Zebu blog

Tag: stock market

  • What Are Value Stocks?

    Growth stocks are companies that have a lot of room to grow. By buying shares in these kinds of companies, investors can make a lot of money through capital appreciation. However, investing in growth stocks requires the right research before you can buy them.

    Features

    People who like to take risks and want to make a lot of money on their investments should buy growth stocks. By looking at the following things, investors can easily find the best growth stocks and the companies that make them:

    Price to earnings ratio

    On the market, companies with a lot of growth potential are found, and shares of those companies have a high bid value. These companies’ growth stocks have a high price-to-earnings (P/E) ratio, which means they give a high return on total investment.

    People see a company’s full potential and think it will grow at a fast rate in the future if it has a high price-to-earnings ratio. But in some situations, a high P/E ratio can be misleading because it could mean that a business is overvalued. The performance of these kinds of businesses is caused by a boom, persistent inflation, or the growth of a financial bubble.

    One of the first things that the best growth stocks in India tend to have is a ratio of 1 or more.

    Price earnings to growth ratio
    Because the P/E ratio has some limitations, investors in India also look at the price-earnings to growth ratio to tell growth shares from standard equity shares. The main benefit of the PEG ratio over the P/E ratio is that it takes into account how much a company’s total earnings per share are growing each year.
    PEG Ratio = Market value of unit shares divided by the growth rate of earnings per share

    When a business has a high PEG ratio, it means that it has done very well. It is a better way to analyse a stock than the price-to-earnings ratio because it doesn’t give you false information.

    Strength of the company

    Companies can only give out growth stocks if they have a lot of room to grow and expand in the future. This can only be done if the company has a strong base, a good plan for business growth, and good management to reach the goals that have been set.

    It can be seen in the return on equity (RoE) value that is published every year. In India, companies that raise money through growth stocks usually have a record return on total equity of 15% or more per year.

    Why should you buy stocks that can grow?

    Capital appreciation
    Investing in the best growth stocks is done to make sure that a lot of money is made through large capital gains. These companies grow faster than the industry they are in, which means they make more money.

    Investing in growth stocks is only a way to make money in the long run. The long-term capital gains tax (LTCG), which is lower than the short-term taxation policy, applies to any capital gains made during this time. There is also a provision for indexation, which lowers people’s tax burdens even more.

    Prepare for rising prices
    The best growth stocks have returns that are much higher than the rate of inflation in an economy. In the long run, people’s purchasing power goes up, which means that their standard of living goes up because they have more money.

    Risks of growth stocks

    Growth companies look to make money by using aggressive business strategies to get a big share of the market. Investors lose a lot when these kinds of companies don’t pay dividends because they want to use the money instead to grow.

    During the lock-in period, investors don’t get any dividends, so if a business keeps losing money, in the long run, investors will lose all the money they put into it.

    Growth stocks are usually issued by companies that are still growing and changing, so they are very risky. They are very sensitive to changes in the market because they are volatile. Even though this feature lets businesses make huge profits when the market goes up, even a small change in price can cause losses. Investing in the best growth stocks should depend on how the market is doing. The underlying performance of growth stocks can also be caused by a country’s stable economy. If there is a financial bubble, companies that work in that sector tend to do better than they should. This kind of growth can be deceiving because it is caused by a strange thing in the economy.

    In order to make enough money, investing in growth shares in India requires a thorough analysis of both the companies chosen and the social and economic conditions at the time.

  • Understanding Block Deals And Bulk Deals

    Today, a lot of different people trade and invest in the stock market. There are also a number of strategies used when trading shares and orders are constantly being placed. Aside from the very common retail investor, large corporations and institutions like hedge funds, mutual funds, investment banks, pension funds, HNIs (high net-worth individuals), FIIs (foreign institutional investors), and company promoters also buy and sell shares on a large scale

    As an online brokerage firm we understand the nuances of trading, hence offer our best services to our customers, including providing our users with the best trading accounts and lowest brokerage options.

