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Stock market trading strategies india

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stock market trading strategies india

Day trading is speculation in securitiesspecifically buying and selling financial instruments within the same trading day. Strictly, day trading is trading only within a day, such that all positions trading closed before the market closes for the trading day. Many traders may not be so strict or may have day trading as one component of an overall strategy. Traders who participate in day trading are called day traders. Traders who trade in this capacity with the motive of profit are therefore speculators. The methods of quick trading contrast with the long-term trades underlying buy and hold and value investing strategies. Some of the more commonly day-traded financial instruments are stocksoptionscurrenciesand a host of futures stock such as equity index futures, interest rate futures, currency futures and commodity futures. Day trading was once an activity that was exclusive to financial firms and professional speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin tradingday trading is available to private individuals. Some day traders use an intra-day technique known as scalping that usually has the trader holding a position for a few minutes or even seconds. Most day traders exit positions before the market closes to avoid unmanageable risks—negative price gaps between one day's close and the next day's price at the open. Other traders believe they should let the profits runso it is acceptable to stay with a position after the market closes. Day traders sometimes borrow money to trade. This is called margin trading. Since margin interests are typically only charged on overnight balances, the trader may pay no fees for the margin benefit, though still running the risk of a margin call. The margin interest rate is usually based on the broker's call. Because of the nature of financial leverage and the rapid returns that are possible, day trading results can range from extremely profitable to extremely stock, and high-risk profile traders can generate either huge percentage returns or huge percentage losses. Because of the high profits and losses that day trading makes possible, these traders are sometimes portrayed as " bandits " or " gamblers " by other investors. The common use of buying on margin using borrowed funds amplifies gains and losses, such that substantial losses or gains can occur in a very short period of time. In addition, brokers usually allow bigger margins for day traders. Because of the high risk of margin use, and of other day trading practices, a day trader will often have to exit a losing position very quickly, in order to prevent a greater, unacceptable loss, or even a disastrous loss, much larger than his or her original investment, or even larger than his or her total assets. Originally, the most important U. A trader would contact a stockbroker, who would relay the order to a specialist on the floor of the NYSE. These specialists would each make markets in only a handful of stocks. The specialist would match the purchaser with another broker's seller; write market physical tickets that, once processed, would effectively transfer the stock; and relay the information back to both brokers. One of the first steps to make day trading of shares potentially profitable was the change in the commission scheme. Inthe United States Securities and Exchange Commission SEC made fixed commission rates illegal, giving rise to discount brokers offering much reduced commission rates. Financial settlement periods used to be much longer: Before the early s at the London Stock Exchangefor example, stock could be paid for up to 10 working days after it was bought, allowing traders trading buy or sell shares at the beginning of a settlement period only to sell or buy them before the end of the period hoping for a rise in price. This activity was identical to modern day trading, but for the longer duration of the settlement period. But today, to reduce market risk, the settlement period is typically three working days. Reducing the settlement strategies reduces the likelihood of defaultbut was impossible before the advent of electronic ownership transfer. The systems by which stocks are traded have also evolved, the second half of the twentieth century having seen the advent of electronic communication networks ECNs. These are essentially large proprietary computer networks on which brokers could list a certain amount of securities to sell at a certain price the asking price or "ask" or offer to buy a certain amount of securities at a certain price the "bid". ECNs and exchanges are usually known to traders by a three- or four-letter designators, which identify the ECN or exchange on Level II stock screens. The first of these was Instinet or "inet"which was founded in as a way for major institutions to bypass the increasingly cumbersome and expensive NYSE, also allowing them to trade during hours when the exchanges were closed. Early ECNs such as Instinet were very unfriendly to small investors, because they tended to give large institutions better prices than were available to the public. This resulted in a fragmented and sometimes illiquid market. The next important step in facilitating day trading was the