Zebu blog

Category: Trading

  • 5 Myths About Technical Analysis Debunked

    TA is criticised by some traders and investors because they believe it is merely a surface examination of charts and patterns with no real effect on the market. However, there are many who feel that once they’ve mastered it, they’ll be rewarded with huge returns. Contrasting views on technical analysis have led to misunderstandings about how it is used.

    Misconceptions regarding technical analysis can be traced back to a lack of exposure to the subject in school. Someone who has just been taught the basics of trading may have little faith in technical analysis at all. If you have a background in technical analysis, though, you can still make money from it.

    These and other TA assumptions are the results of missteps and errors. For example, losses are sometimes caused by the bad use of technical indicators. That doesn’t necessarily mean that the strategy is bad; it could just be that the person needs more instruction and practice.

    Before we get into debunking myths about technical analysis, you need to make sure that you use the best broker for trading with the lowest brokerage on offer. Zebu empowers your online stock trading journey with a state-of-the-art trading platform as well.

    Here are eight of the most frequent technical analysis myths—and why they’re just not true.

    1. Short-term trading or day trading is the only use for technical analysis

    Many people believe that only short-term and computer-driven trading, such as day trading and high-frequency trading, may benefit from using technical analysis in their trading. It was long before computers were commonplace that technical analysis was used by long-term investors and traders rather than day traders. From one-minute charts to weekly and monthly timeframes, several types of traders use technical analysis.

    2. Technical analysis is only used by retail traders.

    Individual traders utilize technical analysis, but so do hedge funds and investment banks. Technical analysis is used extensively by the trading departments of investment banks. High-frequency trading is primarily reliant on technical ideas and accounts for a significant portion of stock exchange trading volume.

    Technical analysis has a low rate of success
    Successful market traders with a long track record of trading disprove this urban legend. A large number of successful traders attribute their success as a result of technical analysis and patterns. They do, however, attribute their success to strict discipline.

    3. Technical Analysis Is Quick and Efficient
    Trading success can be had by following a variety of technical analysis courses available on the internet. Despite the fact that many people begin trading by using simple technical indicators, long-term success in trading takes much education, practice, solid money management, and a strong sense of self-discipline. Technical analysis is merely a tool, a small portion of the larger picture to be considered.

    4. Price Predictions Based on Technical Analysis Are Accurate

    Many newbies expect technical analysts or software patterns to provide 100% accurate advice, which is not always the case. It’s common for new investors to expect a prediction like “stock ABC will hit Rs 200 in two months.” Technical analysts, on the other hand, tend to avoid quoting exact prices. They would rather give range-based predictions like a stock to move between 180 and 200 by the end of next week.

    Traders who place their bets based on technical analysis should be aware that it only provides a range of possible outcomes, not a specific value. When it comes to technical analysis, there are no assurances. Even if something doesn’t function 100% of the time, it can still be very profitable if it works more often than not.

    5. Technical Analysis should have a higher success rate

    Despite popular belief, it is not necessary to have a large percentage of successful trades to be profitable. In this hypothetical example, Peter has four successful transactions out of five, whereas Molly only has one win out of those same five trades. Who is the most successful person in their field? But even if the majority of people say Peter, we won’t know for sure until we have further details. Profitability is a function of victory rate and risk-to-reward tradeoff. It doesn’t matter if Peter wins Rs 20 and loses Rs 80; he still loses Rs 60. If Molly wins Rs 50 and loses Rs 10, she has a net profit of Rs 10. Even though she has had fewer victories, she is in a better position than she was before. Even if there are only a few winners in a deal, it can still be profitable.

    In conclusion

    Traders can use a wide range of tools and principles from technical analysis. There are successful traders who do not use it, and there are successful traders who do. Others argue that technical analysis is erroneous and theoretically unsound, despite the fact that many traders swear by it.

    Now that you have understood more about technical analysis, you also need to ensure that you use the best broker for trading with the lowest brokerage on offer. Zebu empowers your online stock trading journey with a state-of-the-art trading platform as well.

  • Trading Indicators To Use During Volatile Periods

    Many indicators are used by traders and analysts to monitor volatility and decide the best time for entering or exiting a trade. Increased fear in the market amid significant market movements can give ideal trading ground for experienced investors, while high volatility is typically a barrier to reckless trades. Low volatility and complacency among investors, on the other hand, can signal a bubble in the market and a possible market top. It is usual to utilise the volatility index (VIX), ATR and Bollinger Bands to measure volatility relative to other indicators.