    Stock Market Biggies

    These big players come to the stock market with a lot of money and a good understanding of the companies they want to put their money in. The average investor is small compared to these big players in the market, so they don’t have access to this special information that big investors do. Because of this, the ways that big investors trade and invest in the stock market today are different from those of small investors. These big investors do large deals, which are called bulk deals and block deals. Even though they sound the same, you need to know that they are not the same.

    Block Deals

    To know how block deals and bulk deals are different, you need to know what each means. First, you need to understand what a block deal is. A block deal is a single trade in which more than 500,000 shares are traded or a trade in which the value of the shares traded is more than Rs. 10 crores. In 2017, SEBI, which stands for the Securities and Exchange Board of India, changed the value of a block deal to Rs. 10 crores. Block deals happen on the stock market during a certain time called the “block deal window.” Block deals happen in a special trading window that retail investors can’t see. There are no value charts for these deals on any trading platform either.

    In a special “trading window,” block deals are made in two 15-minute shifts. A Block Reference Price is used to figure out how block deals are made. In block deals, orders that aren’t filled are cancelled and don’t move on to the next trading window.

    Bulk Deal

    When at least 0.5% of a company’s listed shares are traded, the deal is considered a bulk deal. In contrast to block deals, bulk deals take place during normal trading hours on the stock market. Again, unlike block deals, details of bulk deals are not kept secret from other market participants like small investors. On different trading platforms, they can be seen on the volume charts. Because bulk deals are visible to other market participants, they can affect stock prices in real-time and in a dynamic way. When a broker does a bulk deal on behalf of investors, he or she must share the details of the deal, such as who is involved, how much is being traded, etc.

    Other differences between block and bulk deals include the fact that bulk deals can be done during the trading window for block deals if they meet the conditions for block trading. For example, if the value of the transaction is more than 0.5% of all the listed shares of the company and more than Rs. 10 crores, participants can choose to trade during the block window or on a normal trading day. If the people involved want the details of the deal to stay secret until they are shared with the exchanges, they can choose to do the deal in the trading window.

    How Prices Change for Bulk and Block Deals
    Any big deals on the stock market today have to affect smaller investors (and some large ones). They get people’s attention because of how big and important they are. Investors think that the stocks involved in such deals must be real. Bulk deals and block deals may show that more people are interested in a stock or that fewer people are interested in it. These signals must be taken seriously. Also, before you decide to trade, you should look at other indicators and trends. Even if a bulk order is filled, it doesn’t mean that a certain stock is likely to move in the same direction as the bulk trade. Still, repeated bulk trades in the same direction (either buy or sell) may show interest in the stock in that direction.

    As an individual investor, you may need to buy or sell stocks in smaller amounts with the help of a trading account that is linked to a Demat account. When you open a Demat account, you probably don’t think that block deals and bulk deals can be as big as they often are in the markets. But these deals, which are used by large funds, high-net-worth individuals, and institutional investors, move a lot of money on the stock market today. During normal market hours, big deals happen that everyone can see. When block deals are done in certain trading windows, the parties involved have a little more privacy. Still, bulk deals must be reported to the relevant exchanges at the end of the trading day (on the same day as the deal) and the information must be made public.

    As an online brokerage firm, we understand the nuances of trading, hence offer our best services to our customers, including providing our users with the best trading accounts and lowest brokerage options.

  • What You Should Know About Loans Against Securities

    There are many benefits to investing in the stock market in India. You can get a loan against the securities in your Demat account, which is one of the many benefits. You can basically use the stocks you own as collateral with your stock broker or a financial institution to get a loan to pay for unexpected expenses.

    Before we get into understanding loans against securities, it is important to understand that trading requires a powerful online trading platform and at Zebu, as share market brokers we understand that. Along with the tool we also offer the lowest brokerage for intraday trading.

    Still, there are a few things you should know before you go ahead with this. Here’s a quick look at the top 5 things you’d have to think about if you used this service.

    Financial Institution

    The first thing you should know about getting a loan against the stock is that not all banks or stock brokers offer this service. So, it is very important to find and pick the right institution. When looking for loans, you should try to get them from places that have low-interest rates. This will help you pay the least amount of money you have to.

