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[How to Trade with Technical Charts](http://akhilendra.com/?p=238)
Posted by admin on February 10, 2011 [None comments](http://akhilendra.com/?p=238#respond)
[](http://akhilendra.com/wp-content/uploads/2011/02/ebookcover_latest-11.png)Imagine the amount of money you have lost in stock market by following others.
Now be your expert, invest in yourself.
Stop following others and learn about technical analysis.
Learn why stock market moves in a certain fashion and how we can gain out of it.
So, grab this ebook only for USD 14/INR 640.
what to expect from the book
A compact book with chapters containing all the information about technical analysis.
Detailed analysis of candlestick charts and it’s formations.
Technical chart patterns and Trend lines.
Emphasis have been given on explaining concepts by using real time charts and minimum theory.
[Click Here to Download your Copy](http://1.akhilebook.pay.clickbank.net)
All the important charts and technical indicators.
Art of money management.
More than 70 real time charts has been used to explain charts, patterns and indicators.
10 power packed chapters with in depth analysis of the following topics,
1. Type of charts.
2. Candlestick charts in details and its formations.
3. Trendlines.
4. Reversal Patterns
5. Continuation Patterns
6. Lagging Indicators
7. Leading Indicators
8. How to club them together and use them
How to figure out the entry and exit points.
[Click Here to download your copy](http://1.akhilebook.pay.clickbank.net)
How to understand the distinguish between Bull, Bear and Sideways trading market.
What not to expect from book
This book is specifically for technical analysis , so there are no information about fundamental analysis. Learning Technical analysis require some efforts. It is not very difficult, but it requires practice. There are no stock picks but one can prepare self and pick own stocks.
If you are not able to make payment using the given link or have any question, please send your queries at;
akhi_pratap@hotmail.com
This is a sticky post! [continue reading?](http://akhilendra.com/?p=238)
[Stock Idea](http://akhilendra.com/?p=290)
Posted by admin on February 18, 2011 [None comments](http://akhilendra.com/?p=290#respond)
Tata Steel’s India operations reported net sales of INR 74 bn for Q3FY11, up 4.1% Q-o-Q and 17.3% Y-o-Y. European operations reported sales volume of 3.5 mt in Q3FY11. Metals have been shining since last few months and TATA steel is one of most prominent player in Indian and Global Market.
Stock is trading around its 20 day moving average. RSI and Slow stochastic are moving ahead. Though markets are turbulent at the moment and can slip in any direction. Therefore, one can enter into TATA steel with a time frame of 6-9 months.
Stock is expected to touch 680-700. Accumulate at dips which may happen during the course. And book profit above Rs 680.
[](http://akhilendra.com/wp-content/uploads/2011/02/TATA-Steel.jpg)
[How to choose a mutual fund?](http://akhilendra.com/?p=215)
Posted by admin on January 22, 2011 [1 comments](http://akhilendra.com/?p=215#comments)
Stock market has been moving in zigzag directions and it is very difficult for a average investor to catch it. So they often end up entering in wrong directions i.e. they either buy just before fall or sell when markets are about to rebound. With growing uncertainty in Indian market, mutual funds are gradually becoming favorites of many investors. Mutual Funds offer a very good opportunity to enter stock market with minimizing risk. But with growing number of investors, mutual fund houses are also gearing up to attract investors. They are offering wide range of products and now even selecting a good fund has become a challenge.
Choosing a correct mutual fund scheme from the basket of funds is like picking one among thousands. It doesn’t mean there are good and bad schemes, off course there are, but even picking the most appropriate schemes among good scheme is a huge challenge. It is very important to understand that there are many good schemes and we need to pick one the most appropriate one. And to do that we need to consider few important things;
Goal- The most important factor in investment across all instruments is Goal. It is the most important factor to keep in mind while shopping for mutual funds. whether you are going to invest for short term for example buying a car or for your child education. Time frame is the most important factor in investing. if time frame is more than 1 year but less than three year, go for a fund which invest in large blue chip companies. If you are looking for something for a long term, you can opt for a small and midcap companies.
Risk Profile- Risk profiling is one of the basic steps, one need to take before investing in any financial instrument. Mutual funds are comparatively safer than direct investment in equities but they too offer great amount of risk depending upon the kind of schemes you invest.So, it is very important to understand own risk appetite and then choose accordingly. Higher the risk , greater is the return on investment. Equity diversified funds are the most popular among all kind of funds available in market. Small and mid cap funds offer highest returns but are the riskiest funds available. Then comes, large cap funds which invest in large companies and they are the most balanced equity funds. They offer good returns and at the same time, offer good safety cushion. If someone is looking for a very short term and is not ready to take much risk on the invested capital, then go for short term debt funds. There are variety of other kind of schemes available in the market like Balance funds, funds of funds, Thematic equity funds, etc. One should always choose schemes after proper risk assessment.
