Investing In Stock Market – Part 6

October 9, 2008 · Filed under Business, Finance, Stock Market · Tagged , , , , ,

Even as more and more radical and strong measures are being taken worldwide to mitigate the ever-deepening economic crisis, the million-dollar question that arises spontaneously is whether these steps would be enough to get the whole thing back to normalcy. In an unprecedented move made by some leading economies in the world, the rates have been cut by 50 basis points by their regulatory bodies. A rare move- because, such cuts are usually not done by such influential bodies simultaneously. In some way, this collateral move by the Feds, ECB, BOE, Bank of Canada etc. only goes further to show a glimpse of the severity of the situation. It could be presumed that in the normal course of events such an action, which can be marked as a tailor-made one for the financial markets, would not probably have been taken. Normally, a 50 basis point cut by the Feds alone would have been sufficient to send the Dow Jones index zooming up for sometime. Many other world indices would have followed the trend eventually. As of now that does not seem to be the case even though it is probably too early to comment on it.

 

Dow took a positive U-turn soon after the news broke out only to be followed by another couple of U-turns over the next few hours and ultimately ending in the red thus refusing to take the much awaited eventual and decisive U-turn towards the greener horizon. This volatility continued for sometime reflecting the utter indecisiveness and lack of confidence among the investors even after such a development and that is something which emanates a kind of creepy feeling at least in the medium term. The silver lining in the dark clouds is that some of the Asian markets have traded green. The reason could be the fact that some of these are isolated to the ongoing sub-prime crisis to an extent. Nevertheless, only the coming days would unfold their actual trend.

 

Let me mention here that my educational or professional background has not much to do with finance or economics as such. With whatever awareness I have acquired over past few years coupled with some insight, I would advocate that unless noteworthy improvements are observed primarily in the US and then some of the European markets within the next week, one would have sound reasons to draw a conclusion that what have been done of late are probably not enough to meet the requirements at all. In that case, I would feel sympathetic to all those who had invested in the stock markets with a short to medium term outlook, especially to the ones who would be forced to liquidate their positions incurring substantial losses in order to meet their sundry financial obligations. The ones invested in with a long term perspective, say two years or so, have not much to worry about, I guess.

 

I spoke of me contemplating some long positions in cheap call options for the month of December with a medium term view. As of now I have abandoned the idea after seeing the very recent developments. If all these extraordinary news are failing to drive the market up, we are most likely in the midst of a financial whirlpool and are probably still far away from the so-called bottom. If the current state continues, I would endorse the following:  to the ones blessed with enough green stuff to flaunt with – go for bottom fishing right from now onwards with a long term view; to the ones for whom it is an issue – abandon all strategies, stay in cash and bide your time; to the ones like me who are not quite blessed and yet can’t abstain from burning their hands in the market – try to ride the chart-waves right on very short term basis i.e. intraday or at the most STBT, BTST etc. without dreaming any farther…………. until, of course, a clear picture emerges in due course of time.

 

Let me take this opportunity to thank all those who appreciated my blog, and encouraged me to keep it going.                                                                                                                            

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Investing In Stock Market – Part 5

October 6, 2008 · Filed under Business, Finance, Stock Market · Tagged , , , , , ,

In my last post I discussed about my positions in various Call & Put options in the form of straddles. As expected, I have now got some values in the put options which I squared off recently. As planned, the profits generated by these positions have fully taken care of the costs of all my remaining call (long) positions. Expectations have no limits however. Even though these puts yielded good returns, I wished I had waited for some more time, as these soared by another 25% or so after I hurried to book profits. Given the current gloomy scenario, I don’t expect anything substantial from the remaining positions. In fact, I would have to book most of these in losses. What relieve me are the facts that now I am sitting on some positions which have already been rendered absolutely free of cost to me and thus making me tension-free and also that whatever I get from these positions would be a net profit, the possibility of any loss having been eliminated already. Hence, in view of the ongoing dismal state, my plan would be to square off these positions at the very first opportunity and not letting these expire worthless in the expectation of a miraculous turn-around. And in the event of such a turn-around happening, the possibility of which can not be denied totally, this small tactic could turn out to be a real money spinner and could be termed as a grand success. A remote possibility of the same is alive at no extra cost to me.

