Why Nifty Might Open Gap Down On Monday

Major indices around the globe traded in red on Friday the 3rd of March. Japan’s Nikkei was down 2.50%, while the Hang Seng and Shanghai composite fell by 1.50%.

The SGX Nifty was down almost 180 points at 10261 even as markets remained closed in India due to Holiday.

SGX Nifty

Fed Rate Hike Imminant

The timing of the Global selloff coincides with the overtly hawkish stance of the US Federal Reserve, which has hinted at the possibility of more than three rate hikes in 2018.

The Feds stance has been strongly backed by the Bank of Japan which too has hinted at rolling back its QE Programme.

Although the Japanese Yen has strengthened in the aftermath of the Roll back call, it is unlikely to fall below the 100 mark.

USD YEN

Significant Drop In US 10 Year Treasury Yield

The proof of the pudding lies in the US 10 Year Treasury Yield. The 10 year Yield curve has dived significantly low to levels of 2.793 which indicates that funds are flowing out of the equity markets into the safe haven US Treasuries.

Well this isn’t good news for Emerging Markets like India. A steep rise in Fed Funds Rate will invariably attract higher interest service cost to Dollar Denominated loans. This leads a domino effect siphoning out funds from the subcontinent.

US 10year bond

The spill over effect will lead to Indian Banks raising their lending rates.  Petrol and Diesel prices are likely to rise in the coming days as India is an importer of crude oil.

Nifty in all likelihood could be in the hunt for its next support of level around 10078.

Nifty And Bank Nifty Poised For An Interesting Week On The Backdrop of PNB Scam

The benchmark index Nifty opened gap up by 50points at 10596 and went on to make a high of 10613. Nifty took resistance of the previous day high and corrected sharply to make a low of 10434 levels. It witnessed selling pressure throughout the day and finally closed near to its low at 10452. The index has technically formed a bearish candle in the daily timeframe chart as it has consistently taken resistance of 10600 levels which was the 50 SMA in the last three trading sessions. The next levels of support would be the 100 SMA mark which is the 10388 level. And on the upside the levels of 10650 has played a vital role as a major resistance level. In coming days we could see the index trading between 10650 – 10300 levels until it closes below the 100 SMA mark.

Bank Nifty opened gap up by 88points at 25512 and went on to make a high of 25601. It took resistance of the previous day high and corrected sharply to make a low of 25101 levels. The index witnessed a selling pressure throughout the day and closed at to the day’s low at 25164. The index has technically formed a bearish candle in the daily timeframe chart as it has consistently fallen from 25750 levels which were close to the 50 SMA levels and also closed below the 100 SMA levels of 25415. The next support level for the index is 25000 and on the upside the levels of resistance would be 25400 and 25600 levels.

 

 

 

 

 

How To be successful in trading

To be successful in trading, however, one needs to understand the importance of and adhere to a set of rules that have guided all types of traders, with a variety of trading account sizes. Each rule alone is important, but when they work together the effects are strong. Trading with these rules can greatly increase the odds of succeeding in the markets.

Rule No.1: Always Use a Trading Plan
A trading plan is a written set of rules that specifies a trader’s entry, exit and money management criteria. Using a trading plan allows traders to do this, although it is a time consuming endeavor.

With today’s technology, it is easy to test a trading idea before risking real money. Backtesting, applying trading ideas to historical data, allows traders to determine if a trading plan is viable, and also shows the expectancy of the plan’s logic. Once a plan has been developed and backtesting shows good results, the plan can be used in real trading. The key here is to stick to the plan. Taking trades outside of the trading plan, even if they turn out to be winners, is considered poor trading and destroys any expectancy the plan may have had.

Rule No.2: Treat Trading Like a Business
In order to be successful, one must approach trading as a full- or part-time business – not as a hobby or a job. As a hobby, where no real commitment to learning is made, trading can be very expensive. As a job it can be frustrating since there is no regular paycheck. Trading is a business, and incurs expenses, losses, taxes, uncertainty, stress and risk. As a trader, you are essentially a small business owner, and must do your research and strategize to maximize your business’s potential.

