This was followed by the shortest bull market on record, a 24% surge over two months. Dependable with recent volatility, the succeeding bear market shaved 28% over a record-short two months. We’re in a 16th bull market as of this writing, confirmed by a greater than 20% point within March, 2009. 
 
Secular markets are not undoubtedly defined, but do span multiple cyclical bulls and bear markets. A secular bear market is characterized by poorer cycle highs and lower cycle lows. The five-year secular bear that ended in 1942 dropped 60%; the to some extent flat eight-year secular bear that ended in 1974 shaved just 34%. The great secular bull that started in 1974 ended in March, 2000, a record 26 years with a eye-catching gain of 2353%, more than doubling the previous record gain from 1942 to 1966. The secular trend from 2000 to 2007 is horizontal, characterized by both new cyclical highs and lows (Ms and Ws); the view from 2000 to 2009 is that of a downward (bearish) secular trend.
 
The model does not distress itself with bull or bear markets per se; rather it strives to detect the beginning of primary up or down trends of 10% or more over at least eight weeks. These primary trends do function within the context of cyclical bull and bear markets. Primary uptrend is more likely within cyclical bull markets, as primary downtrends are more likely within cyclical bear markets. While it’s possible to take advantage of a primary uptrend within a bear market, or a primary downtrend within a bull market, experience with the model shows that it’s difficult to do so. And those counter-signals are probable to be short-lived. Throughout secular bear markets, intermediate to long-term strategies should pretty much remain in capital preservation (money market) modes. Ultimately, patience will be rewarded with a new bull market and the dry powder to exploit it. Execution on to your money for future deployment is, after all, the main benefit of a good timing system.
 
3.  I'm unhappy with switching 100% into stocks at a buy signal or into a money market at a sell signal. Does it have to be all or nothing?
 
No. If you're uncomfortable with switching 100%, you could use a percentage that you can sleep with. For an instance, if you want to be invest 60% in stocks, move 60% of your portfolio into stock funds or exchange traded funds (ETFs) at a buy signal. If you always want to have at least 25% in stocks, keep that amount in stock funds or ETFs during a sell signal. Or increasingly shift funds following a switch signal. For an instance, you could move some proportion into stocks just after a buy signal. Then wait for a market pullback of, say, 3-5% and move another portion into stocks. On the other hand, you could phase in a switch, as in moving into cash in 25% chunks over four weeks. 

“An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks. An ETF holds assets such as stocks or bonds and trades at just about the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500. ETFs may be eye-catching as investments because of their low costs, tax efficiency, and stock-like features. In a survey of investment professionals conducted in March 2008, 67% called ETFs the most innovative investment vehicle of the last two decades and 60% reported that ETFs have essentially changed the way they construct investment portfolios.”
 
4.  I favor domestic stock ETFs and mutual funds. How about bonds, gold, commodities, foreign equities, and individual stocks?
 
Keep in mind that the timing model addresses only the equity portion of a portfolio, which usually should not be the entire portfolio. It’s a good thought to diversify portfolios to other asset classes such as bonds, precious metals, commodities, international securities, and real estate. Primarily invest in ETFs consistent with the model. But also diversify by including ETFs in bonds, gold, and certain commodities such as water. Diversification also includes investment styles (value vs blend vs growth) and company sizes (large cap vs mid cap vs small cap). The S&P 500, for example, would be classified as a large-cap blend Index by Morningstar. If you wish to allocate 40% to assets other than domestic stocks, then move up to 60% of your portfolio between stocks and money market funds at switch signals.
 
To follow the standard portfolio's stock investments suggests the use of an indexed mutual fund or exchange traded fund (ETF) that tracks the S&P 500. Mutual fund families such as Fidelity and Vanguard include menus of index funds. An additional low-cost alternative is to trade ETFs, such as Spiders (S&P 500 Depositary Receipts, symbol SPY) through your broker, a derivative that mimics the S&P 500 and "look, sounds, and acts" like a stock.
 
By the way, "domestic" funds and ETFs usually hold a fair proportion of offshore stocks. Also, large domestic companies are multinational, and many other companies profit from overseas economies, so there's in point of fact a substantial international exposure within most domestic stock ETFs and mutual funds.
 
It's also okay to use individual stocks, but keep in mentality that their price behavior can differ substantially from the market's behavior. At a sell signal, you should consider either dumping or reducing exposure to individual stocks, unless you have reason to consider that they will swim upstream, or the tax consequences are too much for you to "bear". Believe buying your favorite individual stocks at a buy signal, because an up trending market is often favorable for most stocks. 
 