 

I am now kind of charged-up after a reasonable success on the above said positions so far. I have also been trading in derivatives almost in daily basis without risking any substantial capital exposure as, first of all, I can’t afford to do so and secondly, I still recon myself as a novice in this arena. Now, my next major step would be to take advantage of the situation and have some fresh positions in comparatively cheaper call options for the month of December. By doing so I would again be investing a small amount in the expectation of a healthy return. That is because I expect the market to scale some good height within these three months which, after all, is not a very short duration. Besides, the speculation is rife that the market is probably nearing the bottom if not already in the bottom. Hence, I am sort of tempted to take this calculated risk without committing any substantial amount. However, on this occasion I am not planning to have an equal counter position as a cover as I did on the last. All I might go for could be a couple of puts at the most. The reason is the one that has already been mentioned, i.e. the market could already be nearing the bottom. Also, some positive measures are being taken by the regulating agencies to mitigate the sordid state of affairs. I foresee some positive impacts of all these at least in the near term. I will keep my fingers crossed once again and then hope for the best. 

 

Note:  Recently I received a comment from www.knowyourprofit.com team who is bullish on power sector stocks because of the progress in the Indo-US nuclear deal. Even as I am writing this post, positive news are pouring in about P-Notes, RBI cutting CRR by 50-basis point etc. All these are expected to boost the overall sentiments in the Indian markets for the time being and the rate cut should take the financial stocks for a rally at least for a short term. Nevertheless, nothing can be taken for sure in the current situation.

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Investing In Stock Market – Part 4

September 28, 2008 · Filed under Business, Finance, Stock Market · Tagged , , , , ,

This post is a continuation of my previous post titled “Investing In Stock Market-Part 3″.

 

As I could guess by the end of the previous week of expiry all my positions in call options ended up worthless. On the positive side the losses were minor as all of these were bought quite cheap. The idea was to sell them with some profits in the event of an upside rally of moderate nature, good profits in the event of a bull run and at the same time not to loose anything significant if situation takes an U-turn. I also went long in a few cheap put options as a cover to the formers and that kind of worked well as part of the loss was compensated rendering the net loss insignificant. The lesson learnt was significant however. Never go for naked calls in the expectation of big shows unless you are very sure of the trend and are backed up by sound technicalities and very good inputs on the overall market scenario that is likely to unfold.

 

Now, for the next session I have bought quite a number of similar cheap calls with the same expectations. It could be seen as a mildly risky medium-term investment as the whole month is ahead of me. Mildly risky – as the amount involved, once again, is not significant and part of that has already been recovered by cover positions taken simultaneously. It is also a part of my strategy to keep trying various combinations until one or the other works well in the course of time. Plan for the next week is to recover the full amount rendering those positions free of cost and then to go for other short term positions to make some profits. I have to go slow taking into consideration of my risk taking capacity, skill, experience etc. From whatever little experience I have in this realm coupled with studies of relevant articles, I advocate the following so far as trading in option, or rather anything relating to the stock market is concerned:

 

One should put only a minor percentage of their investment portfolio for trading purposes as it, after all, involves in certain amount of risks depending on the expertise of the trader. There may not be any hard and fast rules about the percentage, but I feel 15 to 20% for a novice and 40 to 50% for an expert could serve the purpose. Basically, it depends on one’s individual perceptions, risk taking capacities etc. Yet, the more one is exposing oneself to trading the more is the chance of his capital getting wiped out. Better to limit one’s exposure initially and then probably increase it gradually, once one gets comfortable with their trades. For a beginner initial losses are must and are part of the game. That is another reason for limiting the exposure initially. If one continues to loose over a long period, one should probably stop trading and opt for sound investments or otherwise revise one’s strategy. Revising strategy could involve in learning technicalities, trying new techniques with small trades, finding an expert or a mentor etc.

 

For an intra-day trade a stop-loss is a must as it would limit the probable loss in the event of a contrary movement. One invariably needs to familiarize oneself about the nitty-gritty of this aspect of trading. Profits should be booked at regular intervals without giving in to the lure of a big one. Often this greed brings us down to nowhere which is my personal experience.

 

Also, once one is into a trade, one needs to follow up their trades consistently. If one does not have time or patience for that, trading is not for him. One, to an extent, can probably afford to do that in medium to long-term investments.