Fund House and its past performance- Though it is often said that past performance is not a guarantee for the future performance but it is a very good indicator. In the recent past, we have seen lot of new fund houses flooding Indian market and it has become very difficult to choose the correct fund house even if we have a clear idea about the kind of schemes we are going to invest. While shopping for mutual funds, always look at the number of years a company has been in the industry, total asset under management and its past performance. Old and established fund house will offer better and consistent services.
Though no one can assure anyone of high returns, but by considering these factors we can generate optimum returns. Watch out this space for more information on this issue.
[Option Pricing](http://akhilendra.com/?p=213)
Posted by admin on January 14, 2011 [None comments](http://akhilendra.com/?p=213#respond)
In addition to my previous post about Future and Options trading, today we are going to cover pricing in option. Option trading is very important as it is very economical and can offer great returns. But we need to understand it before we should enter it. One of the most important aspects of options trading is its pricing. Its pricing include;
Intrinsic value (Call Options)- When the strike price is below the current price, it is called In the Money call options.
Intrinsic value (Put Options)- When the strike price is above the current price, it is called In the Money Put options.
At the money- when the strike price is equals to the current market price, it is called At the money options.
Time Value- It is one of the most important factor in option trading. It depends upon the number of days remaining in expiry. Prior to expiration, any premium in excess of intrinsic value is called time value. Time value is also known as the amount an investor is willing to pay for an option above its intrinsic value. If the days remaining in expiry are more, chances of achieving the target is more, so the longer the amount of time for market conditions to work to an investor’s benefit, the greater the time value.
Price of underlying security- price can increase or decrease the value of an option. These price changes have opposite effects on calls and puts. Market price of a call option is directly proportional to the market price of security and inversely proportional for Put options. For example, if the value of the underlying security moves up, market price of a call option will increase and the value of a put will decrease in price and decrease in the underlying security’s value will increase the price of the put option.
The strike price determines whether or not an option has any intrinsic value. An option’s value (intrinsic value plus time value) generally increases as the option becomes more in the money, and decreases as the option becomes more out of the money.
Time Component-Time until expiration is a very significant component of option pricing, as discussed earlier, it affects the time value component of an option’s premium. Generally, as expiration approaches, the levels of an option’s time value, for both puts and calls, decreases or “erodes.” This effect is most noticeable with at-the-money options.
Volatility-The effect of volatility is the most subjective and perhaps the most difficult factor to quantify, but it can have a significant impact on the time value portion of an option’s premium. Volatility is simply a measure of risk (uncertainty), or variability of price of an option’s underlying security. Higher volatility estimates reflect greater expected fluctuations (in either direction) in underlying price levels. This expectation generally results in higher option premiums for puts and calls alike, and is most noticeable with at-the-money options. So if the security prices are moving in momentum in either directions, then volatility would be less and if prices are moving sideways, then volatility would be higher.
Interest rates- The effect of an underlying security’s dividends and the current risk-free interest rates also have it impact on option pricing. It have a small but measurable effect on option premiums. This effect reflects the “cost of carry” of shares in an underlying security — the interest that might be paid for margin or received from alternative investments (such as a Treasury bill), and the dividends that would be received by owning shares outright.
[Adding another chapter in Indian Life Insurance Industry](http://akhilendra.com/?p=209)
Posted by admin on January 10, 2011 [None comments](http://akhilendra.com/?p=209#respond)
With the recent changes in ULIP guidelines, Insurance Regulatory and Development Authority has suddenly put a break to the wild sale of ULIPs by life insurance companies and added a new chapter in the Life Insurance Industry history. Ever since of ULIPs were introduced in Indian market, they were the favorite of the companies and companies were only focusing upon them. They were launching most of the new products in ULIP category. This was mainly because of the high margin in ULIP business. Now as the guidelines have changed, those margins have shrunk and life insurance companies are being forced to relook their product portfolios.
ULIPs lacked transparency and were grossly mis sold. Their charges were higher and agents were paid high commissions to promote their sales. IRDA capped their charges and September 2010 onwards, these products are fair valued and well placed but as margins have gone down, companies are looking for alternatives to boost sales and overall margins. IRDA’s change in guidelines and debate after that led to the apprehension among investors and their sales were dropped.
Now insurance companies are launching traditional Non-ULIP products like Term Plan, Money back plan and Pension plan, etc. ULIPs have lost their attractiveness to the traditional plans which were traditionally ignored in the last decade. Earlier, ULIPs were contributing more than 85 per cent of the total new business premium collection of the companies but now they have gone down to as low as 50 per cent. As per the data available on internet, most of the leading private insurers in India have decreased their dependency on the ULIP products.
