ONLINE TRADING  AND  STOCK RESEARCH TECHNIQUES
RESEARCH OBJECTIVE <ul><li>To qualitatively view the prevalent analysis techniques used for selecting a Company’s stock fo...
RESEARCH METHODOLOGY RESEARCH DESIGN EXPLORATORY DATA COLLECTION Secondary Data TOOLS USED MetaStock Period of Study 8 weeks
A Stock Exchange is an organized market for purchase and sale of existing or second hand securities. STOCK EXCHANGE
SIGNIFICANCE  OF STOCK MARKETS Stock markets are true indicators of the economy of a country wherein they take into consid...
<ul><li>Surplus capital. Speculative instincts. High risk appetite.  Stock Market provides them with a platform wherein th...
PARTICIPANTS <ul><li>An investors attitude makes him synonymous to animals in the market. </li></ul><ul><li>Bull  –  If a ...
<ul><li>DOW THEORY </li></ul><ul><li>ELLIOTT WAVE THEORY </li></ul>THEORIES OF RESEARCH
DOW THEORY <ul><li>DOW THEORY </li></ul><ul><li>The market has three trends </li></ul><ul><ul><li>Up trend, Down trend and...
Accumulation Participation Distribution Reliance Industries 1/9/06- 29/8/08 DOW THEORY
ELLIOTT WAVE THEORY <ul><li>Proposed by Ralph Nelson Elliott  in the 1930s. </li></ul><ul><li>Market prices unfold in spec...
Dominant Trend  Corrective Trend   Motive waves Corrective waves ELLIOTT WAVE PATTERN
ELLIOTT WAVE: A  PRACTICAL EXAMPLE
Technical Analysis <ul><li>Philosophy or Rationale </li></ul><ul><ul><li>Market action discounts everything </li></ul></ul...
<ul><li>Candlestick charts are the oldest type of charts use for price prediction </li></ul><ul><li>Date back to the 1700’...
CANDLESTICK PATTERN
The signals are created by the change in investor sentiment Type of Chart
White Candlestick Black Candlestick Hammer Doji Line Common Candlestick Terminology
HAMMER
Engulfing
STAR FORMATION
CANDLESTICK  PATTERN Reliance Industries 4 month Chart Hanging Man Piercing Pattern Dark Cloud Crow Pattern
<ul><li>Support and Resistance </li></ul><ul><li>Trendlines </li></ul><ul><li>Trading Range (Channel) </li></ul><ul><li>Pr...
SUPPORT AND RESISTANCE
<ul><li>Draw a trendline through the edges of congestion areas </li></ul><ul><li>The most important feature of a trendline...
TRENDLINES
CHANNEL
<ul><li>Five most major reversal patterns: </li></ul><ul><ul><li>Head & Shoulder </li></ul></ul><ul><ul><li>Triple top and...
H & S
DOUBLE TOP
ROUNDING
RSI Relative Strength Index does not compare the relative strength of two securities, but rather the internal strength of ...
FUNDAMENTAL ANALYSIS <ul><li>Data collected from Company’s Balance Sheet. </li></ul><ul><li>Factors considered: </li></ul>...
FURTHER RESEARCH <ul><li>Fiscal Policy of Government </li></ul><ul><ul><li>Varied tax slabs for different sectors </li></u...
Contd. <ul><li>Sector specific announcements </li></ul><ul><ul><li>Windfall tax </li></ul></ul><ul><ul><li>Corporate Tax o...
WORLD BOURSES <ul><li>The markets the world over </li></ul><ul><li>Japan  Nikkei </li></ul><ul><li>China  Shanghai composi...
SAMPLE ANALYSIS
<ul><li>Inflation is receding as threat. </li></ul><ul><li>New problem :Liquidity and Growth </li></ul><ul><li>What can th...
Bull markets are born in despair, rise in skepticism and die in mania. By- John Templeton Famous Quote
ONLINE TRADING MECHANISM <ul><li>Open a DEMAT Account  for Equity Trading with their Depository Participant (DP) who is th...
TRADE EXECUTION <ul><li>ORDER PLACING </li></ul><ul><li>Bids are communicated to the mainframe of the Stock Exchange. </li...
QUESTION AND ANSWERS
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Summer Project

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Equity Research Techniques and Online Trading

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Summer Project

  1. 1. ONLINE TRADING AND STOCK RESEARCH TECHNIQUES
  2. 2. RESEARCH OBJECTIVE <ul><li>To qualitatively view the prevalent analysis techniques used for selecting a Company’s stock for investment purpose. </li></ul><ul><li>  </li></ul><ul><li>To identify the factors to be considered while selecting a particular stock. </li></ul>
  3. 3. RESEARCH METHODOLOGY RESEARCH DESIGN EXPLORATORY DATA COLLECTION Secondary Data TOOLS USED MetaStock Period of Study 8 weeks
  4. 4. A Stock Exchange is an organized market for purchase and sale of existing or second hand securities. STOCK EXCHANGE
  5. 5. SIGNIFICANCE OF STOCK MARKETS Stock markets are true indicators of the economy of a country wherein they take into consideration factors such as GDP growth, Industrial growth, Global cues, Government policies, Budget, Inflation(WPI) and Demand & Supply to reflect the growth of the economy by showcasing the variations as fluctuations in the Index; NSE and the BSE.