    2. Check if you’re eligible

    Before deciding on a financial institution where you want to use this service, it is a good idea to look at their requirements to see if you meet them. Different institutions have different requirements, so it’s important to know if you meet them before you apply. This will help make sure that everything goes smoothly and without any problems.

    Loan Amount

    The next thing you should know about a loan against security is how much you can borrow. Since the value of securities like stocks and bonds tends to change every day, most lenders will only loan a portion of the securities that have been pledged. Most of the time, the amount of a loan from a financial institution is between 60% and 80% of the value of the securities pledged.

    A list of stocks

    Not every place that lends money will take every kind of security as collateral. For example, some lenders may be willing to take mutual fund units as collateral while others may not. So, the list of accepted securities may be different based on where you apply. So, if you want to get a loan against stocks, you should first check with your preferred financial institution to see if the stocks you own can be used as collateral.

    Fees and charges that must be paid

    Lastly, most lending institutions charge fees and interest rates for loans against securities. Fees can be for anything, from processing to making a pledge. Some financial institutions even charge fees if the loan is paid off early. So, before you move forward with the process, you should be aware of the different fees and charges that come with such a service. So, you can make a good choice.

    Conclusion

    With this information, we hope you now know what you should think about when using this service. On the other hand, if you want to invest in the stock market today, you must have a Demat account in your name. Contact Zebu right away to set up a free Demat account in just a few minutes.

    At Zebu, as share market brokers we understand that trading requires a powerful online trading platform, and we offer just that. Along with the tool, we also offer the lowest brokerage for intraday tradingWhat are you waiting for? Download the Zebu app now.

  • How Traders Earn Passive Income From Cash Covered Puts

    Futures and options are two types of derivatives contracts. They are used not only to protect the equity position but also to make a steady income. Many traders and investors combine futures, call options, and put options to make regular money from the stock market. They do this by using their holdings and balance margin to start trades.

    In this blog post, we’ll look at how selling cash-secured puts can be used as a way to make money on the stock market.

    Are you a regular trader? Then, Zebu’s lowest brokerage for intraday trading plans is what you need. As a share broking company, we understand that the lowest brokerage plans can help our users tremendously.

    How do cash-secured puts work?

    As part of an option-selling strategy called “cash-secured put selling,” you set aside enough money to buy a stock at a certain price and then sell the put option for that price. The goal is to buy the stock for less than what it is worth on the market.

    There are, however, some risks involved. The first risk is that the price of the stock may never drop to the level where the trader wants to buy it. This could make it impossible to buy the stocks in the long run. The second risk is that the price of the stock could fall way below the strike price.

    Why selling cash-secured puts is a good idea

    To make money from the option premium, cash-secured puts are usually sold. How much you get depends on the value of the security and how much you are willing to pay for it.

    Gains Invested Quickly

    Cash-secured puts can give you cash right away. It can make option income more appealing and can also help reduce risk.

    You can get paid to invest

    A cash-secured put strategy is a great way to get paid to buy the stock you want to buy. This strategy lets you choose from a number of strike prices and expiration dates.

    Low-dividend stocks can be profitable

    If you want to increase your cash flow but don’t want to be limited by a low dividend yield, you can do so by selling cash-secured puts.

    Risks involved in this strategy

    Multiples of the Lot Size
    Futures and options, which are examples of derivatives, can only be traded in lots. This method won’t help you if you want to buy stocks in a very small amount or a fraction of the lot size.

    Not being able to profit from price correction
    Most investors who want to own shares of a company in the long run shouldn’t use the cash-secured put strategy. If the price of shares stays high, they may never be able to buy any.

    Repeated Actions
    Most investors are more interested in a simple “buy and hold” strategy. In this strategy, you sell cash-secured puts so that you can buy stocks when the person who bought the put options decides to sell. Since the option doesn’t have to be used, it takes more time to go through the same process every time it expires.

    Effects on tax
    When you sell cash-secured puts, the money you make is considered business income and is taxed based on the trader’s tax slab. If the trader owned the stock, he or she would get money from dividends and the increase in value of the stock. Together, these two types of income might have a lower tax rate.