Rule No.3: Use Technology to Your Advantage
Trading is a competitive business, and one can assume the person sitting on the other side of a trade is taking full advantage of technology. Charting platforms allow traders an infinite variety of methods for viewing and analyzing the markets. Backtesting an idea on historical data prior to risking any cash can save a trading account, not to mention stress and frustration. Getting market updates with smartphones allows us to monitor trades virtually anywhere. Even technology that today we take for granted, like high-speed internet connections, can greatly increase trading performance.

Using technology to your advantage, and keeping current with available technological advances, can be fun and rewarding in trading.

Rule No.4: Protect Your Trading Capital
Saving money to fund a trading account can take a long time and much effort. It can be even more difficult (or impossible) the next time around. It is important to note that protecting your trading capital is not synonymous with not having any losing trades. All traders have losing trades; that is part of business. Protecting capital entails not taking any unnecessary risks and doing everything you can to preserve your trading business.

Rule No.5: Become a Student of the Markets
Think of it as continuing education – traders need to remain focused on learning more each day. Since many concepts carry prerequisite knowledge, it is important to remember that understanding the markets, and all of their intricacies, is an ongoing, lifelong process.

Hard research allows traders to learn the facts, like what the different economic reports mean. Focus and observation allow traders to gain instinct and learn the nuances; this is what helps traders understand how those economic reports affect the market they are trading. (Read about 24 different economic reports in our Economic Indicators Tutorial.)

World politics, events, economies – even the weather – all have an impact on the markets. The market environment is dynamic. The more traders understand the past and current markets, the better prepared they will be to face the future.

Rule No.6: Risk Only What You Can Afford to Lose
In rule No.4, I mentioned that funding a trading account can be a long process. Before a trader begins using real cash, it is imperative that all of the money in the account be truly expendable. If it is not, the trader should keep saving until it is.

It should go without saying that the money in a trading account should not be allocated for the kid’s college tuition or paying the mortgage. Traders must never allow themselves to think they are simply “borrowing” money from these other important obligations. One must be prepared to lose all the money allocated to a trading account.

Losing money is traumatic enough; it is even more so if it is capital that should have never been risked to begin with.

Rule No.7: Develop a Trading Methodology Based on Facts
Taking the time to develop a sound trading methodology is worth the effort. It may be tempting to believe in the “so easy it’s like printing money” trading scams that are prevalent on the internet. But facts, not emotions or hope, should be the inspiration behind developing a trading plan.

Traders who are not in a hurry to learn typically have an easier time sifting through all of the information available on the internet. Consider this: if you were to start a new career, more than likely you would need to study at a college or university for at least a year or two before you were qualified to even apply for a position in the new field. Expect that learning how to trade demands at least the same amount of time and factually driven research and study. (Refer to Day Trading Strategies For Beginners for a primer on picking the right strategy.)

Rule No.8: Always Use a Stop Loss
A stop loss is a predetermined amount of risk that a trader is willing to accept with each trade. The stop loss can be either a dollar amount or percentage, but either way it limits the trader’s exposure during a trade. Using a stop loss can take some of the emotion out of trading, since we know that we will only lose X amount on any given trade.

Ignoring a stop loss, even if it leads to a winning trade, is bad practice. Exiting with a stop loss, and thereby having a losing trade, is still good trading if it falls within the trading plan’s rules. While the preference is to exit all trades with a profit, it is not realistic. Using a protective stop loss helps ensure that our losses and our risk are limited.

Rule No.9: Know When to Stop Trading
There are two reasons to stop trading: an ineffective trading plan, and an ineffective trader.