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    VIX

    Volatility in the market is measured by the Volatility Index. Volatility in Nifty 50 can be measured by a ticker symbol known as VIX, which is updated throughout the trading day and reflects the current implied or expected volatility. Other traders use large institutions’ volatility perceptions (as indicated by VIX) to help them gain an idea of the expected volatility of the market in the days to come.

    While numbers in the low teens imply minimal volatility, VIX rates above 30 indicate increased volatility.

    Average True Range

    Any stock, exchange-traded fund, FX pair or commodity can be used to apply the average true range indicator established by J. Welles Wilder Jr. ATR is a 14-day exponential moving average (EMA) of what Wilder called the “true range” of an asset’s price movement. One of three following equations produces the greatest number, which is used to determine the true range.

    Current day’s high minus the current day’s low
    Current day’s high minus the previous day’s close
    Previous day’s close minus the current day’s low

    Finally, an EMA is produced using the ATR (computed using the highest value found when the three equations are solved). The greater the ATR, the greater the volatility of the market. There is a correlation between ATR values and quiet trading periods.

    Bollinger Bands
    There are two bands or lines that are two standard deviations above and below a 20-day moving average, which shows as a line in between the two bands, in the Bollinger Bands indication, which is another charter indicator. The wider the bands, the more volatile the market is, and the narrower the bands, the less volatile the market is. Bollinger Bands, like ATR, can be applied to any chart of a stock or commodity.

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  • All The Ways In Which You Can Use VIX

    VIX is a contract that you’ve likely heard of if you’ve ever traded futures or options. The NSE VIX futures contracts can be traded in the same way that index and equity futures and options are. To begin, what precisely is a VIX contract? The volatility index (VIX) is a metric for market volatility, thus its name. Since a high VIX implies a high amount of fear in the market and a low VIX suggests a high level of confidence, it is commonly referred to as the Fear Index.

    Examine some strategies for trading the VIX in India and some methods for trading the VIX in general. Do you realise that the India VIX and the Nifty are negatively correlated? What you should know about VIX is summarised below.

    Before we get started on how you can use VIX, it is important that you have the right tools to trade efficiently. That is why as an online trading company we have created a high-end online trading platform with the lowest brokerage for you to maximize your returns from the market.


    It’s important to keep in mind that the VIX measures market expectations for volatility.

    To compute the VIX, VIX typically employs options expiring in the current month and the following month. According to the VIX, it is assumed that the premium on important Nifty options indicates the market’s implied volatility. Because of this, you can get a fair sense of how volatile the options are by averaging them. Expectations of more volatility are typically reflected in the price of options (both calls and puts). Nifty option order books are used to construct the India VIX. When determining the best bid-ask prices, we look at both the near-month and next-month Nifty options. As an indicator of how volatile India’s stock market is projected to be in the following 30 days. This is how the India VIX is computed:

    NSE calculates and distributes the VIX on a real-time basis, hence the formula is only for educational reasons. In order to fully grasp the VIX, it is necessary to understand how it is interpreted and what it means.

    How to use VIX in practise is a more important subject than its simple depiction of projected volatility or risk. This is how you can accomplish it:

    For equities traders, the VIX is an excellent and reliable indicator of market risk
    Stock traders who trade intraday and for the short term might use this information to gauge whether the market’s volatility is rising or falling. They’ll be able to fine-tune their approach. Intraday traders, for instance, run the danger of stop losses being swiftly triggered when volatility is projected to go up sharply. Consequently, they have the option of either reducing their leverage or widening their stop losses.

    For long-term investors, the VIX is a great indicator. Most long-term investors are unconcerned by the volatility of the stock market. The risk and MTM losses of institutional investors and proprietary trading desks, however, are limited. To play the market both ways, they can boost their hedges in the form of put options when the VIX shows a rise in volatility.

    Traders of options can potentially benefit from VIX as an indicator. When deciding whether to buy or sell an option, volatility is typically taken into account. In times of high volatility, options become more valuable and buyers are likely to profit more. Option sellers stand to gain when the VIX declines since more time value will be wasted.