    Getting to Know with an Example
    Let’s say that the price of Stock XYZ is Rs. 250 right now. Stock XYZ’s derivatives contract has a lot size of 100 shares, and you want to buy 100 shares of XYZ for Rs. 235.

    You can make money by selling the 235 strike price put option every month and keeping the premium. Let’s say that for the current month, the premium for 235 put options is Rs. 8. You get Rs. 800 when you sell that put option (Rs. 8 x 100 shares).

    This means that you are willing to buy 100 units of the stock XYZ for Rs. 235 at the end of the expiration period if the price at that time is Rs. 250 or less. For this obligation to buy, you need to keep an account balance of Rs. 23,500 (Rs. 235 x 100 shares).

    If the stock price goes above Rs. 235, you get to keep the entire premium you got for selling the put option with a strike price of Rs. 2350.

    The Bottom Line: Cash-secured put selling is a strategy that involves buying a security at a price that you would be willing to pay. This method works for people who want to make more money or feel safer without spending too much. You might not want to sell cash-secured puts because the deal is complicated and you don’t want to own the security. This strategy could be better for investors and traders who want to make money on the stock market without doing much work.

    If you are a regular trader then, Zebu’s lowest brokerage for intraday trading plans is what you need. As a share broking company, we understand that the lowest brokerage plans can help our users tremendously.

  • Here’s How Volatility Impacts Put and Call Prices Equally

    What does it mean to say that something is volatile? Volatility, in simple terms, is a way to measure risk. But in technical terms, what does volatility mean? It can be thought of as the average difference between returns and the mean. Every investor wants a way to put their money to work that will give them predictable returns over time. When returns are too unstable, they can’t be predicted. At that point, the asset is worth less than it did before. Investors usually don’t like stocks that are too volatile, and those stocks tend to be worth less. But did you know that when it comes to options, it’s the other way around? In fact, volatility makes both call options and put options worth more.

    As we all know the market is volatile, but your platform does not have to be. Zebu, one of India’s top brokerage firms provides our users with a seamless online trading platform that can help them create the best trading accounts.

    Usually, volatility and the prices of assets go in opposite directions. The risk is higher when the volatility is high, and when the risk is high, the returns are lower than expected. Investors are always willing to pay more for stability than for risk. But things are very different when it comes to call and put options. When the market gets more volatile, both call and put options are worth more. So, let’s figure out why volatility makes the price of options go up. Let’s also look at the relationship between how volatile an option is and how much it costs. How does this affect the implied volatility between a call and a put?

    First, let’s look at what it means for call options.
    Volatility means that the stock’s returns are likely to be very different from the mean. It also means that there is too much uncertainty in this situation. But why does that make the put option worth more money? Let’s start by looking at the basic Black-Scholes model.

    According to the Black Scholes model, the price of an option is affected by 5 main factors:

    Market Price of the Stock: When the stock price goes up, the value of the call option goes up, but the value of the put option goes down.

    Strike Price of the Stock: When the strike price goes up, the value of a call option goes down, but the value of a put option goes up.

    Interest rates: When interest rates go up, the present value of the strike price goes down. This makes the call option more valuable and the put option less valuable.

    The value of a call option and a put option goes down if the time until maturity or expiration goes down.

    The value of both the call option and the put option increases when the stock’s volatility increases.
    As you can see from the points above, volatility is the only thing that affects both call and put options in the same way. The time to expiration is the same, but it is a subset of volatility because a longer time to expiration makes people expect more volatility. But why does volatility have the same effect on calls and puts?

    It’s not hard to figure out why. Both calls and puts on an option are not the same. This means that the person who bought the option will only use it when it is good and will not pay the premium when the price goes down. This rule is true for both call and put options. The risk of going up or down is high when volatility is high. When there is a risk of going down, the person who bought the call option won’t pay the premium. When there is a chance of going up, the person who bought the call option will make a lot of money. Put options are also subject to the same rule. This is why call options and put options are worth more when the market is volatile.