An ineffective trading plan shows much greater losses than anticipated in historical testing. Markets may have changed, volatility within a certain trading instrument may have lessened, or the trading plan simply is not performing as well as expected. One will benefit by remaining unemotional and businesslike. It might be time to reevaluate the trading plan and make a few changes, or to start over with a new trading plan. An unsuccessful trading plan is a problem that needs to be solved. It is not necessarily the end of the trading business.

An ineffective trader is one who is unable to follow his or her trading plan. External stressors, poor habits and lack of physical activity can all contribute to this problem. A trader who is not in peak condition for trading should consider a break to deal with any personal problems, be it health or stress or anything else that prohibits the trader from being effective. After any difficulties and challenges have been dealt with, the trader can resume.

Rule No.10: Keep Trading in Perspective
It is important to stay focused on the big picture when trading. A losing trade should not surprise us – it is a part of trading. Likewise, a winning trade is just one step along the path to profitable trading. It is the cumulative profits that make a difference. Once a trader accepts wins and losses as part of the business, emotions will have less of an effect on trading performance. That is not to say that we cannot be excited about a particularly fruitful trade, but we must keep in mind that a losing trade is not far off.

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GAMBLING AND TRADING – Are SAME?

Day trading is a cousin to both investing and gambling, but it is not the same as either. Day trading involves quick reactions to the markets, not a long-term consideration of all the factors that can drive an investment. It works with odds in your favor, or at least that are even, rather than with odds that are against you.

Investing is slow and steady

Investing is the process of putting money at risk in order to get a return. It’s the way that businesses get started, roads get built, and explorations get financed.

Investing is very much focused on the long term. Good investors do a lot of research before committing their money because they know that it will take a long time to see a payoff. Investors often invest in things that are out of favor, because they know that, with time, others will recognize the value and respond in kind.

In contrast to investing, day trading moves fast. Day traders react only to what’s on the screen. There’s no time to do research, and the market is always right when you’re day trading. You don’t have two months or two years to wait for the fundamentals to work out and the rest of Wall Street to see how smart you were. And if you can’t live with that, you shouldn’t be day trading.

Day trading works fast

Trading is the act of buying and selling securities. All investors trade, because they need to buy and sell their investments. But to investors, trading is a rare transaction, and they get more value from finding a good opportunity, buying it cheap, and selling it at a much higher price sometime in the future. But traders are not investors.

Traders look to take advantage of short-term price discrepancies in the market. In general, they don’t take a lot of risk on each trade, so they don’t get a lot of return on each trade, either. Traders act quickly. They look at what the market is telling them and then respond.

They know that many of their trades won’t work out, but as long as more than half work, they’ll be okay. They don’t do a lot of in-depth research on the securities they trade, but they know the normal price and volume patterns well enough that they can recognize potential profit opportunities.

Trading keeps markets efficient because it creates the short-term supply and demand that eliminates small price discrepancies. It also creates a lot of stress for traders, who must react in the here and now. Traders give up the luxury of time in exchange for a quick profit.

Speculation is related to trading in that it often involves short-term transactions. Speculators take risks, assuming a much greater return than may be expected, and a lot of what-ifs may have to be satisfied for the transaction to pay off. Many speculators hedge their risks with other securities, such as options or futures.

Many people think that trading and gambling is pretty much the same thing – thus very risky! Not only is that assumption false. It also acts as a deterrent, keeping people away from the financial markets. Hence those miss the exciting opportunities that trading offers. This article will examine activities, trading and gambling, and shed light on the key differences.

It’s a matter of fact that investing money as a trader or investor always bears a risk. And so does gambling – not surprisingly. Therefore, the misconception lies on the fact that both actions involve the same risk.

gamble1.jpg

Gambling is nothing more than luck

A gambler puts up money in the hopes of a payoff if a random event occurs. The odds are always against the gambler and in favor of the house, but people like to gamble because they like to hope that, if they hit it lucky, their return will be as large as their loss is likely.