founding in of NASDAQ —a virtual stock exchange on which orders were transmitted electronically. Moving from paper share certificates and written share registers to "dematerialized" shares, computerized trading and registration required not only india changes to legislation but also the development of the necessary technology: These developments heralded the appearance of " market makers ": A market maker has an inventory of stocks to buy and sell, and simultaneously offers to buy and sell the same stock. Obviously, it will offer to sell stock at a higher price than the price at which stock offers to buy. This difference is known as the "spread". The market maker is indifferent as to whether the stock goes up or down, it simply tries to constantly buy for less than it sells. A persistent trend in one direction will result in a loss for the market maker, but the strategy is overall positive otherwise they would exit the business. Today there are about strategies who participate as market-makers on ECNs, each generally making a market in four to forty different stocks. Without any legal obligations, market-makers were free to offer smaller spreads on ECNs than on the NASDAQ. Following the stock market crash, the SEC adopted "Order Handling Rules" which required market-makers to publish their best bid and ask on the NASDAQ. Another reform made was the " Small Order Execution System ", or "SOES", which required market makers to buy or sell, immediately, small orders up to shares at the market-makers listed bid or ask. The SOES system ultimately led to trading facilitated by software instead of market makers via electronic communications networks "ECNs". In the late s, existing ECNs began to offer their services to small investors. New brokerage firms which specialized in serving online traders who wanted india trade on the ECNs emerged. New ECNs also arose, most importantly Archipelago "arca" and Island "isld". Archipelago eventually became a stock exchange and in was purchased by the NYSE. At this time, the NYSE has proposed merging Archipelago with itself, although some resistance has arisen from NYSE members. Moreover, the trader was able in to buy the stock almost instantly and got it at a cheaper price. ECNs are in constant flux. New ones are formed, while existing ones are bought or merged. As of the end ofthe most important ECNs to the individual trader were:. This combination of factors has made day trading in stocks and stock derivatives such as ETFs possible. The low commission rates allow an individual or small firm to make a large india of trades during a single day. The liquidity and small spreads provided by ECNs allow an individual to make near-instantaneous trades and to get favorable pricing. The market for individuals to day trade coincided with the extreme bull market in technological issues from to earlyknown as the Dot-com bubble. From tothe NASDAQ rose from to In March,this bubble burst, and a large number of less-experienced day traders began to lose money as fast, or faster, than they had made india the buying frenzy. The NASDAQ crashed from back to strategies many of the less-experienced traders went broke, although obviously it was possible to have made a fortune during that time by shorting or playing on volatility. In parallel to stock stock, starting at the end of the s, a number of new Market Maker firms provide foreign exchange and derivative day trading through new electronic trading platforms. These allowed day traders to have instant access to decentralised markets such as forex and global markets through derivatives such as contracts for difference. Most of these firms were based in the UK and later in less restrictive jurisdiction, this was in part due to the regulations in the US prohibiting this type of over-the-counter trading. These firms typically provide trading on margin allowing day traders to take large position with relatively small capital, but with the associated increase in risk. Retail forex trading became a popular way to day trade due to its liquidity and the hour nature of the market. The following are several basic strategies by which day traders attempt to make profits. Besides these, some day traders also use india reverse strategies more commonly seen in algorithmic trading to trade specifically against irrational behavior from day traders using these approaches. It is important for a trader to remain flexible and adjust their techniques to match changing market conditions. Some of these approaches require shorting stocks instead of buying them: There are several technical problems with short sales—the broker may not have shares to lend in a specific issue, the broker can call for the return of its shares at any time, and some restrictions are imposed in America by the U. Securities and Exchange Commission on short-selling see uptick rule for details. Some of these restrictions in particular the uptick rule don't apply to trades of stocks that are actually shares of an exchange-traded fund ETF. Trend followinga strategy used in all trading time-frames, assumes that financial instruments strategies have been rising steadily will continue to rise, and vice versa with falling. The trend follower buys an instrument which has been rising, or short sells a falling one, in the expectation that the trend will continue. Contrarian investing is a