    Volatility trading is also important. Consider buying strangles or straddling if you think the market will be more volatile in the future. However, when volatility is expected to rise, these become extremely expensive. In order to reap the benefits of volatility without having to worry about the direction of the market, you should buy futures on the VIX index itself.

    This index’s volatility is well-captured by the VIX. You can clearly detect a negative link between VIX and the Nifty if you map their movements over the previous nine years from the beginning of VIX. The volatility index (VIX) tends to rise and fall in tandem with the market’s overall performance. Index traders can use this data as an input.

    Portfolio and mutual fund managers can greatly benefit from the VIX index. When the VIX reaches its all-time high, investors can aim to increase their exposure to high beta companies, and when the VIX reaches its all-time low, investors can increase their exposure to low beta stocks.

    Although the India VIX has only been around for a little over a decade, it has already become a reliable indicator of market risk and volatility.

    As we mentioned earlier it is important that you have the right tools to trade efficiently. That is why as an online trading company we have created a high-end online trading platform with the lowest brokerage for you to maximize your returns from the market.

  • Everything You Need to Know About Trailing Stop Losses

    Online brokers are always looking for new ways to keep investor losses to a minimum. One of the most popular downside protection techniques is a stop-loss order, which automatically sells a position at the current market price if the price drops to a specified level, preventing further losses.

    Before we get into the basics of trailing stop loss, it’s important to know that it takes a certain level of experience before you can become profitable. However, if you would like to get started, you need access to the best trading platform from one of the best online share brokers in the country. At Zebu, we give you all of this and more – we also offer the lowest brokerage for intraday trading.


    Trailing stop-loss order

    Traders can improve the effectiveness of a stop-loss order by combining it with a trailing stop, which is a trade order in which the stop-loss price is set at a percentage or rupee amount below the market price.

    When the price goes up, the trailing stop goes up with it. The new stop-loss price remains at the level it was dragged to when the price finally stops climbing, automatically safeguarding an investor’s downside while locking in profits when the price achieves new highs. Trailing stops can be used with regular stop-loss orders on stock, options, and futures exchanges.

    The Functions of a Trailing Stop

    Consider the following scenario for a better understanding of how trailing stops work:

    Buy price: Rs 100
    Price at the time of setting a trailing SL: Rs 100.5
    Trailing amount: Rs 1
    Immediate SL: 99.5
    If the market goes up to 101, the trailing SL will be moved up to 100.

    If the price goes back to 100, your SL order will be triggered and you will exit with a slight loss (considering slippage, taxes, and fees).

    It’s critical to avoid the need to reset your trailing stop during market dips, or your effective stop-loss will be lower than intended. When you notice momentum peaking in the charts, especially when the stock is hitting a new high, it’s also a good idea to rein in a trailing stop-loss.

    It’s critical to assess your maximum risk tolerance when using classic stop-losses with trailing stops. Set a stop-loss at 2% below the current stock price and a trailing stop at 2.5 percent below the current stock price, for example. As the price of the stock rises, the trailing stop will outperform the fixed stop, making it redundant.

    To make this approach work on current trades, you’ll need to select a trailing stop value that takes into account the stock’s regular price movements while catching just the genuine price decline. This can be accomplished by analysing a stock for several days before engaging in active trading.

    Furthermore, when using a trailing stop, there is the risk of setting it too tight during the early phases of the stock’s support. The consequence will be the same in this situation, with the stop being triggered by a temporary price downturn, leaving traders concerned about a perceived loss. This might be a difficult mental pill to take.

    You need the lowest brokerage for intraday trading as well as the best trading platform. As a leading online share broker, we at Zebu have created the perfect trading platform with an extensive amount of features to simplify trading for you.

  • Ways To Determine The Ideal Stop Loss

    When it comes to trading, no one wants to lose money. That is why it is critical to establish a floor of security for your position. Stop-loss orders are used in this situation. Many investors, however, struggle to determine where to place their stop-loss levels. If your stop-loss orders are placed far away from your entry price, you can lose a lot of money. However, you can get out of a position too rapidly if you set your stop-losses too close together.

    So, how do you know where your stop-loss order should be placed?

    When you start trading, it is important to have one of the best trading accounts from the best share broker in terms of the number of indicators you can use. Our online trading platform that gives you the widest range of leading as well as lagging indicators for you to choose from. With us, you can execute any complex strategy with any number of indicators.