 

Trading should not be based on emotions like greed, panic etc. One needs to be driven by sound reasons or trends to enter and exit a trade in order to turn it into a profitable one. This however is not easy and can be acquired primarily through experience, learning etc. Alternatively, cues could be obtained from someone who is an expert in the game.

 

There are many other qualities one needs to inculcate in their trading system in order to transform it into a successful venture. Plenty of books, articles etc. have been written on these aspects. It is always easy to point out these qualities but not so to follow these verbatim. Probably, time only equips one with these arms provided one is a cautious trader. The quicker one acquires these virtues or the quicker one learns from their mistakes the better is one’s chance of making it big.

 

And once one makes it big in trading, which is not at all an easy catch, there is no looking back. That is something we all would agree on perhaps!!

 

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Investing In Stock Market – Part 3

September 20, 2008 · Filed under Business, Finance, Stock Market · Tagged , , , , ,

After a long bear-run the market has suddenly shown a kind of uptrend now. The important point is how long this trend would continue in the backdrop of a global, especially US, economic scenario which does not seem to be comfortable yet. One certainly needs to trade caution as of now.

 

Of late, I have been trading primarily in options to minimize my investment exposure to the market, limiting potential losses and also to have a greater leverage with an expectation of greater profits. Call it lure or whatever. It is the lure of having some reasonable profits that keeps me going in this arena. Since I am relatively inexperienced, so far as market technicalities or investment ideas are concerned, I try to get the pulse of the market from various websites, TV channels etc.

 

I have incurred substantial losses in futures and options and as of now have abandoned trading in futures to minimize the risks in current situation. My experience in option trading tells me that unless one is an expert in the field or is very sure of the trend trading in option without hedging is quite dicey. Hence, nowadays I am carrying hedged positions only.

 

Las week I took few positions in options keeping in mind the probabilities for the next week which I gathered from various sources seemingly having some technical expertise. At the moment I am keeping my fingers crosses and can’t do much but wait and see the results when market comes to life next week. Of the positions, few are cheap call options for the month of November and one put option for the same month to hedge the call positions. Basically I am expecting some bullishness to be followed by profit bookings. What is worrying me is my position in put options for this month as expiry is round the corner. There is a good chance that I could come a cropper in this position. In that case, I will have to try to compensate this limited yet probable loss in my positions for the coming month as I am shy of trading in this month’s options as of now keeping in view of my financial muscles.

 

What happens in reality would however be obvious in the coming week only. Let’s see.

 

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Investing In Stock Market – Part 2

September 20, 2008 · Filed under Business, Finance, Stock Market · Tagged ,

This is continuation of the first page with heading “Investing In Stock Market”.

 

Some other important factors which could affect stock markets are the crude price, the status of other stock markets such as the US markets, European markets or the Asian markets, the status of currency exchange rates etc.

 

 

The fluctuation of crude price seems to have reasonable, and drastic at times, impact on stock markets in macro as well as micro levels. A lower crude price means cheaper fuel and thus comparatively cheaper commodities which in turn is a boost to the economy. For countries like India this means a lot as it has to import substantial amount of crude. A lower crude price implies hefty savings in the import bills as well as cheaper commodities in the domestic markets due to lesser transportation or production costs. This is a boon to the overall economic status which in turn is reflected in the stock market sooner or later. In fact, certain stocks are directly related to crude price, specially the stocks of refining or crude exploring companies. A higher crude price seems to have a positive and a negative impact in the stocks of crude refining and the producing companies respectively and vice versa. The movement of crude price is thus an important factor to keep an eye on for traders or investors. Crude prices can be found from newspapers, business TV channels, websites etc.

 

 

Some of the weblinks which track movement of crude prices among host of other information are www.oil-price.net, www.bloomberg.com/markets/commodities/energyprices.html,  www.wtrg.com/daily/crudeoilprice.html etc. Besides getting the latest price one could also track the way crude price has been moving in live charts published by some websites. One may use these information in trading crude also besides having an idea of its impact on the overall market prospects.