Some gamblers believe that the odds can be beaten, but they are wrong. They get excited about the potential for a big win and get caught up in the glamour of the casino, and soon the odds go to work and drain away their stakes.

gamble2

GAMBLERS might loss to all

Yet examining the strategy of clever investors and traders, it becomes very clear that they have the opportunity to implement risk management strategies. Traders can set stop loss limits in order to well… limit the losses. With gambling it is totally different: One bets on something with a specific amount of money. With that one risks to lose the entire sum of the money with one single bad decision.

trading1.jpg

TRADING provides ownership

Moreover, trading provides ownership over something, ranging from currencies and commodities to ownership in a company (stocks) to which we can add the concept of time and the pay of dividends. The ownership involved in trading will derive in profits if the price of the stocks goes up. The same occurs when the company is profitable and issues dividends. Although the financial markets have fluctuated over the decades, the general trend has been upwards. Furthermore, one of the key elements is to maintain a diversified portfolio, which would be complicated when betting.

Investing represents ownership

Let’s sum it up: There is a similarity between trading and gambling, which is the fact that both activities involve monetary risk at the hopes of increasing future profits. Nevertheless gambling involves no risk management, whereas investing represents ownership over a product, the possibility to earn dividends from companies and implement several risk management strategies.

Sources:
http://www.futuresmag.com
http://www.dummies.com

GAMBLING AND TRADING – Are SAME?

Day trading is a cousin to both investing and gambling, but it is not the same as either. Day trading involves quick reactions to the markets, not a long-term consideration of all the factors that can drive an investment. It works with odds in your favor, or at least that are even, rather than with odds that are against you.

Investing is slow and steady

Investing is the process of putting money at risk in order to get a return. It’s the way that businesses get started, roads get built, and explorations get financed.

Investing is very much focused on the long term. Good investors do a lot of research before committing their money because they know that it will take a long time to see a payoff. Investors often invest in things that are out of favor, because they know that, with time, others will recognize the value and respond in kind.

In contrast to investing, day trading moves fast. Day traders react only to what’s on the screen. There’s no time to do research, and the market is always right when you’re day trading. You don’t have two months or two years to wait for the fundamentals to work out and the rest of Wall Street to see how smart you were. And if you can’t live with that, you shouldn’t be day trading.

Day trading works fast

Trading is the act of buying and selling securities. All investors trade, because they need to buy and sell their investments. But to investors, trading is a rare transaction, and they get more value from finding a good opportunity, buying it cheap, and selling it at a much higher price sometime in the future. But traders are not investors.

Traders look to take advantage of short-term price discrepancies in the market. In general, they don’t take a lot of risk on each trade, so they don’t get a lot of return on each trade, either. Traders act quickly. They look at what the market is telling them and then respond.

They know that many of their trades won’t work out, but as long as more than half work, they’ll be okay. They don’t do a lot of in-depth research on the securities they trade, but they know the normal price and volume patterns well enough that they can recognize potential profit opportunities.

Trading keeps markets efficient because it creates the short-term supply and demand that eliminates small price discrepancies. It also creates a lot of stress for traders, who must react in the here and now. Traders give up the luxury of time in exchange for a quick profit.

Speculation is related to trading in that it often involves short-term transactions. Speculators take risks, assuming a much greater return than may be expected, and a lot of what-ifs may have to be satisfied for the transaction to pay off. Many speculators hedge their risks with other securities, such as options or futures.

Many people think that trading and gambling is pretty much the same thing – thus very risky! Not only is that assumption false. It also acts as a deterrent, keeping people away from the financial markets. Hence those miss the exciting opportunities that trading offers. This article will examine activities, trading and gambling, and shed light on the key differences.