    What Is a Stop-Loss Order and How Does It Work?

    A stop-loss order instructs a broker to sell stocks at a certain price if they reach it. These orders aid in minimizing an investor’s loss in a security position. As an example, if you set your stop-loss order at 10% below the price at which you bought the security, your loss will be limited to 10%.

    If you buy Company X stock for Rs 100 per share, for example, you can place a stop-loss order for Rs 90. This will limit your losses to 10%. Your shares will be sold at the present price if Company X’s stock falls below Rs 90.

    Choosing a Stop-Loss Order
    Targeting a permitted risk level is the key to determining where to place a stop-loss order. This price should be calculated wisely to minimize loss.

    There are numerous theories about where to place a stop-loss order. Technical traders are continuously looking for new ways to time the market, and different types of stop or limit orders have diverse applications based on the timing strategies used. Some theories employ universal stops, such as a 6% trailing stop on all stocks, while others employ security- or pattern-specific stops, such as average true range percentage stops.

    Methods of Stop-Loss placements


    The above-mentioned percentage technique is one of the most common. There’s also the support strategy, which involves placing hard stops at a certain price. This strategy may be a little more difficult to master. You’ll need to determine the stock’s most recent support level. You can put your stop-loss order slightly below that level once you’ve figured that out.

    The moving average method is the other option. Stop-losses are placed just below the moving average price when using this method.

    Swing traders frequently use the multiple-day high/low strategy, in which stops are set at the lowest price of a given trading day. Lows, for example, may be replaced at the two-day low. Indicator stops based on larger trend analysis may be used by more patient traders. Other technical indicators, like the relative strength index, are frequently used in conjunction with indicator stops.

    What to Think About When Using Stop-Loss Orders

    When it comes to stop-loss orders, there are a few things to keep in mind as an investor:

    Stop-loss orders are not for active traders who monitor every move of the price.
    Stop-loss orders aren’t ideal for huge blocks of stock because you risk losing more money in the long run.
    Also, never assume that your stop-loss order has been executed. Always wait for a confirmation of your order.

    Final Thoughts

    To select stop-loss placements, traders should assess their personal risk tolerances. To determine whether retracements are common, specific markets or securities should be investigated. Retracement-prone securities require a more active stop-loss and re-entry approach. Stop-losses are a type of profit-capture and risk-management strategy, but they do not ensure profitability.

    Creating a trading strategy is an art. You need the best trading accounts from the best share broker to give you access to all types of leading and lagging indicators. This is exactly what we offer at Zebu. We have created a highly advanced online trading platform that helps you take the best possible trades. To know more about Zebull Smart Trader, please get in touch with us now.

  • Everything You Need To Know About Paper Trading

    With the rise of high-speed trading and algorithmic trading in the markets, day trading has become extremely competitive. But it is an extremely difficult field to succeed in. That is why you need to practice as much as possible.

    Executing paper trading requires a huge amount of analysis and the lowest brokerages you can find in India. As one of the fastest-growing stock broker companies in India, we at Zebu have created the best trading platform for calendar spreads and other futures and options strategies.


    What Is Paper Trading and How Does It Work?

    Simulated trading, often known as paper trading, allows aspiring traders to buy and sell stocks without risking real money. Investors might be able to replicate trading with a basic spreadsheet or even pen and paper, but day traders would find it difficult to manually record tens of transactions per day and calculate their profits and losses. However, there are many online platforms that provide paper trading accounts for people to practice with before investing real money in the market. This allows them to try out different techniques and get some practice with the software.

    Consider paper trading platforms that offer live market feeds before you start with real money while looking for the ideal place to practice your trades. This is critical since you’ll want to be able to trade without having to wait for delayed feeds or orders to be processed.

    TradingView is a commonly used market simulator that most traders get started with. To utilize the simulator, day traders on these platforms will need to open an account, which may include depositing the minimum funding requirements. The good news is that traders can practice with the simulator before risking their money on live transactions.

    It’s important to remember that there are some distinctions between simulated and live trading. Simulators may not account for slippage, spreads, or commissions, which can have a substantial impact on day trading returns on a technical level. On a psychological level, traders may find it simpler to follow trading system guidelines when there isn’t any money at stake—especially if the trading system isn’t performing well.