5.  I would like to be more aggressive with some investments at buy and sell signals. What strategies are available?
 
At a sell signal, aggressive portfolios might consider the purchase of mutual funds or exchange traded funds (ETFs) that look forward to down markets. Mutual fund examples include Bear ProFund (BRPIX), Potomac U.S./Short (PSPSX), and Rydex Ursa (RYURX). Rydex Ursa, for instance, is designed as an inverse to the S&P 500, with a beta of -1. For instance, if the S&P 500 declines 15%, Ursa should theoretically advance 15%. Very aggressive portfolios might look into shorting the S&P 500 through Spiders (SPY), the Dow Industrials via Diamonds (DIA), or the Nasdaq 100 Index using Nasdaq-100 Shares (QQQQ). These ETFs act like index funds but trade like shares and are bought and sold in stock brokerage accounts. A simpler alternative to shorting is to buy ETFs that do that for you: DOG for the Dow30, SH for the S&P500 and PSQ for the Nasdaq 100. A more aggressive alternative is to buy a fund such as UltraBear ProFund (URPIX), which shorts the S&P 500 200% or ETFs that short 200%: DXD for the Dow30, SDS for the S&P500 and QID for the Nasdaq 100. The most aggressive alternative is buying index put options for the Dow Jones Industrials (^DJX), S&P 500 (^GSPC), S&P 100 (^OEX), Major Market (^XMI), Nasdaq 100 (^NDX), or Russell 2000 (^RUT).
 
At a buy signal, ETFs that mimic our main indices include the previously mentioned DIA, SPY, and QQQQ. Aggressive portfolios could invest in so-called high-beta funds. For instance, Potomac U.S. Plus (PSPLX) and Rydex Nova (RYNVX) have a beta of about 1.5, meaning that their expected return is 50% better than the S&P 500 return in an up market. The dark side of this flip is an expected 50% greater loss in a down market. ETFs leveraged 200% include DDM for the Dow30, SSO for the S&P500, and QLD for the Nasdaq 100. Buying Spiders, Diamonds, or Nasdaq-100 Shares on edge are other aggressive buy strategies. Even more aggressive alternatives include the purchase of UltraBull ProFund (ULPIX) and index call options.
 
These risky strategies can turbo-charge returns, but should be exercised only by sophisticated investors with high risk tolerances and cast-iron stomachs. They can do severe damage to portfolios should the market go against the signal. The likelihood of loss when trading options is elevated, even with reasonably good timing.
Commitments to these instruments should not exceed 5% of a portfolio.
 
6.  What do I receive as a subscriber to the Bull Market Report? What are the benefits of subscribing to this service?
 
As a member of the Bull Market Report, you will receive the following membership benefits:
 
    • The daily Bull Market Report delivered directly to your email inbox: The Bull Market Report is emailed to you every weekday evening (Monday – Friday) between 5PM and 6PM Eastern Standard Time. The daily report includes a recap of the day’s most important market activity, in-depth stock research and analysis, and updates on Bull Market’s Recommended List stocks, as well as an actionable stock idea.
 
    • NewsFlashes emailed to you during market hours: Whenever Bull Market changes a (buy, sell, hold) rating on one of its Recommended List stocks, you will receive a Newsflash via email. You will also receive a Newsflash anytime Bull Market needs to update you about a material development at one of its Recommended List companies.
 
    • Access to Bull Market’s Recommended List of stocks: As a subscriber, you have access to Bull Market’s Recommended List of stocks, which includes about 50 of our best stock ideas across all major industries (including Financials, Information Technology, Healthcare, Consumer Staples, Consumer Discretionary, Energy, Industrials, Telecom Services, Materials, and Utilities).
 
    • Access to Bull Market’s Recommended List Change Log: Want to know what Bull Market has traded in the past? Take a look at Bull
 
    • The ability to search Bull Market’s full archives for the coverage you need: Easily find past analysis and insights on all current and previous Recommended List stocks, plus coverage on literally hundreds of other stocks Bull Market has commented on and investigated.
 
    • The ability to send feedback, comments, and questions to the Bull Market research team: As a subscriber, you are welcome to email the Bull Market research team with your comments and questions. Sometimes subscriber questions will be included in the daily Bull Market Report as a “Member Q&A.”
 
Contrasting many online investment services, the Bull Market Report has been in business for over a decade, weathering both bull and bear markets along with its membership. Through it all, Bull Market has never mislaid sight of its mission: to create long-term wealth for its members by consistently providing sound investing advice. Day in and day out, Bull Market publishes top-notch analysis and invaluable insights for its subscribers.
 