    This shows that the value of the call option and the put option goes up when volatility increases, as long as all other factors stay the same.

    Zebu, one of India’s top brokerage firms provides our users with a seamless online trading platform that can help them create the best trading accounts. Visit us for more information.

  • Why You Should Know Time Value Before Trading In Options

    When it comes to trading options, the time value of an option is one of the most basic and important things to understand. In technical terms, it is called “Theta,” which shows how an option’s value decreases over time. Before we get into the details of time value and time decay, let’s take a quick look back at what options are and how they work.

    Before we get into understanding the importance of time value in trading, we should understand that the right technology is equally important. As a share broking company, we offer our clients a seamless online trading platform and also provide them with the lowest brokerage on intraday trading, to make their journey as a trader as smooth as possible.

    So, what are options really all about?

    As the word “option” suggests, it is a right that doesn’t have to be used. Unlike a futures contract, which is both a right and a duty, this is not the case. The buyer of the option has the right to buy or sell the underlying asset at an agreed-upon price (strike price). If the price change goes in the buyer’s favour, he will make money, but if the price change goes against him, he will not use the option. That doesn’t seem fair to the person who sold the option, does it?

    Not at all! Since the person who buys the option has a right but no obligation, the person who sells the option has a duty but no right. The seller won’t do that for free, that much is clear. The person who buys an option pays a certain fee to the person who sells the option for the right to do something without having to do it. This fee is called an “option premium,” and it is what gets traded on the NSE when you buy and sell options. The buyer of the option pays the option premium to the seller of the option as a reward for taking on the obligation without the right.

    Options can be either “call” or “put.”

    Call options give you the right to buy something, while put options give you the right to sell something. You buy a call option if you think the price of a stock will go up. If you think the price of a stock will go down, on the other hand, you will buy a put option. Even though it sounds easy, it’s not as easy as it sounds.

    Getting to the heart of an option’s intrinsic value and time value.

    Before you can understand the idea of time value, you need to know about the three types of options below.

    1. An In-The-Money (ITM) option is a contract for an option that has an intrinsic value that is greater than zero. If the market price of the Nifty is higher than the strike price, a call option on the Nifty is in the money. If the market price of the 17000 Nifty call option is Rs.70 and the spot Nifty is at 17100, then the intrinsic value of the Nifty call will be Rs. 100 (17100-17000). The option’s time value will be the remaining value, which is Rs.30. So, of the Rs.70 option premium that is being quoted on the market, Rs. 100 is due to intrinsic value and Rs. 30 is due to time value. If the spot price of the Nifty is lower than the strike price of the put option, the option is in the money.

    2.An “at the money” (ATM) option is a contract for an option that has a value of zero. If the market price of the Nifty is the same as the strike price, it will be an ATM for a call option on the Nifty. Since there is no intrinsic value, the time value is the only thing that makes the option worth anything.

    3. Out-of-the-Money (OTM) options are option contracts where the market price is lower than the strike price for a call option or higher than the strike price for a put option. According to our formula, the intrinsic value will be negative, but since the intrinsic value can’t be negative, we’ll treat it as zero. So, only time value will make up the option premium.

    At the beginning of the month, ATM options have the highest time value, followed by ITM options and then OTM options. In the long run, the time value of all three options will tend toward zero as the expiration date gets closer. Even though the OTM and ATM options themselves have no value, the option premium for ITM options will still be positive because they have intrinsic value.

    Why is time value such an important part of trading options?

    An option is a wasting asset because its time value tends to go to zero as its expiration date gets closer. This loss of time is also called “Theta.”

    Time and volatility are two of the most important parts of time value. For both call options and put options, the time value goes up as the time to expiration goes up. Even if the option is still Out of the Money, a rise in volatility can cause the time value to rise. The person who buys the options bets that volatility will make the time value go up, while the person who sells the option hopes that the time value will work in his favour so that the option expires worthless. This is the main idea behind trading with options.