It’s a matter of fact that investing money as a trader or investor always bears a risk. And so does gambling – not surprisingly. Therefore, the misconception lies on the fact that both actions involve the same risk.

gamble1.jpg

Gambling is nothing more than luck

A gambler puts up money in the hopes of a payoff if a random event occurs. The odds are always against the gambler and in favor of the house, but people like to gamble because they like to hope that, if they hit it lucky, their return will be as large as their loss is likely.

Some gamblers believe that the odds can be beaten, but they are wrong. They get excited about the potential for a big win and get caught up in the glamour of the casino, and soon the odds go to work and drain away their stakes.

gamble2

GAMBLERS might loss to all

Yet examining the strategy of clever investors and traders, it becomes very clear that they have the opportunity to implement risk management strategies. Traders can set stop loss limits in order to well… limit the losses. With gambling it is totally different: One bets on something with a specific amount of money. With that one risks to lose the entire sum of the money with one single bad decision.

trading1.jpg

TRADING provides ownership

Moreover, trading provides ownership over something, ranging from currencies and commodities to ownership in a company (stocks) to which we can add the concept of time and the pay of dividends. The ownership involved in trading will derive in profits if the price of the stocks goes up. The same occurs when the company is profitable and issues dividends. Although the financial markets have fluctuated over the decades, the general trend has been upwards. Furthermore, one of the key elements is to maintain a diversified portfolio, which would be complicated when betting.

Investing represents ownership

Let’s sum it up: There is a similarity between trading and gambling, which is the fact that both activities involve monetary risk at the hopes of increasing future profits. Nevertheless gambling involves no risk management, whereas investing represents ownership over a product, the possibility to earn dividends from companies and implement several risk management strategies.

Sources:
http://www.futuresmag.com
http://www.dummies.com

Diwali Muhurat trading at BSE and NSE on Diwali

TheNIFTYFeed wishing you happy Diwali, The ‘Muhurat’ trading, which is conducted on the auspicious occasion of Diwali, will be held between 1830 hrs and 1930 hrs, the stock exchanges said.

#. Mahurat trading :(also pronounced Muhurat) refers to the trading activity in the Indian stock market on the auspicious occasion of Diwali (Deepawali), a big festival for people of India . Usually, it is held during evening hour and is announced by the stock market exchanges notifying traders and investors of the non-scheduled trading hour.[1] This hour is derived from Gujarati culture(dominant sect of people in Dalal Street) who do similar trading on hours of Diwali.

mT1.jpg

#.Tradition : For the trading communities of the north India, the new financial year begins with Diwali. A puja is performed to accounts books and safes on Dhanteras as well as on Diwali day to signify the beginning of a new year. A coin – which signifies wealth – is placed on the account books before the puja. Stock brokers perform ‘Lakshmi Puja’ at the exchange and the customary Muhurat trading takes place. It is believed that on the night of Lakshmi Puja, the Goddess comes to reside at the place of the puja during which the traders and shopkeepers stay awake with lights burning all night.

As Diwali also marks the beginning of the New Year, it is believed that Muhurat trading on this day brings in wealth and prosperity throughout the year. An auspicious beginning is thus made on the first day of the year.

mt2.jpg

#. Trading activity : Stock brokers’ offices take on a distinctly ethnic look with neatly designed rangoli patterns and innumerable diyas lined up to welcome Goddess Lakshmi. Muhurat trading is one of the many links the broking(trading) community retains with its rich past. The practice of Muhurat trading has been retained and observed for ages. The schedule of the muhurat trading is announced by the stock exchange and the Sensex closes on a higher note at the ending of the trading hour. With this, the traders on Dalal Street welcome the New Year on a positive note. Many start the New Year with traditional ceremonies and pujas. This tradition has been followed as a ritual for many years.[2]

Muhurat trading is traditionally an occasion for an auspicious beginning to the traditional New Year. Investors place token orders and buy stocks for their children, which are held for the long term and sometimes never sold. Traders normally book their intra-day profits, however small they may be.

mt3

References:
https://en.wikipedia.org/wiki/Mahurat_trading

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