Bull Market also prides itself on contribution a more personalized experience than other online investment newsletters. Perhaps most importantly, the Bull Market Report differentiates itself from other investment services by its solid track record and winning stock picks. Looking back at just the past five years, Bull Market has easily beaten the S&P 500 and other indexes, posting an average return of +4.7% in 2007, +13% in 2006, +11% in 2005, +19% in 2004 and +37% in 2003..
 
8.  How long has the Bull Market Report been in business?
 
The Bull Market Report was founded in 1997 by Todd Shaver. In 2003, Indie Research purchased the Bull Market Report, growing its family of investment services .The day-to-day research and writing for the Bull Market Report is done by the Bull Market research team.
 
9.  How does Bull Market define its investment time horizon (short, medium, long-term)?
 
Everyone’s description of short, medium and long term varies somewhat, but Bull Market generally views the short term as 0 to 6 months, the medium term as 6 to 18 months, and the long term as 18 months or more. The majority of Bull Market’s investment ideas are focused on the medium to long term, although occasionally we opportunistically suggest short term ideas as well. In general, though, Bull Market’s main focus is on long term investing.
 
10. What is Bull Market’s Recommended List of stocks?
 
The Bull Market Report maintains a list of approximately 50 recommended stocks across several different industries (including Financials, Information Technology, Healthcare, Consumer Staples, Consumer Discretionary, Energy, Industrials, Telecom Services, Materials, and Utilities).
 
The Recommended List contains several different columns of information, including: the company name, its ticker symbol, its risk level, its “type” (core, value, income or growth), the date when it was added to the Recommended List, its average cost basis, its current price, the total return (including dividends), its year-to-date return, its 12-18 month target price, and Bull Market’s current rating of that stock.
 
11.  What does it mean when Bull Market classifies its recommended stocks as “core,” “value,” “income,” and “growth?”
 
Read below for an explanation of each type of stock:
 
•  A core stock is defined as “a substantial long-term holding in a portfolio or fund. A core holding is bought with the express purpose of being held for a very long time, and is often a high quality security with a history of fairly steady performance.”
 
A value stock is defined as “a stock that is considered to be a good stock at a great price, based on its fundamentals, as opposed to a great stock at a good price. Generally, these stocks are contrasted with growth stocks that trade at high multiples to earnings and cash.”
 
An income stock is defined as “a stock with a history of paying consistently high dividends.”
 
•     A growth stock is defined as “stock of a company which is growing earnings and/or revenue faster than its industry or the overall market. Such companies usually pay little or no dividends, preferring to use the income instead to finance further expansion.
 
Bull Market classifies each of its Recommended List stocks so you can easily see which fit into your personal investing situation and/or style. Also, some investors like to allocate a certain percentage of their portfolio to a specific type of stock (core, value, income, growth). Bull Market’s “type” column helps you to easily pinpoint which stocks are of more interest to you. In fact, you can simply click on the up or down arrows found below the "Type" heading in order to easily sort the list of stocks by type.
 
12. How does Bull Market measure the total return of stocks on the Recommended List?
 
For stocks that pay a dividend, the total return is calculated by adding the dividends paid to date to the most recent closing price and calculating the percentage difference gain/loss from the day the stock was added to the Recommended List.
For stocks that don't pay a dividend, the total return is given by the percentage gain/loss for the stock from the day it was added to the Recommended List.
 
13.  Does Bull Market publish entry, stop-loss, and target prices?
 
Bull Market does not publish specific entry prices for its Recommended List stocks, but does give general guidelines through daily commentary and through ratings.
A stop-loss is defined as “a stop order for which the specified price is below the current market price and the order is to sell.”
 
 Bull Market does not use stop loss orders, but does concede that stop loss orders can be a good way to protect profits if a stock has a lot of momentum and if you “inch up” the trigger price as the stock rises. In Bull Market’s experience, however, ordinary intra-day volatility is often enough to make a decision to sell a stock. Additionally, if the stock you own “drops a bomb” after hours, you may find yourself selling at a price well below your stop-loss order the next day. Consequently, Bull Market doesn’t publish stop-loss prices.
 
Bull Market does publish 12-18 month target prices, which can be found on the Recommended List for easy reference. These target prices are also published in NewsFlashes when the “buy” alert goes out to subscribers.
 
14.  How does Bull Market’s rating system work? Do you inform me when you change a rating on one of Bull Market’s Recommended List stocks?
 
Bull Market issues standard “strong buy,” “buy,” “hold,” and “sell” ratings for each of its Recommended List stocks..
 
