Trading Zone India

2.1– Overview In the previous chapter we briefly understood what Technical Analysis was all about. In this chapter we will focus on the versatility and the assumptions of Technical Analysis. 2.2 – Application on asset types Probably one of the greatest versatile features of technical analysis is the fact you can apply TA on any asset class as long as the asset type has historical time series data. Time series data in technical analysis context is information pertaining to the price variables namely – open high, low, close, volume etc. Here is an analogy that may help. Think about learning how to drive a car. Once you learn how to drive a car, you can literally drive any type of car. Likewise you only need to learn technical analysis once. Once you do so, you can apply the concept of TA on any asset class – equities, commodities, foreign exchange, fixed income etc. This is also probably one of the biggest advantages of TA when compared to the other fields of study. For ...

.1 – Overview The previous module set us on a good plane with the basic understanding about the stock markets. Taking cues from the previous module, we now know that developing a well researched point of view is critical for stock market success. A good point of view should have a directional view and should also include information such as: Price at which one should buy and sell stocks Risk involved Expected reward Expected holding period Technical Analysis (also abbreviated as TA) is a popular technique that allows you to do just that. It not only helps you develop a point of view on a particular stock or index but also helps you define the trade keeping in mind the entry, exit and risk perspective. Like all research techniques, Technical Analysis also comes with its own attributes, some of which can be highly complex. However technology makes it easy to understand. We will discover these attributes as we proceed along this module. 1.2 – Technical Analysis, what is i...

12.1 – Overview For a market participant transacting just based on company specific information may not be sufficient. It is also important to understand the events that influence the markets. Various outside factors, economic and/or non-economic events have a key impact on the performance of stocks and markets in general. In this chapter we will try to understand some of these events, and also how the stock market reacts to them. 12.2 – Monetary Policy The monetary policy is a tool with which the Reserve Bank of India (RBI) controls the money supply by controlling the interest rates. They do this by tweaking the interest rates. RBI is India’s central bank. World over every country’s central bank is responsible for setting the interest rates. While setting the interest rates the RBI has to strike a balance between growth and inflation. In a nutshell – if the interest rates are high that means the borrowing rates are high (particularly for corporations). If corporate ca...

1.1 – Overview Corporate actions are initiatives taken up by a corporate entity that bring in a change to its stock. There are many types of corporate actions that an entity can choose to initiate. A good understanding of these corporate actions gives a clear picture of the company’s financial health, and also to determine whether to buy or sell a particular stock. In this chapter, we will be looking into the five most important corporate actions and their impact on stock prices. A corporate action is initiated by the board of directors, and approved by the company’s shareholders. 11.2 – Dividends Dividends are paid by the company to its shareholders. Dividends are paid to distribute the profits made by the company during the year. Dividends are paid on a per share basis. For example, during the financial year 2012-13 Infosys had declared a dividend of Rs.42 per share. The dividend paid is also expressed as a percentage of the face value. In the above case, the face valu...