    As a share broking company, we offer our clients a seamless online trading platform and also provide them with the lowest brokerage on intraday trading, to make their journey as a trader as smooth as possible. Contact us to know more.


  • What Is All The Hype About A Trading Edge?

    What Is All The Hype About A Trading Edge?

    In theory, a trading edge is a strategy, observation, or special technique that gives a trader an edge over other traders in the market and helps them make more money. There are a lot of books and papers on different trading techniques, but since many people learn and use the same information, the chances that it will give a trader an edge quickly go down to almost nothing.

    Finding an edge and understanding what that really means can help you decide if it’s worth your time to look for one or if it’s even possible or useful.

    The Common Thought

    Most people think that an edge is something that a trader knows or uses that gives them an advantage over the market or all the other traders. For example, a trader might think that using a certain indicator (like the Relative Strength Index, or RSI), in a certain way (like making short trades when the RSI is above 84), gives them an advantage over traders who don’t use the same indicator in the same way.

    Many new traders spend years trying out different indicators or different settings for indicators (like a length of 10, then a length of 15, etc.). They also try out different chart settings, like time-based charts, tick-based charts, or volume-based charts, to find the combination that gives them an edge.

    Getting Your Way

    Some traders have never heard of the term “edge.” When they do, they might start to wonder if they have an edge or if they need to find one. A few rules can help traders find trading edges, if there are any:

    The edge must be based in reality and can’t be based on assumptions. A trader needs to know that an edge might not work all the time. It is possible to make a lot of money with an edge, but then the edge might stop working for a while.

    If you think you have an edge, you should test it by clearly defining the rules and then applying them to historical market data and “paper trading.”

    A wake-up call

    In reality, there are traders who think they have an advantage and traders who think they need an advantage. Some traders laugh every time someone talks about an edge while they make another trade that makes them money. In other words, you might find and use an advantage or you might not.

    Many traders think that good training and instruction give them an edge. In fact, this could be the edge that people looking for an edge are looking for. To trade well, you don’t have to compete with the market or other traders. In fact, the opposite is true. Good risk management and a healthy dose of patience are more likely to lead to success in trading. Retail traders often do better when they focus on controlling their own decision-making processes instead of making decisions based on things they can’t change.

    This is not what many new traders will say. If you are one of them, think about this: Traders who think they have an edge will never tell other traders what trade they are about to make. These traders think that if they talk about it, they might lose their edge.

    Professional traders, on the other hand, won’t think twice about telling other traders what trade they are about to make. This is because it doesn’t change the potential of the trade if other traders know about it or make the same trade.

    Prices can change over time based on supply, demand, and investor sentiment as a whole, but just because one investor thinks they have an edge won’t change anything.

    If you are a new trader who is just starting to look for your edge or if you are an experienced trader who has been looking for your edge for years, you should stop. Markets change so quickly that an edge you find today is likely to be useless tomorrow. In the short term, looking for a trading edge might help you make quick money, but it’s more likely to waste your time and cause you to miss out on opportunities and money.

  • 5 Skills That Every Trader Should Have

    There are many ways to become a professional trader, and a person needs a lot of skills to do well in a field with a lot of stress and competition. When financial firms hire people for trading jobs, they usually look for people with degrees in math, engineering, and hard sciences instead of just people with backgrounds in finance.

    There are also different kinds of trading jobs, some of which require communication skills with customers as well as knowledge of charts. So, let’s take a look at some of the skills that all traders need.

    Skill at analysing

    Every trader needs to be able to look at data quickly and figure out what it means. Trading involves a lot of math, but charts with indicators and patterns from technical analysis show what the data means. So, traders need to improve their analytical skills so they can see trends in the charts.

    Research

    Traders need to have a healthy thirst for information and a desire to find all the important data that affects the securities they trade. Many traders make schedules of economic reports and news that affects the financial markets in a way that can be measured. By keeping up with these sources of information, traders can act on new information while the market is still processing it.

    Focus

    Focus is a skill, and the more traders use it, the better they get at it. Because there is so much financial information out there, traders need to be able to focus on the important, actionable information that will affect their trades.