The Bull Market research team considers several different factors when deciding to make a change to a stock rating. In addition to factoring in fundamentals, they consider how the stock has traded since it was added to the Recommended List and the potential for changes to its Target. The NewsFlashes that are sent out to alert subscribers of a rating change always include an explanation for the change.
 
Please note that Bull Market can also rate a portfolio stock as "SOF," which stands for "Source of Funds." If a stock is rated "SOF" on the portfolio, it means that the stock is on Bull Market's list to sell because the thesis for owning it has not played out and is no longer valid. In many cases, a "SOF" rated stock is oversold and Bull Market is looking to sell it on strength.
 
15.  Sometimes Bull Market raises the Target on a Recommended List stock that is currently rated as a “hold.” Does this mean that the stock is now a “buy?”
 
When Bull Market changes the Target on a Recommended List stock, this doesn’t mean that the stock automatically qualifies as a “buy.” If we consider the stock a “buy” for investors coming to the name for the first time, we’ll make that clear by issuing a “buy” rating. Bull Market reserves its “buy” rating for stocks that are considered the best opportunity at that time.
 
16. Can you give me some points which I should remember in order to make profit in Indian Stock Markets in India?
 
Remember that trading or investing is not a game just for playing. Trading should be planned properly before venturing. Remember the below mentioned rules (though you will find these things written everywhere).
 
Never venture into stock markets without a proper plan. You should know the money you are ready to invest, the risk you are going to take and know your expectations. Have a clear plan, as one wrong move in stock markets can take all your money away from you.
 
Keep a notebook with you to note the amount you are losing and winning in trades. Never overtrade and trade only in limited quantity. Learn from the losses you make in trading. One important thing you learn from trading is patience. Failures are the stepping stones to success.
 
A hard reality of stock trading is that good trader of today had been a loser in stock trading at one time. If you do not overtrade, you will never lose your temper. Losing patience and overtrading go hand in hand
 
Do not fall in love with any particular stock. It has been seen that if a person has lost in Reliance stock, then that person wants to earn from that stock only.
Treat stock market trading as a business and not a “do or die” act.
Don't put all your eggs in one basket means i.e., do not put all your money in stock markets at one go. Put a part of it only.
 
Do not give big losses and take small profits. It should be big profits and small losses.
Try and judge the effect of news. It is generally seen that good news bring the market down and bad news take the markets up. Treat market to be supreme and do not think that market will go as per your wishes. You will have to go as per the wishes of the market.
 
Do not try to buy stocks at the bottom and sell at the top, be prepared to buy stocks at the top, and sell at low. There is no end to a top and no end to a fall also. We believe that if one is trading with the trend, then only one will earn.
 
 It has been seen that investors go to the NSE (National Stock Exchange) or BSE (Bombay Stock Exchange) terminal or their brokers office with a view that they want to sell a particular stock but the investors sitting there convince him to rather buy that stock. Investor should not be influenced by judgment or opinion of others. Investors must believe in themselves and do their own home work; after all it is their money at stake.
 
Know your limits in trading i.e. you should know the maximum loss you are ready to give. A trader or an investor who does not care for the stop loss will ultimately lose all his money and then a stage will come where he will only blame his luck. So a clear cut stop loss is a must before buying or shorting.
 
Do not enter the stock market just because you want to play something. Remember it is not a toy. Wait for the clear opportunity to enter. Beginners must not do intraday trading. Trading is like a war; always have a set of rules which you are going to follow before venturing into trading. Do not sing praises of your winning trades.
 
Do not try to earn all profits in starting. Have realistic expectation and know it clearly that Rome is not built in a day. Remember that even the best of traders are still learning, so one can never be a master of trading. It is an ever learning process. After 15 years of education does a person become a graduate and you expect to be a master of trading in just a year. Impossible.
 
Risk Management is another important thing in trading. Test the waters before swimming in deep. Do not worry if good opportunity has gone by today, it will again come up tomorrow but if you think today is the end of world, it might really be.
 
 Cut your loss before booking your profits. If in one stock you are having loss and in the other profit, then cut the one which is giving you loss before booking your profits Never borrow money for trading.
 
Do not let success go to your head. It has been seen that the best of traders who earned for years lost everything once they became over confident.
 
17.  Could you tell me how to apply stop loss as I am unable to understand how to implement it .Whenever I put a stop loss it always gets triggered and then the stock starts moving in the direction in which I had thought.
 
