Zebu blog

Tag: Volatility

  • The top 9 most popular intraday trading strategies and when to use them

    Intraday trading, also known as day trading, is a popular trading strategy that involves buying and selling securities within the same day. This type of trading can be a lucrative way to make money if you have the knowledge and skills to do it successfully. In this article, we will take a look at the top 10 most popular intraday trading strategies and when to use them.

    Breakout trading: This strategy involves buying or selling a security when it breaks out of a pre-determined price range. For example, if a stock has been trading between $50 and $55 per share for a while, a breakout trader might buy the stock if it breaks above $55 or sell it if it falls below $50. This strategy can be useful when a stock is showing signs of a strong trend in either direction.

    Momentum trading: This strategy involves buying stocks that are showing strong momentum, or a rapid increase in price. Momentum traders look for stocks that are making big gains and then buy them in the hopes that the upward trend will continue. This strategy can be useful when there is a lot of excitement and optimism in the market.

    Trend following: This strategy involves buying stocks that are trending upwards and selling stocks that are trending downwards. Trend followers try to capitalize on the momentum of a stock by buying it when it is moving up and selling it when it is moving down. This strategy can be useful when the market is in a clear uptrend or downtrend.

    Range trading: This strategy involves buying stocks that are at the low end of their price range and selling them when they reach the high end of their range. Range traders try to capitalize on the natural fluctuations in a stock’s price by buying when the price is low and selling when it is high. This strategy can be useful when a stock is showing little or no trend and is trading within a well-defined range.

    Scalping: This strategy involves making many small trades throughout the day in an attempt to profit from small price movements. Scalpers try to capitalize on the volatility of the market by buying and selling stocks quickly and often. This strategy can be useful when the market is particularly volatile and there are many opportunities to profit from small price movements.

    News trading: This strategy involves buying or selling a stock based on the news. News traders try to capitalize on the impact that news events can have on a stock’s price. This strategy can be useful when there is a major news event that is expected to affect the market.

    Reversal trading: This strategy involves buying or selling a stock when it is reversing its trend. Reversal traders try to capitalize on the natural ebb and flow of the market by buying a stock when it is starting to trend upwards and selling it when it is starting to trend downwards. This strategy can be useful when a stock is showing signs of a reversal in its trend.

    Arbitrage trading: This strategy involves buying and selling a security simultaneously in two different markets in order to profit from the difference in price. Arbitrage traders try to capitalize on price differences in different markets in order to make a profit. This strategy can be useful when there are pricing inefficiencies in the market.

    Pair trading: This strategy involves buying one stock and selling another stock that is related to it in some way. Pair traders try to capitalize on the relationship between the two stocks by buying one when it is undervalued and selling the other when it is overvalued. This strategy can be useful when there is a clear relationship between two stocks and one of them is undervalued compared to the other.

    In conclusion, intraday trading can be a profitable way to make money if you have the knowledge and skills to do it successfully. The top 10 most popular intraday trading strategies are breakout trading, momentum trading, trend following, range trading, scalping, news trading, reversal trading, arbitrage trading, pair trading, and swing trading. Each of these strategies has its own advantages and disadvantages, and the best strategy to use will depend on the current market conditions and your own personal trading style.

  • How To Choose Stocks For Swing Trading

    You might know what swing trading is, but might not know where to begin. A good swing trading strategy starts with learning how to find stocks for swing trading. Swing traders carefully choose stocks that have a good chance of doing well in the future. This lets them take a much larger share of the market. How do they do that, though? Let’s look into swing trading’s mysteries.

    With swing trading, you can make money from market changes that happen over a few days or weeks. Like day trading, it gives traders the chance to make money when the market moves in their favour. Your strategy for trading will be built on your ability to pick the right stocks. Like day trading, you would also have to choose stocks with high liquidity and the chance of big changes in price and volume. So, let’s talk about how to find stocks that are good for swing trading.

    How to Pick Stocks for Swing Trading: The Simple Rules
    Swing traders will always swear by a few general rules. Of course, you can make your own plan and put it into action, but having one or two of these is a great place to start.

    Market direction

    When trading, traders follow a rule that says if a stock’s value is going up in the current market, it will keep going up if the market stays the same.