    Paper Trading Suggestions

    The way you trade on a given day is primarily determined by the approach you utilize. Some day traders, for example, rely solely on “feel” and must rely on paper trading accounts, whereas others utilize automated trading systems and backtest hundreds of systems before paper trading only the most promising. Traders should pick the finest broker platform for their needs depending on their trading preferences and then practice trading on those accounts. Here is where Zebu comes in.

    When paper trading, it’s critical to keep a detailed record of your trades and to follow your approach over a long enough time frame. Some methods may only work in bull markets, leaving traders vulnerable when the market turns bearish. In order to verify that their strategies hold up successfully and deliver the maximum risk-adjusted returns, it’s critical to test enough stocks in different market scenarios.

    Finally, paper trading isn’t only a one-time activity. Day traders should use the paper trading capabilities on their brokerage accounts on a frequent basis to test new and experimental tactics before entering the market. For day traders who risk tens of thousands of rupees in hundreds of trades every day, simple mistakes can be extremely costly. As a result, paper trading is an essential component of long-term success.

    Advantages of Paper Trading

    Starting with a paper trading account can help you learn more quickly. However, there are additional advantages to self-education. To begin with, there is no risk. You don’t lose anything because you aren’t utilising real money. You can assess your mistakes and develop a winning plan. This also helps you gain confidence and gives you the opportunity to practice the tactics and strategies required to be a good day trader, such as profit or loss taking and pre-market preparation. Finally, it reduces the amount of stress associated with trading. You may focus on your strategies in a calm environment, removing the emotional aspect of trading.

    Paper Trading’s Drawbacks

    While paper trading will provide you with the necessary practice, there are a few drawbacks. You don’t get a sense of how fees and commissions affect your trades because it doesn’t use actual money. These simulators also don’t truly depict market reality, including lows and highs, as well as the emotion that comes with trading. As a result, keep in mind that this is a simulated environment where you can practice your trading talents.

    Practice Makes Perfect

    If you are new to trading or investment, spend as much time as possible with paper trading before entering the live markets. Make an effort to experiment with new strategies and ideas so that you can become more comfortable. Ultimately, the goal of paper trading is to shorten your learning curve.

    When it comes to executing paper trading, you need access to the best trading platform from one of the most reliable stock broker companies in the country. We also complement our platform with the lowest brokerage for trading. Please get in touch with us to know more about our services and products.

  • An Overview of Volume vs. Open Interest

    Volume and open interest are two of the most important technical metrics for understanding options and the broader market. The amount of contracts exchanged in a given period is referred to as “volume,” whereas “open interest” refers to the number of contracts that are active, or not settled. We’ll look at these two variables and give you some pointers on how to utilise them to better understand trade activity in the derivatives markets. But before we get into that, there is one thing you will require: the best Indian trading platform with a wide range of features. With Zebu, one of the best stock brokers in the country, your online stock trading journey will be drastically enhanced.


    Volume

    In the stock market, volume refers to the number of times shares are traded between buyers and sellers. The volume metric for options markets gives the number of options contracts bought and sold in a given trading day, as well as the degree of activity for a specific contract.

    Every transaction counts against the daily volume, whether it’s an opening or closing transaction.

    The higher the volume, the more people are concerned about security. Volume is often used by investors to determine the strength of a price movement. More volume also suggests that the contract has more liquidity; this is advantageous in short-term trading because it means that there are more buyers and sellers in the market.

    Assume that the volume in call option ABC with a strike price of Rs 1000 and a three-week expiration date did not trade any contracts on a given day. As a result, the trade volume is zero. An investor buys 15 call option contracts the next session, and there are no other trades that day, thus the volume is now 15 contracts.

    The volume and open interest measurements reveal the amount of buying and selling that supports a prospective price change. In technical analysis, however, it is also necessary to determine whether the open interest is in calls or puts, as well as whether the contracts are being purchased or sold.

    Open Interest

    The quantity of options or futures contracts owned by active traders and investors is known as open interest. These positions have been created, but they haven’t been filled, expired, or exercised yet. When buyers and sellers (or writers) of contracts close off more positions than were opened that day, open interest declines.

    A trader must take an offsetting position or exercise their option to close out a position. When investors and traders open additional new long positions or sellers take on new short positions in an amount bigger than the number of contracts that were closed that day, open interest rises once more.