Handling of stop loss is one of the trickiest things in stock market trading. Generally one should not give a loss more than one is expecting the profit from a particular trade. If you expect a return of 20 % from a particular trade, then your loss should not be more than 20%. If you are playing intraday and are expecting a profit of 3% then your loss should not be more than 3%. Controlling loss means half the battle won. It is seen that even if majority of your trades have given you a loss and only minority of trades have given a profit, still you can be a winner provided your stop losses were small and your profits were big. (Give a link of our intraday trade’s details of monthly chart).
 
-When talking of stop loss, I am reminded of a person who did not have any graphs, fundamentals or computer but he traded very well. He just chose some stocks at random of his liking and would buy those stocks and would quit the stock if it closed below his buying price for three days (it need not necessarily have to close for consecutive three days but on any three days). At the end of the month on last working day he would again treat that closing price as the cut off price and next month he would again wait for the stock to close three days below the price of last month's last day. This way he would keep his profits running and kept cutting the losses. (This is a small way he would take care of his portfolio. When he was short, he would play just the reverse. In the sideways market he gave losses but when market became trendy he earned good profits. ) So keep running your profits and cut your losses fast.
 
18. My broker is telling me to trade in futures at very less margin. In your view which is better, buying delivery or trading in Futures?
 
 Deliverytrading and Margin trading are two different trades and both have their advantages and disadvantages. These days it has become common for Brokers to ask their clients to trade in futures and the clients are also happy trading with margin as it gives them a kick as well as chances of trading big positions and a hope of making good money.
 
19. What security do I have while trading in stock market as I am told that what I need is just a computer terminal to trade at home. Can I enjoy my life and secure my family with trading?
 
On one side you are looking for security for family and on other side you are entering a field which is unpredictable. So do not expect stability in stock trading. Be clear to invest only that money you can afford to lose in stock market. If you do not have spare money, then forget trading
 
20.  Someone told me that Option trading is good and if done carefully with the trend it can reward me well. What is your view?
 
Option trading is for a mature trader. But remember losses are unlimited so it is best for experienced traders only. The worst thing about options is that investors keep holding the options even when the market trend changes and with the result they expire worthless. Most of the people have a notion that most of options expire worthless which might be wrong.
 
21. Can you guide me whether I should do intraday trading i.e. go to the trading terminal daily and trade or just invest in deliveries and forget them ?
 
Now if you as an intraday trader can judge the mood of the stock on small intervals then only you can think of intraday trading. You must be good at technical analysis as technical tools help in short term movements of stock. Fundamentals play fewer roles in predicting the movements of a stock for small intervals. But if one sees fundamentals then Long term Investor is better
 
Now if you as an intraday trader can judge the mood of the stock on small intervals then only you can think of intraday trading. You must be good at technical analysis as technical tools help in short term movements of stock. Fundamentals play fewer roles in predicting the movements of a stock for small intervals. But if one sees fundamentals then Long term Investor is better
 
Now if you as an intraday trader can judge the mood of the stock on small intervals then only you can think of intraday trading. You must be good at technical analysis as technical tools help in short term movements of stock. Fundamentals play fewer roles in predicting the movements of a stock for small intervals. But if one sees fundamentals then Long term Investor is better
 
22.  Is there any objective analysis which I can do to determine whether my trading is going fine or not, and also when I should increase or reduce?
 
Well, a nice and tricky question. If you can plot a graph of each day’s return on a "xy" axis graph and can join the dots to see if the chart is making a higher bottom higher top-. If making a higher bottom higher top, it means you are making profits then you can increase your quantity but if the graph making a lower bottom lower top formation, then stop your trading (It is not an easy exercise).
 
23.  Can any outside force manipulate the market?
 
Stock market moves either on the basis of fundamentals which take care of long term valuations where as the technical governs the short term movements of it. The short term movements are influenced more by short term sentiments which can be quite volatile at times. The short term movements seems to a lay investors sometimes as if they are manipulated but actually it is a play of fear and believe in the short term and hence it becomes very volatile
 
24.  What is a difference between a stock market and a new issue market? Does any opening in new issue market effects stock market?
 
A stock market is a place where people buy and sell shares where as a new issue market is just a part of the stock market, in the sense that any company which has to raise its money from public has to come out with a public issue only after which that stock can be listed on the stock exchange. Sometimes an issue of an existing listed company comes which increases the floating stock of that company as a result that when more stock is available, there is a pressure on the stock and at times till the new stock is not absorbed by the market and the stock remains depressed.
 
25Can I trade without hard money?
 
One can trade in the stock market without hard money provided one has stocks with him to give as margin for any exposure he wishes to take.
 

 

 

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