    You can find the best-performing stocks in a number of ways, such as by reading company news, looking for the best stocks on the market, or keeping an eye on stock indices.

    Orientation bias

    Swing traders look for possible buy or sell signals to find opportunities. They use a mix of basic information and technical analysis to find industries and stocks that do better than indices for a large part of the trading day. They sort through the stocks to find ones that have the right amount of volatility and volume to store their expectations. This process, called “screening stocks,” is made up of the following steps.

    Liquidity is a very important metric for swing traders. The number of times a stock trades each day shows how popular it is on the market. How often a stock trades on the exchange tells you how liquid it is. If a stock trades a lot every day, it is considered liquid enough for swing trading. Stocks with a lot of trading show less risk.

    Performance is a way to compare how well a stock has done compared to other stocks in the same industry. The goal is to find the best stocks in each sector that have done better than sector indices.

    Swing traders look for stocks that trade in the same way over and over again. They think that a pattern that keeps coming up is more reliable. Experienced traders will wait for the stock to break out of its trading range before they decide when to buy or sell. They might make a few small profits while they wait by trading in the direction of the trend.

    Some swing traders may like stocks that are less volatile and have a clear uptrend. They stay away from stocks that are prone to big drops and selling for no reason. Instead, they would keep holding on to stocks whose prices didn’t change much and had no gaps in the price line.

    Correlation and volatility: Stocks that go against the market trend may look good, but most swing traders will stay away from them. It makes sense to stay away from stocks that aren’t stable and instead focus on those that track key market indices. Look at how a stock has been acting in the past to figure out why it is acting the way it is.

    Another important factor is how volatile the market is. Volatility is a way to figure out how much a stock price will change, if the target and stops are reasonable, or if the risk criteria are good enough for the amount of time the trader wants to keep the position open.

    Conclusion

    After we’ve talked about how to swing trade stocks, it’s important to know that swing trading is riskier than day trading because it involves keeping stocks for a longer time. You need a strong strategy to help you find trade opportunities and possible red flags.

    When picking stocks for swing trading, investors should keep in mind that there are other ways to do things besides the ones described in this article. Every trader needs to come up with a plan that works for them.

    Whether you swing trade or not, it will help you a lot in the stock market to know how to find stocks to swing trade. You can use this information to make trading plans that will make you money and to learn more about how stock prices move.

  • Everything You Should Know About Breakout Trading


    Did you know that sometimes on the stock market, fake breakouts can happen? But what are breakouts? How can you tell if a breakout is real or not?

    Assume that there is a resistance for the market at 18,000. When the price reaches there, sellers might come in and try to push the price down. However, if the price manages to move above 18,000, then it is called a breakout.

    Similarly, you could say that there is some support. When the price gets to the support level, everyone buys. When the price hits this level twice in a row, it means something. When there is a third strike and the price goes through the support level line, this is called a breakdown. Simply put, breakouts and breakdowns are a rise and a fall.

    First, let’s talk about what “breakout” means. What price action will help you the most if there is a breakout? For our breakout to happen, a bullish engulfing pattern must form. Now, the price breakout should be supported by the volume breakout, which means that when the price breakout happens, there should be a lot of volume. This can be seen when the volume bars at the bottom of the chart break over the black line that shows the volume line. The first thing is that a bullish engulfing candle pattern forms, and this is the second thing.

    The third and most subtle trait is called consolidation. Think about how the market always forms bullish candlestick patterns right before a breakout during intraday trading on a 15-minute time frame. Many people think the upward trend is reliable, but they will learn over time that after the candle breaks out, smaller green candles, a doge, and finally a huge giant red candle are seen, and smaller red candles start moving sideways. As a result, a lot of people lose. Then, how can we stop this?

    Consolidation. When a breakout happens, it should follow a significant pattern, like three or four contact points. This tells us that the breakout is real, and the breakout of the candle and the volume should back this up. If there has been no consolidation and there is a straight breakout, there is a higher chance that the trade will fail. We should enter those breakout trades when there is a strong consolidation.