    Sector-based traders also focus on one particular industry. This helps them learn more about a certain sector, industry, or currency, which gives them an edge over traders who don’t specialise as much.

    Control

    Control and, more specifically, self-control go hand in hand with being able to focus. A trader needs to be able to keep their feelings in check and stick to a plan and strategy for trading. This is especially important when using stop losses or profits at set points to manage risk.

    Many trading strategies are made so that the trader loses less when things go wrong and makes more money when things go right. Strategy goes out the window when traders start to get emotional about their trades, whether they are good or bad.

    Keeping a record

    Keeping good records is one of the most important parts of trading. If a trader keeps careful records of how his or her trades turn out, all that’s left to do to get better is to try out different strategies and change them until one works. If you don’t keep good records, it’s hard to show real progress.

  • How To Keep Your Emotions In Check While Trading

    How To Keep Your Emotions In Check While Trading

    On their way to becoming market masters, stock traders go through different stages. One of the hardest things to learn is how to trade without letting your emotions get in the way. You can be good at picking stocks and managing risk and still fail as a trader if you can’t keep your emotions in check.

    When you know how to control your emotions, you can be patient with your winners and not at all with your losers. Even though it seems easy to say that you should stick to your trading plan, it is actually much harder to do so. Most of us have strong feelings about money, which makes it hard to stick to our rules.

    To do this, you have to take the money out of the picture. Financial risk can’t be a factor in making decisions. It might be hard to incorporate this ideology while trading but you can remove the emotions from trading only if you are able to get this right.

    Here are some ways to trade without letting your emotions get in the way:

    1. Don’t put yourself in more risk than you can handle.

    Most traders keep their losers too long and sell their winners too soon because they take on too much risk. Taking on too much risk ties down your risk management, making it harder for you to make trades with a positive expected value.

    This is something you can change by taking less risk. Then, many traders find that the upside isn’t enough to make them want to trade at all. If a trader doesn’t have a way to make good profits with the money they have, they may start to take on more risk to try to get better results.

    But you can make your trades more likely to go up without taking on more risk if you scale into your positions. As the trade goes in your favour, add to your winners. You don’t need to put yourself in danger by doing this. You can lower the risk of your other positions by using the money you made from your first positions. Add to the list of winners. Don’t throw money at your losers.

    2. Change how you think about money

    We often tell people that it’s best not to look at the summary of their trades’ profits and losses. When you do this, you get too caught up in the current gain or loss on your positions, which makes your fear or greed about the trade worse. Instead of making decisions based on the chart, think about the money.

    People can’t be expected to trade without checking to see if they are making or losing money. So, if you have to look at your trades, instead of focusing on how much money you are making or losing right now, think about how much money you will make or lose if your trade hits the stop loss levels.

    If you buy 1,000 shares of a stock for Rs 100 and the stop is at Rs 90, you could lose Rs 10,000. That’s how much you could lose when you leave.

    Let’s say that this stock goes up to Rs 120 and you move your stop to Rs 110. Even though your position is up Rs 20,000 right now, if you get out on the stop, you will only make Rs 10,000. You need to pay attention to the number that matches your exit point. Don’t think too much about where you are now.

    If you congratulate yourself on making Rs 20,000 on a trade, you start to feel something about that number. If so, you are less likely to sell the stock if it goes back down to Rs 110, where you would only make Rs 10,000. You thought you would make Rs 20,000 and hoped it would be more. It hurts to leave at a lower price, so many people stay and wait for things to turn around. Count on what you already have, not what you want.

    3. Make a plan on paper and trade it

    Some people can lose their minds because of how they feel about a trade. When you make a trade, your feelings can make you break your trading rules. Having a plan written down will help you stay on track when you get lost.

    The plan doesn’t need to be long or hard to understand. A trading plan shouldn’t be longer than one page, in our opinion. It should include your rules for entry, risk management, scaling, and leaving the business. There should also be a review process so that you can work to make your rules and how they are carried out better.

    When you write down an idea, it gives it more value. Before you make another trade, take the time to write out a plan.

  • What exactly is the intrinsic value of a stock?