 

 

The latest status of stock markets of other countries gives important global cues. In the era of globalisation economies of many countries have moderate to major influences on each other. Many economies are closely related to each other due to matters like export, import etc., thus influencing each other in a subtle or obvious ways. Besides, fund managers from other countries may have substantial exposure in the markets of some other countries. Thus economic conditions of the countries highly influence the investment decision making processes and thus the inflows and outflows of money to and from the countries. If most of the world markets are in red in a particular day or over a particular period, the market of a country has good reason to open and be in the red unless some others domestic factors are weighing heavily in favour of it. Hence, keeping an eye on influential markets of the world is relevant. For example the status of the US stock markets like Dow Jones or Nasdaq etc. tend to influence the stock markets of many other countries like India because of the abovementioned reasons. Stock markets of some other countries too give important global cues to the Indian market.

 

 

Some of the websites which show the latest status of various world markets are www.en.stockq.org,  www.tdd.lt/slnews/Stock_Exchanges/Stock.Exchanges.html,  www.money.cnn.com/data/world_markets, www.finance.yahoo.com/intlindices?e=asia etc. etc. All these weblinks would lead one to host of other information too which are relevant to economy and stock market.

 

 

The status of currency exchange rates also may have reasonable impact on the stock markets, specially the exchange rate of the currency of a particular country versus the US dollar. For example the status of the exchange rate between the US dollar and the Indian Rupee could have noteworthy impact on the overall economic scenario of India as most of the external monetary dealings including the oil import bills are settled in terms of US dollars. Companies in India which procure plenty of business from other countries like US etc. are very much affected by the exchange rate fluctuations. A stronger rupee means more revenue for these firms and vice versa. Thus a gradually strengthening rupee tends to leave gradual positive impact on the stocks of such companies and weakening rupee tends to erode their values to an extent. Keeping an eye it could pay well in the process of investment, especially in such stocks. Few popular links for this purpose are www.xe.com/ucc,  www.x-rates.com, www.exchangerate.com,  www.finance.yahoo.com/currency?u  etc. etc.

 

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Investing in Stock Market

August 30, 2008 · Filed under Business, Finance, Stock Market · Tagged , , , , , , , ,

This Blog is about investing in share market. As an enthusiastic small trader cum investor who is still in a relatively nascent stage in this alluring yet ‘kind of dicey’ avenue of generating wealth, I would like to share my views, experience, useful information etc. along with the readers who have similar interests and would try to add to it from time to time to make it more resourceful.

 

Investments in stocks involve good amount of risks unless one knows the pulses of the share market. But at the same time the lure of quick gains have always been inviting new and new investors or traders to the stock market. I have been involved with share trading for quite sometime now and these few years have gave me some amount of experience in this field.

 

Not that I am a very active trader or investor, as I utilize only part of my free times in trading shares and I am basically a service holder, but I have tried several avenues of investing in shares like medium-term investments in blue-chip shares as well as penny shares to quicker ones like day-trading, futures & options etc. Nevertheless, I admit that overall I am in loss as I am still in the process of growing. But in the same breadth I also feel that even if this is a risky avenue of earning wealth the prospects of generating wealth is huge provided one learns from his previous investment experience and doesn’t keep repeating their earlier mistakes. The world of investing in stocks seems to be all about learning from the past investment experience, having some patience with one’s investments, not panicking during tough times, having reasonable knowledge about the market and the stocks where one is invested in or likely to invest, etc. etc.

 

Another very important fact is to have prudent guidance from successful, technically sound and proven players which nowadays are available in the form of professional stock investment service providers. All one needs to do is subscribe to their services by paying some amount and get tips from them routinely. They are in plenty and not difficult to find out. However, not all of them are what they claim to be. So, one needs to be careful in choosing one out of the lot. After all, it seems no one is absolute expert in this highly unpredictable field. Its more about being more consistent than others. Aim is to minimize losses and maximize profits by shrewd investment ideas which could be one’s own or could be from the stables of such service providers or some other mentor’s.

 

In spite of the risk factors involved in this highly volatile avenue of stock trading, my experience says that once one is involved in this field for sometime it is difficult to give it up even if one is making losses. The prospect of making gains in the future, which is not illusionary provided one learns to adopts the right approach from experience and shrewd guidance, is always there and it is that prospect of unlimited earning from the comfort of your own nest that keeps one hooked to this risky yet interesting avenue of generating wealth. All one needs are a computer, an internet connection and a share trading account which can be clubbed with a bank and demat accounts. None of these are difficult to get or is expensive. However, while choosing one’s broker one should be aware of the services rendered by them and other factors like cost of buying and selling stocks as these varies from broker to broker and finally transaction costs are the major costs involved in the process in due course of time. Some broking facilities come with real cheap transaction costs.