    Assume that the open interest in the ABC call option is 0 for example. The next day, an investor opens a new position by purchasing 10 option contracts. The number of people who have expressed interest in this particular call option has now reached ten. Five contracts were closed the next day, ten were opened, and open interest grew by five to 15.

    Open interest, along with other variables, is used by technical analysts to determine the strength of a market trend. Increased open interest signals the entry of new traders into the market and can be used to corroborate a current market trend. The current trend may be deteriorating as open interest declines, indicating that traders are closing their positions.

    Particular Points to Consider

    We’ve listed a few situations that include the volume and open interest indicators, as well as some possible interpretations.

    Rising prices during an uptrend, combined with rising open interest, can indicate that new money is entering the market (reflecting new positions). If long positions are fueling the growth in open interest, this might be an indication of a bullish mood.
    If, on the other hand, open interest falls while prices rise during an advance, this could imply that money is leaving the market, which is a bearish indicator.
    If, on the other hand, open interest falls while prices rise during an advance, this could imply that money is leaving the market, which is a bearish indicator.
    Prices falling in a downtrend while open interest rises could indicate that new money is entering the market on the short side. This scenario is negative since it is consistent with a continuous downtrend. However, falling prices in a downtrend with declining open interest may imply that holders are being compelled to liquidate their positions, which is a bearish indicator.

    If open interest is high as prices are falling sharply during a market peak, it could be a bearish indicator if those who bought near the top are suddenly losing money; this could also create a panic selling scenario.

    Option Chain And Its Working

    An option chain is a table that lists all of the available options for a certain security. An option chain displays all of the published calls and puts for a given expiry date, organised by characteristics such as strike price, expiration date, volume, and pricing.

    How much open interest and volume should an option have?
    In general, a high volume and open interest both indicate a liquid market with a large number of buyers and sellers for a specific option. Market mood can also be confirmed by changes in open interest and volume. A rising price with increasing volume and open interest, for example, indicates a robust market, whereas a rising price with declining volume and open interest indicates a weak market.

    When the Volume Exceeds the Open Interest, What Does It Mean?

    If an option has a high volume but a low open interest, it has a limited secondary market, which means it may have low liquidity. A trader trying to sell that option might have trouble finding a buyer, or they might face a wider bid-ask spread than usual.

    What Does a High Open Interest Indicator Indicate?

    A huge number of traders have taken active positions in an options or futures contract with a high open interest. If open interest rises over time, it indicates that new traders are taking positions in the market and that money is flowing in. When open interest decreases over time, it indicates that traders are beginning to close positions.

  • The 200 Day Moving Average And Everything You Need To Know About It

    The 200-day moving average, a simple line that is displayed across a chart, is considered an important tool for traders and investors to determine the trend of the market. The indicator shows as a line on a chart that rises and falls in sync with the stock, commodity, or other instrument being charted as longer-term price movements.

    Before you start investing or trading, always consider going with one of the best brokerage firms in the country like Zebu. As a top broker in share market we have created one of the best stock trading platforms, for you to use and invest.

    When the price is above the moving average, the 200-day SMA appears to act as an incredible support level, and when the price is below it, it appears to serve as a resistance level.

    The 200-Day SMA

    The 200-day SMA is often used in stock trading to detect the broad market trend. It covers around 40 weeks of trade. A company is generally regarded to be in an overall uptrend if its price continues above the 200-day SMA on a daily time period. A 255-day moving average, which covers the preceding year’s trade, is a popular alternative to the 200-day SMA.

    The 200-day SMA is a very long-term moving average that is frequently used in conjunction with other, shorter-term moving averages to display not only the market trend but also the strength of the trend as measured by the distance between moving average lines. Comparing the 50-day and 200-day SMAs, for example, is rather frequent.

    When moving average lines converge, it can imply a lack of clear market momentum, but increasing the distance between shorter-term and longer-term moving averages usually implies increased trend strength and market momentum.

    Death Crosses and Golden Crosses

    The 200-day simple moving average is regarded as such an essential trend indicator that a “death cross” occurs when the 50-day SMA crosses below the 200-day SMA, indicating a downtrend for the stock.

    In a similar vein, the crossing of the 50-day SMA to the upside of the 200-day SMA is known as a “golden cross,” and the stock is regarded as “golden,” or almost certain to gain in price, once this occurs.