Though, companies are quite confident that sales of ULIP will again pick and volumes will make them profitable. But as stock market is also quite volatile, it may still take some more time before investors again start taking a look at these ULIPs. It is going to be a challenge for life insurance companies to reshape their business model and attract customers again. Investors are now more cautious about their investment decisions and looking for more options. Mutual offer a better bet than ULIPs and traditional plans, so regaining old volumes may remain a challenge for the life insurers.
[Bollinger Bands & Rate of change Indicator](http://akhilendra.com/?p=205)
Posted by admin on January 1, 2011 [None comments](http://akhilendra.com/?p=205#respond)
Bollinger Bands
Bollinger Bands are a technical analysis tool invented by John Bollinger in the 1980s. Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades.
Bollinger Bands consist of:
a middle band being an N-period simple moving average (MA)
an upper band at K times an N-period standard deviation above the middle band (MA + K?)
a lower band at K times an N-period standard deviation below the middle band (MA ? K?)
Typical values for N and K are 20 and 2, respectively. The default choice for the average is a simple moving average, but other types of averages can be employed as needed. Exponential moving averages are a common second choice. [note 1] Usually the same period is used for both the middle band and the calculation of standard deviation.
Interpratation
They can be used to determine if prices are relatively high or low. According to Bollinger, the bands should contain 88-89% of price action, which makes a move outside the bands significant. Technically, prices are relatively high when above the upper band and relatively low when below the lower band. High or Low doesn’t indicate Sell or Buy signals. Prices are high or low for a reason. As with other indicators, Chartists should combine Bollinger Bands with basic trend analysis and other indicators for confirmation.
[](http://akhilendra.com/wp-content/uploads/2011/01/600px-BollingerBandsSPX_svg.png)
Rate of change (ROC) Indicator
Rate of change is a momentum indicator which shows the percentage difference between the current price and the price n periods ago.
ROC = (Close – Close N periods ago) / Close N periods ago * 100
ROC moves above and below the zero line. when prices are moving up, it will move high and when prices are moving down, it will move down. It is a very useful indicator and is mainly used in measuring the trend. It is also sometimes referred as momentum indicator. As a momentum oscillator, ROC signals include centerline crossovers, divergences and overbought-oversold readings. It should be used in conjunction with other indicator before taking any final call.
ROC produces easily indentifiable oversold an overbought signals. When can buy the stock with positive ROC and Short stocks with negative ROC.
[](http://akhilendra.com/wp-content/uploads/2011/01/2010Dec-TATA-CONSULTANCY-SERV-LT-800x600.png)
[MACD](http://akhilendra.com/?p=201)
Posted by admin on December 26, 2010 [None comments](http://akhilendra.com/?p=201#respond)
MACD which stands for moving average convergence divergence is momentum indicator. it is a trend following indicator that is based on two moving averages of prices. The MACD measures the divergence and convergence between a shorter term moving average and longer term moving average. MACD is the difference between two moving average. it measure trend and momentum, where momentum shows the strength of the trend.
It is created by calculating a 12 day EMA and a 26 day EMA of closing price. The 26 day EMA is then subtracted from the 12 day EMA and the difference is plotted as solid line. This is known as fast line and then a slow line is plotted as a dashed line. MACD is drawn in two form;
1. The line form
2. Histogram
How to use it;
1. if MACD is greater than zero, it means that the short term average is higher than the longer term average, signaling an up trend.
2. If MACD is less than zero it suggests a down trend.
[](http://akhilendra.com/wp-content/uploads/2010/12/MACDpicwiki.gif)
[FNO Trading](http://akhilendra.com/?p=195)
Posted by admin on December 18, 2010 [None comments](http://akhilendra.com/?p=195#respond)
Derivatives, as the name suggest are the derivative products whose price is derived from the underlying assets like stocks, commodities, currency or bullion. Derivatives are financial instruments which are very popular among hedgers and traders. They are traded on exchanges like any other stocks. Derivatives are traded at separate segment of existing exchange like NFO. Derivatives trading is broadly done through Future and Options.
Future and Options are also known as FNO. They are considered as high risk and high rewarding products. Future and options, both are derivative instrument, but are traded differently. They were traditionally being used for hedging but now because of their high rewarding nature, they are attracting fresh breed of aggressive traders.
Future Trading
Future trading is quite different from trading in cash market. In cash market, you buy stock in multiple in one and pay full transaction amount. You can hold it as long as you like where as in future trading, you cannot buy stocks in multiple of one, you have to buy them in lots by paying a margin money and every lot has a expiry which is last Thursday of every month and you can maintain your position for maximum three months. You can go long or short on a stock or index depending upon your short term view on it. When you think that stock or index will move up, you buy it at low and sell it when prices move higher. This is known as going long and when you think that prices will move down, you sell it before buying it and then buy when it is low. Futures are linear product, which means, they posses unlimited gains and unlimited risk, as well.