  6. 6. <ul><li>Surplus capital. Speculative instincts. High risk appetite. Stock Market provides them with a platform wherein the variations in its Index levels amounts to huge gains/losses in a short span of time (minutes to several days). The quick and high returns from Stock Market lures Traders and Investors to invest. A variable RoR. </li></ul>Why Invest in Stock Market?
  7. 7. PARTICIPANTS <ul><li>An investors attitude makes him synonymous to animals in the market. </li></ul><ul><li>Bull – If a person is optimistic, believing that stocks are going up, he or she is called a “bull&quot; and said to have a &quot;bullish outlook&quot;. </li></ul><ul><li>Bear - If a person is pessimistic, believing that stocks are going to drop, he or she is called a &quot;bear&quot; and said to have a &quot;bearish outlook&quot;. </li></ul><ul><li>Chicken - Chickens are afraid to lose anything. Their fear overrides their need to make profits, so they avoid the market completely and never take any risk. </li></ul><ul><li>Pig – Pigs are impatient, greedy, and emotional investors who blindly invest in high-risk securities without strategizing. </li></ul>Traders - are those people who invest in the market with an aim to earn quick money in a short term. Investors - are people who invest their capital in a fundamentally solid company for a long term.
  8. 8. <ul><li>DOW THEORY </li></ul><ul><li>ELLIOTT WAVE THEORY </li></ul>THEORIES OF RESEARCH
  9. 9. DOW THEORY <ul><li>DOW THEORY </li></ul><ul><li>The market has three trends </li></ul><ul><ul><li>Up trend, Down trend and Sideway </li></ul></ul><ul><li>Major trends have 3 phase </li></ul><ul><ul><li>Accumulation </li></ul></ul><ul><ul><li>A public participation </li></ul></ul><ul><ul><li>A distribution </li></ul></ul><ul><li>The stock market discounts all news. </li></ul><ul><li>Trends are confirmed by volume </li></ul>
  10. 10. Accumulation Participation Distribution Reliance Industries 1/9/06- 29/8/08 DOW THEORY
  11. 11. ELLIOTT WAVE THEORY <ul><li>Proposed by Ralph Nelson Elliott in the 1930s. </li></ul><ul><li>Market prices unfold in specific patterns known as the Fractal Pattern </li></ul><ul><li>5 waves up. </li></ul><ul><li>3 waves down. </li></ul>
  12. 12. Dominant Trend Corrective Trend   Motive waves Corrective waves ELLIOTT WAVE PATTERN
  13. 13. ELLIOTT WAVE: A PRACTICAL EXAMPLE
  14. 14. Technical Analysis <ul><li>Philosophy or Rationale </li></ul><ul><ul><li>Market action discounts everything </li></ul></ul><ul><ul><li>Prices move in trends </li></ul></ul><ul><ul><li>History repeats itself </li></ul></ul>
  15. 15. <ul><li>Candlestick charts are the oldest type of charts use for price prediction </li></ul><ul><li>Date back to the 1700’s,when they were used for predicting rice price </li></ul><ul><li>Sokuta Honma is said to have executed over 100 consecutive winning trades!! </li></ul><ul><li>Sakata’s method is the first verifiable beginning of pattern recognition </li></ul>CANDLESTICK
  16. 16. CANDLESTICK PATTERN
  17. 17. The signals are created by the change in investor sentiment Type of Chart
  18. 18. White Candlestick Black Candlestick Hammer Doji Line Common Candlestick Terminology
  19. 19. HAMMER
  20. 20. Engulfing
  21. 21. STAR FORMATION
  22. 22. CANDLESTICK PATTERN Reliance Industries 4 month Chart Hanging Man Piercing Pattern Dark Cloud Crow Pattern
  23. 23. <ul><li>Support and Resistance </li></ul><ul><li>Trendlines </li></ul><ul><li>Trading Range (Channel) </li></ul><ul><li>Price patterns </li></ul><ul><li>RSI </li></ul>TOOLS FOR TECHNICAL ANALYSIS
  24. 24. SUPPORT AND RESISTANCE
  25. 25. <ul><li>Draw a trendline through the edges of congestion areas </li></ul><ul><li>The most important feature of a trendline is its angle </li></ul><ul><li>Trendlines show the action of bulls and bears </li></ul>TREND LINES
  26. 26. TRENDLINES
  27. 27. CHANNEL
  28. 28. <ul><li>Five most major reversal patterns: </li></ul><ul><ul><li>Head & Shoulder </li></ul></ul><ul><ul><li>Triple top and bottom </li></ul></ul><ul><ul><li>Double top and bottom </li></ul></ul><ul><ul><li>Spike top and bottom </li></ul></ul><ul><ul><li>Rounding </li></ul></ul>PRICE PATTERNS
  29. 29. H & S
  30. 30. DOUBLE TOP
  31. 31. ROUNDING
  32. 32. RSI Relative Strength Index does not compare the relative strength of two securities, but rather the internal strength of a single security.