market timing strategy used in all trading time-frames. It assumes that financial instruments which have stock rising steadily will reverse and start to fall, and vice versa. The contrarian trader buys an market which has trading falling, or short-sells a rising one, in the expectation that the trend will change. Range trading, or range-bound trading, is a trading style in which stocks are watched that have either been rising off a support price or falling off a resistance price. That is, every time the stock hits a high, it falls stock to the low, and vice versa. Such a stock is said to be "trading in a range", which is the opposite of trending. A related approach to range trading is looking for moves outside of an established range, called a breakout price moves up or a breakdown price moves downand assume that once the range has been broken prices will continue in that direction for some time. Scalping was originally referred to as spread trading. Scalping is a trading style where small price gaps created by the bid-ask spread are exploited strategies the speculator. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds. Scalping highly liquid instruments for off-the-floor day traders involves india quick profits while minimizing risk loss exposure. The basic idea of scalping is to exploit the inefficiency of the market when volatility increases and the trading range expands. When stock values suddenly rise, they market sell securities that seem overvalued. Rebate trading is an equity trading style that uses ECN rebates as a primary source of profit and revenue. Most ECNs charge commissions to customers who want to have their orders filled immediately at the best prices available, but the ECNs pay commissions to buyers or sellers who "add liquidity" by placing limit orders that create "market-making" in a security. Rebate traders seek to make money from these rebates and will usually maximize their returns by trading low priced, high volume stocks. This enables them to trade more shares and contribute market liquidity with a set amount of capital, while limiting the risk that they will not be trading to exit a position in the stock. The basic strategy of news playing is to buy a stock which has trading 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. Determining whether news is "good" or "bad" must be determined by the price action of the stock, because the market reaction may not match the tone of the news itself. This is because rumors or estimates of the event like those issued by market and industry analysts will already have been circulated before the official release, causing prices to move in anticipation. The price movement caused by the official news will therefore be determined by how good the news is relative to the market's expectations, not how good it is in absolute terms. Keeping things simple can also be an effective methodology when it comes to trading. These traders rely on a combination of price movement, chart patterns, volume, and other raw market data to gauge whether or not they should take a trade. This is seen as a "simplistic" and "minimalist" approach to trading but is not by any means easier than any other trading methodology. It requires a sound background in understanding how markets work and the core principles within a market, but the good stock about this type of methodology is it will work in virtually any market that exists stocks, foreign exchange, futures, gold, oil, etc. An estimated one third of stock trades in in United States were generated by automatic algorithmsor high-frequency trading. The increased use of algorithms and quantitative techniques has led stock more competition and smaller profits. Commissions for direct-access brokers are calculated based on volume. The more shares traded, the cheaper the commission. A scalper can cover such strategies with even a minimal gain. The numerical difference between the bid and ask prices is referred to as the bid-ask spread. Most worldwide markets operate on a bid-ask -based system. The ask prices are immediate execution market prices for quick buyers ask takers while bid prices are for quick sellers bid takers. If a trade is executed at quoted prices, closing the trade immediately without queuing would always cause a loss because the bid price is always less than the ask price at any point in time. The bid-ask spread is two sides of the same coin. The spread can be viewed as trading bonuses or costs according to different parties and different strategies. On one hand, traders who do NOT wish to queue their order, instead paying the market price, pay the spreads costs. On the other hand, traders who wish to queue and wait for execution receive the spreads bonuses. Some day trading strategies attempt to capture the spread as additional, or even the only, profits for successful trades. Market data is necessary for day traders, rather than using the delayed by anything from 10 to 60 minutes, per exchange rules [8] market data that is available for free. A real-time data feed requires paying fees to the respective stock exchanges, usually combined with the broker's charges; these fees are usually very low compared to the other costs of trading. The fees may be waived for promotional purposes or for customers meeting a minimum monthly volume of trades. Even a moderately active day trader can expect to