    Have you ever thought about why one stock might sell for Rs 200 and another for Rs 20? How do these prices get set? In this article, we’ll talk about what intrinsic value is.

    What Does Internal Value Mean?

    The true value of a stock is called its “intrinsic value.” This is calculated based on anticipated monetary benefits. Let’s put it this way: it is the most you can pay for the asset without losing money when you sell it later.

    Technical analysis helps you figure out how the price of a stock will move and what price levels it may reach. But the price is still very closely tied to what the stock is really worth. So, technical analysis only helps figure out where and how much a stock’s price will move.

    Prices have to start from somewhere before they can move in a certain direction. Say that the price of stock right now is Rs 300. Based on your technical analysis, it looks like it might go up to Rs 330. But how did the price of Rs 300 get there? There is a way to figure it out.

    Let’s use the example of buying a house. The main reason for building this apartment is to rent it out.

    Let’s say you want to keep it for 10 years. You shouldn’t pay more than you can make from it. In other words, the total amount of rent you could get in 10 years plus the price you could get if you sold it after 10 years. The value found in this way would be the flat’s true value.

    This value is adjusted for things like inflation and different kinds of risks to make sure it is correct. This will come up again in the section. The discounted cash flow model or the present value model is a way to figure out the true value of something. It can also be used to figure out what a stock is really worth.

    So, the bottom line is that a stock’s “intrinsic value” is the total amount you could make from it in the future.

    The question then is: How much money can you expect to make in the future from shares? When you buy stocks, the company gives you a piece of its annual profit. We call this a dividend. If you add up the value of the dividends and the price at which the share will be sold in the future (called the “terminal value”), you can figure out what the share is really worth.

    However, does Rs 200 in dividends today have the same value as Rs 200 in dividends 10 years from now? The value of Rs 100 in ten years is less than the value of Rs 100 today. In other words, inflation makes money worth less over time.

    To account for this change in value, you will have to use a method called “discounting” on each future dividend. In this step, you will divide each of the future dividends by a certain rate and then add them all up. Add the values to get the intrinsic value.

    RELATIVE VALUE METHOD: Now, let’s talk about the second way to figure out what a stock is really worth. This is done by comparing the price of the stock with one of the most important things about the company.

    Some key fundamentals include sales revenue, net income or profit (also called earnings), book value of equity shares, etc. When you buy shares of a company, you own a piece of the company’s core assets. For instance, you might get a share of the company’s sales or profits. This is because when you buy shares, you become a part-owner of the business.

    Now, it makes sense that you should always try to buy something at a good price and pay as little as possible. The less these shares cost on the market, the less you have to pay per unit to buy these fundamentals.

    Let’s look at a specific case. The price to earnings (PE) ratio is one of the ratios you can use to compare prices. In this ratio, you compare the price of a company’s share to how much it earns per share. If the price per share is Rs 300 and the earnings per share (EPS) is Rs 30, the PE will be Rs 10. This means that you pay Rs 10 for each rupee that the company makes.

    How do you know whether or not this price is fair? To find this, you must compare it to the PEs of the company’s competitors. If, for example, the average PE of your competitors is 15, you are paying less for your shares. This is because you have to pay an average of Rs 15 per unit of earnings for a share of one of the competitors. But you only pay Rs 10 for your company. Because of this, this method is called the relative value method.

    You can also use this method to figure out how much a company’s stock is really worth. By rearranging the formula for PE, you can see that the stock’s real value is the sum of PE and EPS. Now, take the average PE of your competitors, which is 15, and multiply it by the EPS of your company, which is 10. This will give you the intrinsic value of your stock. It adds up to Rs. 150. This means that Rs 150 is a fair price for your stock. Since you can buy it in the market for only Rs 120, it is a great deal. You can buy it with the expectation that it will go up to this fair value.

    The relative value method is important because it uses both the fundamentals of the company and market trends to figure out how much a stock is really worth. This makes it more real, but also more likely to be wrong. If fundamentals change a lot in the future, your estimate of the stock’s true value could be wrong.