    SMAs vs. EMAs Simple Moving Averages vs. Exponential Moving Averages
    It’s likely that the 200-day SMA has a self-fulfilling prophecy quality to it; markets respond strongly in response to it partly because so many traders and analysts value it so highly.

    However, some traders prefer to use the exponential moving average (EMA). An EMA provides a higher weight to the most recent trading days than a simple moving average, which is calculated as the average price over the selected time range. For example, the exponential moving average provides current prices a higher weighting than the basic moving average, which gives all values equal weighting. Technical analysts use EMAs and SMAs in comparable ways to recognise trends and identify overbought or oversold markets, despite the differences in methodology.

    How is the SMA calculated?

    The average closing prices of a security over a period of time are used to calculate a simple moving average (SMA). It’s used to smooth out price swings and provide traders a better understanding of trends and reversals.

    How do I find a stock’s 200-day moving average?

    With Zebull Smart Trader from Zebu, you simply have to change the time frame to 1 day and add the moving average indicator. In the settings, you can change the period to 200. This will overlay the 200 day moving average over your chart.

    As one of the top brokers in share market, we have created the best stock trading platform for you to invest in wisely. Our tool is designed to help investors and traders alike to analyse a company with a wide range of indicators and screeners as per your strategy. As one of the best brokerage firms in the country, we invite you to open a trading and investment account with us.

  • The Detailed Guide To Trading With VWAP

    Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

    The volume-weighted average price (VWAP) is a trading benchmark that shows the average price a security has traded at over the course of a day, depending on both volume and price. VWAP gives you the average pricing of a stock by accounting for one of the most important parameters – volume. How to Work Out the Average Volume-Weighted Price Instead of manually calculating the VWAP, you can simply add it as an indicator to your chart. When it comes to using the right indicators for your trading strategy, you need an online trading platform from one of the fastest-growing stock broker companies in India. Our goal is to give you the best online stock trading experience with every possible indicator that you might need to create your strategy. Getting back to calculating the VWAP – you can follow these steps to compute the VWAP on your own. Assume a 5-minute chart; regardless of the intraday time frame, the formula is the same. Find the stock’s average price for the first five minutes of the trading day. Now, multiply the high, low, and close of a candlestick by three. Multiply by the volume of that time period. In a spreadsheet, enter the result in the price column. Divide this value from the volume for that time period. This will give you the VWAP. Continue to add the price value from each period to the previous values to maintain the VWAP value throughout the day. Subtract this amount from the total volume up to that point. Create columns for cumulative price value and cumulative volume in a spreadsheet to make this easier. What Does VWAP Have to Say to You? The VWAP ratio is used by large institutional purchasers and mutual funds to help them move into and out of companies with as little market impact as feasible. As a result, institutions will try to buy below the VWAP or sell above it whenever possible. As a result of their efforts, the price is pushed back toward the average rather than away from it. VWAP can also be thought of as a trend confirmation tool and you can build a trading strategy around it. They may prefer to open long bets when the price is above VWAP, for example. They may opt to start short positions when the price is below VWAP. Difference Between MA and a VWAP? VWAP and a moving average may appear similar on a chart. The calculations for these two indicators are different. VWAP is calculated by dividing the entire volume by the sum of price multiplied by volume. A simple moving average is calculated by adding closing prices over a set number of periods (say 10) and dividing by the number of periods (10). There is no consideration for volume. The Volume-Weighted Average Price’s Limitations VWAP is a one-day indicator that is reset at the start of each trading day. When attempting to calculate an average VWAP over several days, the average may become distorted from the genuine VWAP reading, as explained above. When institutional buyers decide to buy or sell a stock, the VWAP is an important consideration for them. In strong uptrends, the price may continue to rise for several days without ever or only sometimes falling below the VWAP. Waiting for the price to fall below VWAP may therefore be a missed chance if prices are rapidly rising. VWAP is based on historical data and does not have any inherent prediction or calculation capabilities. Because VWAP is tied to the day’s opening price range, the indicator’s lag grows as the day progresses. This may be observed in how, after 330 minutes (the length of a normal trading session), a 1-minute period VWAP calculation can typically resemble a 390-minute moving average at the end of the trading day. Why Does The VWAP Matter? Traders who want to get a smoothed-out indication of a security’s price over time utilise the VWAP. Larger traders that need to make sure their trades don’t alter the price of the security they’re seeking to purchase or sell use it as well. To prevent artificially inflating the price of an asset, a hedge fund might refrain from placing a buy order for a price higher than the security’s VWAP. Similarly, it should avoid placing orders that are too low in comparison to the VWAP, so that the price is not driven down by the sale. When used right, VWAP can take your best online stock trading experience and enhance it. With the right online trading platform like Zebull Smart Trader that comes with VWAP and so many other in-built indicators, you can ensure that your strategy is designed to make the most profits. As one of the fastest-growing stock broker companies in the country, we are dedicated to providing you with the best tools for the best trades. Please get in touch with us to know more about our products and services.