 

As already mentioned, one should also have their own knowledge about stocks and the overall market pulses. This may be achieved by reading financial newspapers, journals etc or viewing business TV channels. What I have observed is that internet also is turning out to be a huge source of such information. One could find out such information, ideas etc. from the internet by periodical searching of the net which is also not al all difficult. These virtually free information and ideas, if properly absorbed and used, could in fact be more useful than the services provided by a professional in due course of time.

 

There are plenty of websites which provide stock trading ideas and tips free. One can always try these tips and ideas by investing small amounts and thus come to know which websites suits them more. Most of these websites are useful in some way or the other. However, it is not advisable to follow any such information blindly and go for huge investments based solely on such info. It is always prudent to check the authenticities of these information from other websites or sources before going for investment based on these. Experience generally teaches all these matters during the course of one’s trading venture. There seem to be no absolutely perfect ideas or tips for this avenue as all these may work at times and may also fail at some other time. One needs to keep on trying discretely till one gets the pulses of these and gets comfortable with his overall investment process over a reasonable span of time.

 

Initial losses seem to be a must for new investors unless they are backed by some real smart mentors. Bringing down the losses gradually and then generating profits may be a key to success in this avenue. Once one starts generating profits more frequently than losses, one is most probably into the exciting career of trading in securities where sky is the limit where one could generate good income from a minor capital and thus start creating wealth for oneself from the comfort of one’s home without dealing with the hustles involved in other avenues of income. You are on your own now. Trade whenever you like and go for vacation whenever you want a break. Nobody is there to stop you and it’s your life now true to its meaning.

 

Nevertheless, that does not imply that one does not need a systematic approach to this avenue of income. In fact, that is the essence of sustaining in this profession and yet one can still enjoy a real independent career or lifestyle as compared to most other careers. That is the beauty of it once one graduates to a successful trader or investor. That’s no mean feat however. Money, after all, does not grow on trees. At least I have not been able to be one so far and nor have I decided to become a full-fledged investor as of now. However, I have been trying and improving in this field gradually and would love to have this as my profession one day, if only I could.

 

I have been searching the net for quite sometime now to add to my trading knowledge or skills which at the moment is in a nascent stage. Mentioned below are some of the links I had found useful in some way or the other. As I have already mentioned, one may not follow these blindly, but yet these could prove to be quite helpful at times. Finally it is one’s own discretion that would lead one to the destination. I have mentioned these in the hope of benefiting the readers and they are welcome to provide their comments, inputs etc.

 

For viewing charts of performance of stocks over a period of time the following links may be helpful:  http://www.tradersedgeindia.com/stock_charts.htm,   http://www.vantagetrade.com, finance.yahoo.com/charts.

 For free simple software to get entry and exit point of a stock (this software named Pivot Point Calculator works well sometimes, but not always):  http://surefirething.com.

There other websites providing various kind of downloadable calculators which could be beneficial in various ways, e.g. http://www.bloomberg.com/invest/calculators/index.html.

 For daily free tips on shares in NSE & BSE:  www.Indian-Share-Tips.blogspot.com, www.day-trading-shares.blogspot.com, http://www.power2profit.com/sharetips.htm, http://niftyviews.blogspot.com, www.knowyourprofit.com,

www.95506am.blogspot.com,  http://www.stockadv.com, http://www.sharemasterindia.com etc.  Not all these sites may provide regular free tips. Most of them also provide subscription services.

 For trading software one may try:  www.technicaltrends.com,  www.viratechsoftware.com,   http://www.spidersoftwareindia.com/index1.htm,  www.reliable.co.in,  http://www.trader-software.com.

I have not tried these softwares myself and do not have much idea about these as such, but someone could be interested in exploring them in these sites. Most of these are not free. Software like Metastock, Falcon etc. are supposed to generate buy and sell signals for stocks. Then there are other free softwares like Amibroker, Amiquote which offer host of live information about stocks including live quotes, charts, technical indicators and many more.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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