So, when you buy/sell a future contract, it gives you a obligation to buy or sell the underlying asset at the expiry date. All future contracts are dated. They are settled at a daily basis. So, if you at the end of day, you are having a loss of Rs 100, then you need to add funds to your account and if you have gained Rs 100 then they will be credited to your account.
Options Trading
Options are the second type of derivative trading. In option trading, you pay a margin money and get the right to buy or sell a particular index/scrip but there is no obligation to do that. This makes it quite economical for trader with relatively low capital.An option is available in two form,
1. Call Option
2. Put Option
1. Call Option- When you think that the price of a particular index or scrip will move up, you buy Call Option.
2. Put Option- If a trader believe that price will go down, then Put Options are chosen.
An option is a non-linear product where risk is limited and profit is unlimited. Risk is limited because one will lose the margin money in worst case scenario, but can gain unlimited if markets moves in the desired direction. Strike Price is a key component in Option Trading. The Price at which scrip/index is trading in market is spot price and the price which a trader expect it to achieve in future is strike price. It can be high as well low than spot price, depending upon the call or put options. Theoretically, it is defined as the fixed price at which the owner of an option can purchase (in the case of a call), or sell (in the case of a put), the underlying security or commodity. It’s the price at which the stock will be bought or sold when the option is exercised. Other Important factors in the Options trading are;
In the Money
A call option whose strike price is below the current price of the underlying scrip or index and put option whose strike price is above the current market price.
For example- If Reliance Industries is trading at Rs 1000, then the RIL’s call option strike price below Rs 1000 like Rs 980, Rs 960 would be In the Money.
Out Of the Money
A call Option whose strike is above the current market price and put whose strike price is below the current price.
For Example- Lets refer to the previous example of Reliance Industries, So if it is trading at Rs1000 then the call options with strike rate above Rs 1000 would be Out Of the Money.
At the Money
If the strike price is equal to the current price, then it is At the Money.
It is very important to understand that one should only trade In the Money Options.
Pricing in Future and option is very important, we will look into that in our later posts.
[Average Movement Directional Movement Index (ADX)](http://akhilendra.com/?p=191)
Posted by admin on December 11, 2010 [1 comments](http://akhilendra.com/?p=191#comments)
ADX was developed by Welles Wilder.The ADX is a indicator which indicates whether market is trending or moving in a range. ADX tell about a market’s strength. This can help in avoiding weak market and staying in market for longer when it is trending to enhance gains. It doesn’t tells anything about market prices. It just tells about the strength of the current trend. It indicates the directional strength rather than it strength.
Directional Movement
Directional movement is defined as the difference between the highs and lows of a particular bar that falls outside the range of a previous bar. In terms of a daily chart, if price close above the previous close, it will be a positive directional movement and if it closed below previous close, then it will be negative directional movement.
The Directional Indicator (DI)
Welles Wilder developed directional indicator. Absolute difference in price movement fails to take into account the proportion of the movement.Wilder decided that price movements are better described in ratios and not numbers.DIs are calculated over a number of days. Wilder used 14 days for this. The DIs provide the timing signals in the directional movement system.
Conclusion
The primary thing in technical analysis is to look for high ADX.
1. A high ADX value defines a strong trend; the trend could be either up or down.
2. A low ADX shows a consolidation; such markets are quite volatile.
DI timing signals
1. Long Trades can be initiated when +DI moves over -DI.
2. Short trades should be done when -DI moves below +DI.
Though, it should not be used when ADX is very low.
[](http://akhilendra.com/wp-content/uploads/2010/12/ADX.jpg)
[Relative strength index (RSI)](http://akhilendra.com/?p=187)
Posted by admin on December 10, 2010 [None comments](http://akhilendra.com/?p=187#respond)
RSI is an oscillator which is used to measure the technical strength or weakness of a particular stock. It is a technical momentum indicator that compares the magnitude of recent gains against recent losses. They determine overbought and oversold conditions of a scrip.
RSI can be measured for any time frame. Most of the traders use 5 day, 7 day and 9 day RSI for short trading. It ranges between 0 and 100. 70 represents overbought condition and 30 represent oversold condition.
1. when RSI turns 30 after falling below 25, it is a bullish signal.
2. when RSI turns 70 after reaching 80 to 90 levels, it is considered bearish signals.
How to use RSI for trading?
BULLISH SIGNALS
Buy when RSI turns up from its second bottom and place stoploss below last minor low.
BEARISH SIGNALS
Sell when RSI turns down from its second high.
Charting Pattern
1. when RSI break its down trend and start moving up, buy.
2. when RSI breaks its up trend, sell.
[](http://akhilendra.com/wp-content/uploads/2010/12/RSIwiki.gif)
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