  • Leading And Lagging Indicators For Beginners

    For those who trade using technical analysis, technical indicators are the core of their trading.

    Whether you day trade or swing trade, these indicators are extremely important. Technical analysis’ principal purpose is to forecast future price movement. Understanding the art of trading patterns and indicators will help you in understanding them better.

    Technical indicators are separated into two types: leading and lagging indicators.

    In this post, we’ll look at both types of indicators to see which one best suits your trading style. But before we begin, let’s talk about access to indicators. When you start trading, it is important to have one of the best trading accounts from the best share broker in terms of the number of indicators you can use. Zebull Smart Trader is a high-end online trading platform that gives you the widest range of leading as well as lagging indicators for you to choose from. With us, you can execute any complex strategy with any number of indicators.

    What is a Leading Technical Indicator, and how does it work?

    Leading indicators are used to anticipate future price changes and provide a trading advantage to the trader.

    Leading indicators provide an early signal of entry or exit and show price momentum over a period of time that is utilised to calculate the indicator.

    The following are some well-known leading indicators:

    Stochastic Oscillator
    RSI
    Volume
    William % R
    Volume profile

    Because volume gives us the buying and selling pressures in the market, it tends to indicate changes even before the price moves. For example, when a market top is formed, you can clearly see an exhaustion of buyers. If that is followed by an increasing number of sellers, then you can assume that the trend has reversed.

    What is a Lagging Technical Indicator, and how does it work?

    Lagging indicators are price reversal indicators that follow a trend and predict price reversals.

    These are especially useful if you follow a trend following strategy.

    They don’t predict future price changes; instead, they just notify us whether prices are rising or falling so that we can invest accordingly.

    Despite the delayed feedback, many traders prefer lagging indicators since they let them trade with greater confidence by confirming their results.

    Before buying a stock, traders usually employ two or more lagging indicators to confirm price movements.

    Examples of lagging indicators:

    Moving Averages
    Moving averages convergence and divergence

    Let’s look at an example:

    A 50 period 200 period moving average is a typical example of a lagging indicator setup.

    When the 50 MA crosses below the 200 SMA, a security is said to be bearish. When the 50 MA crosses above the 200 SMA, a security is considered to be bullish.

    If you consider the first signal from the moving average crossover and execute your trades, they might end up in a loss.

    The key reason for this is that by the time the price moves lower and the SMAs respond, the price would have already dropped significantly and reversed.

    Similarly, when we receive a bullish crossover indication, it is better to wait for a pullback before entering a trade.

    What is the difference between the two types of indicators?

    Signal Generation
    Leading indicators provide trading signals when a trend is about to begin, whilst lagging indicators track price movements.

    Time Periods to Avoid
    Leading indicators attempt to predict price using a shorter timeframe and, as a result, trail price fluctuations.

    Lagging Indicators provide signals after a trend or reversal has occurred. They can be used to determine the direction of the trend.

    Drawbacks of leading and lagging indicators

    Leading indicators are prone to false signals because they react quickly to price changes.

    Lagging indicators take a long time to react and might also send out false signals.

    Using Leading and Lagging Technical Indicators in Combination
    Traders can use a combination of a leading and lagging indicator to create a better trading system. For example, you can use RSI and Moving average crossover. In this strategy, you can wait for a buy/sell signal from RSI (a leading indicator) and wait for a confirmation from the moving average crossover to initiate a trade. Combining leading and lagging indicators can be a simple but powerful way to trade.

    Creating a trading strategy is an art. You need the best trading accounts from the best share broker to give you access to all types of leading and lagging indicators. This is exactly what we offer at Zebu. We have created a highly advanced online trading platform that helps you take the best possible trades with a host of indicators. To know more about Zebull Smart Trader, please get in touch with us now.