meet these requirements, making the basic data feed essentially "free". Strategies addition to the raw market data, some traders purchase more advanced data feeds that include historical data and features such as scanning large numbers of stocks in the live market for unusual activity. Complicated analysis and charting software are other popular additions. These types of systems can cost from tens to hundreds of dollars per month to access. Day trading is considered a risky trading style, and regulations require brokerage firms to ask whether the clients understand the risks of day trading and whether they have prior trading experience before entering the market. In addition, in the US the Financial Industry Regulatory Authority and SEC further restrict the entry by means of "pattern day trader" amendments. Pattern day trader is a term defined by the SEC to describe any trader who buys and sells a particular security in the same trading day day tradesand does this four or more times in any five consecutive business day period. It is important to note that this requirement is only for day traders using a margin account. From Wikipedia, the free encyclopedia. This article is about the practice. For the occupation, see Day trader. This article has multiple issues. Please help improve it or discuss these issues on the talk page. Learn how and when to remove these template messages. Trading Strategies for Direct Access Trading: Change is the only Constant. Lindzon, Howard ; Pearlman, Philip; Ivanhoff, Ivaylo. SFO Magazine republished on Trader Planet, Retrieved 2 October Retrieved 11 August Artificial intelligence applied heavily to picking stocks - Business - International Herald Tribune. Primary market Secondary market Third market Fourth market. Common stock Golden share Preferred stock Restricted stock Tracking stock. Authorised capital Issued shares Shares outstanding Treasury stock. Broker-dealer Day trader Floor broker Floor trader Investor Market maker Proprietary trader Quantitative analyst Regulator Stock trader. Electronic communication network List of stock exchanges Opening times Multilateral trading facility Over-the-counter. Alpha Arbitrage pricing theory Beta Bid—ask spread Book value Capital asset pricing model Capital market line Dividend discount model Dividend yield Earnings per share Earnings yield Net asset value Security characteristic line Security market line T-model. Algorithmic trading Buy and hold Concentrated stock Contrarian investing Day trading Dollar cost averaging Efficient-market hypothesis Fundamental analysis Growth stock Market timing Modern portfolio theory Momentum investing Mosaic theory Pairs trade Post-modern portfolio theory Random walk hypothesis Sector rotation Style investing Swing trading Technical analysis Trend following Value investing. Block trade Cross listing Dark liquidity Dividend Dual-listed company DuPont analysis Efficient frontier Flight-to-quality Haircut Initial public offering Margin Market anomaly Market capitalization Market depth Market manipulation Market trend Mean reversion Momentum Market outcry Public india Public offering Rally Returns-based style analysis Reverse stock split Share repurchase Short selling Slippage Speculation Stock dilution Stock market index Stock split Trade Uptick rule Volatility Voting interest Yield. Trading shareholder Distressed securities Risk arbitrage Special situation. Algorithmic trading Day trading High-frequency trading Prime brokerage Program trading Proprietary trading. Commodities Derivatives Equity Fixed income Foreign exchange Money markets Structured securities. Arbitrage pricing theory Assets under management Black—Scholes model Greeks finance: Vulture funds Family offices Financial endowments Fund of hedge funds High-net-worth market Institutional investors Insurance companies Investment banks Merchant banks Pension funds Sovereign wealth funds. Fund governance Hedge Fund Standards Board. Alternative investment management companies Hedge funds Hedge fund managers. Retrieved from " https: Navigation menu Personal tools Not logged in Talk Contributions Create account Log in. Views Read Edit View history. Navigation Main page Contents Featured content Current events Random article Donate to Wikipedia Wikipedia store. Trading Help About Wikipedia Community portal Recent changes Contact page. Tools What links here Related changes Upload file Special pages Permanent link Page information Wikidata item Cite this page. This page was last edited on 22 Juneindia Text is available under the Creative Commons Attribution-ShareAlike License ; additional terms may apply. By using strategies site, you agree to the Terms of Use and Privacy Policy. Privacy policy Trading Wikipedia Disclaimers Contact Wikipedia Developers Cookie statement Mobile view. This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. July Learn how and when to remove this template message. The examples and perspective in this article may not represent a worldwide view of the subject. You may improve this articlediscuss the issue on the talk pageor create a new articleas appropriate. April Learn how and when to remove this template message. Markets Commodities Derivatives Equity Fixed income Foreign exchange Money markets Structured securities. stock market trading strategies india

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