    The fourth quality is that it’s been tested more than once. It’s important to test the level of resistance more than once. Let’s say that over the course of 15 minutes, you can see a lot of consolidations against the resistance level, that the resistance line has been reached before and really broken through the day before. It will be less likely that the stock will break through resistance.

    When we talk about breakdown, it’s for the same reason that bearish engulfing candle patterns, the volume breakout, consolidation, and several tests all work. Once all of these checklists are met, then you can go ahead and take your trade. As always, follow a strict stoploss.

    Breakout trading is a simple price action strategy that can work wonders if you know how to prevent false breakouts. To open a trading account with Zebu and start trading breakout strategies today, please get in touch with us.

  • 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.

  • Factors That Decide An Option’s Premium

    Factors That Decide An Option’s Premium
    Any trader will tell you that in order to be successful, you have to understand and, more importantly, master the concept of option pricing and how to figure out its correct value.

    When you look at all the things that affect an option’s price, you can figure out what its real price is. Let’s look at oil as an example. The final prices of petroleum depend on consumer demand, the price of crude oil, the time of year, local and state taxes, refinery output, etc. If you want to know or figure out the price of an option before you buy or sell it, you can use a mathematical model like the Black Scholes model. You only need to think about the different parts of the model to figure out the right price.

    Being a successful trader depends on several things, but most importantly it depends on the kind of platform you use to trade. As a stock broker, we understand this and offer the best trading platform to our users that provides them with the best trading accounts.

    Putting a price on an option depends on a number of things.

    The stock’s current price: If you’re interested in a call option that lets you buy shares of X company for, say, Rs 350 each, you’d probably be willing to pay more for that call when the stock is trading at Rs 320 instead of Rs 350. This is because the call option gets much closer to being ITM at Rs 49 than it would have been if it traded at Rs 40. Put options, on the other hand, do the opposite.

    The Strike Price: This is the price that a call owner has to pay to buy stock, while a put owner has to pay if he wants to sell his stock. This is like the example that was given above. Most of the time, it costs more to get the right to buy stock at Rs 350 than at Rs 380. The average investor would, of course, like to have the right to buy stocks at lower prices at any time of day. With the strike price going down, this makes calls cost more. In the same way, the value of puts goes up when the strike price goes up.

    Time before expiration: It’s important to remember that all options have a set amount of time they can be used and usually end on or after a certain date. Because of this, the value of an option goes down as time goes on. The more time there is until expiration, the more likely it is that you can make moves that will make you money.

    Interest rates: This is not a very important factor when figuring out the price of an option. When interest rates go up, so do the prices of call options. When the trader chooses the call option instead of the stock, any extra cash in his account should, at least in theory, earn him interest. This doesn’t really happen in the real world, but the basic idea makes sense.

    Dividends: When a stock trades but the owner doesn’t get any dividends, this is called “ex-dividend,” and the price of the stock goes down by the amount of the dividend that was due. When dividends go up, put values go up and call values go down.

    Volatility is thought to be the most important variable. In simple terms, volatility is the difference between the prices of stocks from one day to the next. It can also be called swings in the price of a stock. When compared to stocks that are less likely to change, volatile stocks are more likely to have a different strike price level. When investors make big moves, their chances of making money go up. So, options on stocks that change a lot are definitely more expensive than options on stocks that change less or not at all. So, it’s important to remember that even small changes in estimates of volatility have a big effect on the prices of options. Volatility is usually thought of as an estimate, and if you only have an estimate, especially of future volatility, it’s almost impossible to figure out the right option value.

    As we mentioned earlier being successful as a trader depends on several things, but most importantly it depends on the kind of platform you use to trade. As a stock broker, we understand this and offer the best trading platform to our users that provides them with the best trading accounts.



  • Types Of Fear In The Stock Market – Part 2

    Here are two more phenomenons traders and investors fear about the stock market and a few tips to avoid them.


    If you are a regular investor or a trader, you know how important the tools are. And as a share trading company, we understand that you need the best share trading platform so we are here to give you just that along with the lowest brokerageoptions.

    3. Don’t listen to the crowd

    What is the government like and how is it like the stock market? Everyone has an opinion on them, no matter how much they know or how high up they are.