  33. 33. FUNDAMENTAL ANALYSIS <ul><li>Data collected from Company’s Balance Sheet. </li></ul><ul><li>Factors considered: </li></ul><ul><li>Dividend </li></ul><ul><li>PAT </li></ul><ul><li>Reserves and Surplus </li></ul><ul><li>EPS </li></ul><ul><li>PE ratio </li></ul>
  34. 34. FURTHER RESEARCH <ul><li>Fiscal Policy of Government </li></ul><ul><ul><li>Varied tax slabs for different sectors </li></ul></ul><ul><li>RBI’s Monetary Policy </li></ul><ul><ul><li>Repo Rate </li></ul></ul><ul><ul><li>CRR </li></ul></ul><ul><ul><li>SLR </li></ul></ul><ul><ul><li>FOREX policy </li></ul></ul><ul><li>Tracking Global Cues </li></ul><ul><li>Inflation – 5p.m every Thursday </li></ul><ul><ul><li>Imported inflation </li></ul></ul><ul><ul><li>Domestic Inflation </li></ul></ul><ul><li>Speculative Instincts </li></ul>
  35. 35. Contd. <ul><li>Sector specific announcements </li></ul><ul><ul><li>Windfall tax </li></ul></ul><ul><ul><li>Corporate Tax on IT companies </li></ul></ul><ul><ul><li>Subsidy to Agri sector </li></ul></ul><ul><ul><li>Ban on Iron Ore to control inflation </li></ul></ul><ul><ul><li>Increased export duty on metals </li></ul></ul><ul><li>Re-Dollar equation </li></ul><ul><li>FII Turnover </li></ul><ul><li>Domestic turnover </li></ul><ul><li>Keeping a check on Commodity driven stocks </li></ul><ul><li>Keeping a check on Demand-Supply of Crude oil </li></ul>
  36. 36. WORLD BOURSES <ul><li>The markets the world over </li></ul><ul><li>Japan Nikkei </li></ul><ul><li>China Shanghai composite </li></ul><ul><li>Thailand Set </li></ul><ul><li>India Nifty 50/Sensex </li></ul><ul><li>London FTSE </li></ul><ul><li>USA Nasdaq/Dow Jones </li></ul><ul><li>Brazil Bovespa </li></ul><ul><li>Korea Kospi </li></ul>
  37. 37. SAMPLE ANALYSIS
  38. 38. <ul><li>Inflation is receding as threat. </li></ul><ul><li>New problem :Liquidity and Growth </li></ul><ul><li>What can the banks do: </li></ul><ul><ul><li>Cut interest rates </li></ul></ul><ul><ul><li>Increase liquidity </li></ul></ul><ul><li>India caught in a ripple of financial crisis. </li></ul><ul><li>High counter party risk and thus no lenders resulting in reduced liquidity </li></ul>Current Market Scenario
  39. 39. Bull markets are born in despair, rise in skepticism and die in mania. By- John Templeton Famous Quote
  40. 40. ONLINE TRADING MECHANISM <ul><li>Open a DEMAT Account for Equity Trading with their Depository Participant (DP) who is their Stock Broker or the Online Trading Company registered with the Stock Exchange. Negotiate Brokerage </li></ul><ul><li>Requirements for opening a Demat a/c are as follows: </li></ul><ul><ul><ul><li>Fill the DEMAT Form provided by the Stock Broker. </li></ul></ul></ul><ul><ul><ul><li>Provide the PAN number with it. </li></ul></ul></ul><ul><ul><ul><li>Provide residence proof. </li></ul></ul></ul><ul><ul><ul><li>Draw a cheque in favour of NSCCL as the a/c opening fee. </li></ul></ul></ul><ul><li>After the DEMAT a/c has been opened and mapped to a Stock Broker’s VSAT terminal, one can commence trading. </li></ul>
  41. 41. TRADE EXECUTION <ul><li>ORDER PLACING </li></ul><ul><li>Bids are communicated to the mainframe of the Stock Exchange. </li></ul><ul><li>Bid entered is first TIME stamped and then PRICE stamped. </li></ul><ul><li>TRADE - Stock Exchange mainframe automatically matches the orders and as soon as the price quotations are matched, Order is converted into Trade. </li></ul><ul><li>Trade confirmation is given to the Broker or the Client immediately. </li></ul><ul><li>CONTARCT NOTES are issued by the Brokerage Houses. </li></ul>
  42. 42. QUESTION AND ANSWERS
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