    People talk about the stock market as if they know everything about it, even though they don’t. In a corporate office, people talk about all kinds of things, and one person’s opinion might have been the start of a rumour. Don’t blindly agree with these points of view. It is very important that you do market research for your portfolio.

    “Be fearful when others are greedy and greedy when others are fearful,” says a famous quote from an investing genius.

    4. Diversify into multiple asset classes

    We just can’t say this enough. This is the most important thing you can do to lessen the risks of the stock market. To diversify means to put your money in different things so that if one doesn’t work out, the whole portfolio doesn’t lose money. The first rule of investing is to do this.

    Investing in different things comes with different kinds of risks. Having both high-risk and low-risk products in your portfolio gives it a sense of balance. Because of this, the best portfolios are made up of a mix of equity, debt, and cash. It could even have land or gold in it. But having one thing out of all of them is a big problem.

    5. Figure out the risk

    Risk appetite is how willing you are to take risks. It depends on the person and what stage of life they are in. If you’re a student or young person, you don’t have to worry about feeding anyone or taking care of a home, so you can take risks. But as people age, their responsibilities grow. One needs to plan for getting married, sending their kids to school, and finally, retiring. Over time, people become less willing to take risks, which makes them afraid of the stock market.

    So, before you invest your money, you should carefully look at the product you want to buy, its risk model, and whether or not it fits your risk tolerance. The stock market has its own risks, but if you are careful, you can make good money from it.

    Conclusion

    Investing in the stock market is definitely scary and full of big risks.

    But if you stay calm, learn to make decisions that make sense, and use these strategies, you can have a smooth sail.

    Successful investors have made a lot of money by making the right choices at the right times. How would you know you’re not one of them if you’re always afraid of the stock market? So, don’t wait until tomorrow; start now and see what happens.

    As a share trading company, we understand that you need the best share trading platform so we are here to give you just that along with the lowest brokerage options.

  • Types Of Fear In The Stock Market – Part 1

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

    The fear of the stock market is real, and why wouldn’t it be? How can someone trust the market cycle and go with it when there are so many unknowns and the market will always be volatile? Especially when our hard-earned money is at stake! Before we get into understanding the various types of fears in the stock market, it is important to understand that the technology you use is as important as the strategy. And as a share broking company, we offer the best trading accounts with the lowest brokerage for intraday trading.

    At the end, who wants to lose?

    People have lost tens of thousands of rupees in the past when the stock market went down. Because of this, when the stock market crashes, people tend to pull their money out of fear, which leads to even more losses. It’s a never-ending loop. So, what should we do? To stop further capital loss and deal with stock market fear, you need patience and tried-and-true strategies.

    How to Deal with Stock Market Anxiety Let’s look at some of the best and easiest ways to deal with this fear of the stock market:

    1. Don’t try to catch the bottom of the market Value investing is the most basic way to put money into the stock market. The one backed by Warren Buffet is a strategy in which you just buy stocks when their value goes down and sell them when it goes up. This sounds like a good way to deal with fear about the stock market. But when they do this, some people invest a large amount of money all at once. This should be avoided at all costs. There are many different ways to trade and invest in stocks, so you must be very careful. You need to put some money at one low and some at the other until you reach the lowest point and the recovery begins.

     2. Have patience. When markets start to go down, people tend to panic and get rid of their stock market investments out of fear. When you invest in stocks for the long term, you do so with a specific time frame and goal in mind. If you take these away when things are bad, you lose in both ways. First, the capital value goes down, and second, the goal of the investment is no longer met. For example, you could buy a house in 5 years if you saved Rs. 5,000 per month in a SIP. Some of the money in your portfolio lost value, so you took it all out of fear. Where does it leave you? With a loss of capital and unfinished goals, and if the fund starts going up again (which it usually does in the first year after a drop), you would feel like you missed the bus. So, unless it’s an emergency, you can try not to sell your equity investments unless you have to. Giving your investments time to grow is a hard thing to do. The stock market is NOT a quick way to make money. For wealth to start and grow, you have to keep at it.

    As we mentioned, it is important to understand that the technology you use is as important as the strategy. And as a share broking company, we offer the best trading accounts with the lowest brokerage for intraday trading.