The price is decided by the Demand and Supply of the market.
To convert physical shares into an electronic one, which contacts the broker, who forwards it to the company and then it forwards it to the depositories.
A stable government is the most positive factor.
There are corporate actions such as bonus, rights, split, merger, warrant that impact the price of the equity share.
A Bonus announcement is made in advance, you should ideally buy on the Ex Bonus Date.
If we are holding shares on the Record Date, then we are entitled to the bonus, but the last date for buying them is t-2 termed as Ex Bonus Date,(Excluding Bonus) the shares start trading at a revised price.
Face Value is decided by the company’s promoters.
The prize can be different from NSE and BSE.
When the upper circuit happens during short selling, your broker buys it on your behalf from another broker after the market closes till 4 pm.
The closing price is not equal to the next day's opening price due to AMO's.
Technical analysis is based on one fact that history reports itself.
Stock prices generally fall when VIX is too high.
Stock Split happens when the management of the company decides to split the face value of the shares, the number of shares increases proportionately, and the share price decrease proportionately, keeping the overall value intact. Mad people sell at this moment thinking that the company is out. It is done if the company wants more people to invest.
The line chart is made by plotting closing prices on a graph.
The resistance level is always above the current market price. The support level is always below the current market price.
Glossary
RII -> Retail Individual Investors.
HNI -> High Net-worth Individuals, more than 2 lakh rupees worth of shares in an IPO.
DII - Domestic Institutional Investor
FII/FPI - Foreign Institutional Investor / Foreign Portfolio Investor.
Stock Exchange provides a platform for investors to buy and sell securities from each other.
Bonus Ratio, x/y means that you get X free shares for every Y shares held. Bonus is given to reward the shareholders and to encourage retail investors by decreasing the price per share. They are issued out of the reserves of the company. The overall amount of investment remains unchanged as the price falls proportionately.
Penny stocks are those that trade at a very low price, has a very low market capitalization.
LTCG (long term capital gain) is applied when we hold a stock for more than one year and make a profit, which means no tax at all.
The book value literally means the value of a business according to its books or accounts, as reflected on its financial statements. Theoretically, it is what investors would get if they sold all the company's assets and paid all its debts and obligations.
A promoter in the initial period is the founder of the company.
Register of Members: It is the list of all shareholders. A company needs it on the Record Date.
The order placed between 4 pm to 9 am is called After Market Orders (AMO) but they are executed after the market starts.
Topline means turnover and the bottom line is profits after tax. If the bottom line is growing faster than the top-line it is a good point.
LTP - Latest Traded Price, is another term for a closing value.
If the opening price is more then it is called Gap-Up Opening and if it is less then it is called Gap-Down Opening and if it is unchanged then it is termed as unch(unchanged)
Bid Price - It represents the highest price an investor is willing to pay for a share.
Ask Price - It represents the lowest price at which a shareholder is willing to sell a share.
Disclosed quantity allows a trader to disclose only a part of the actual quantity he wishes to buy/sell. Once the disclosed quantity is specified, the order is sent to the exchange and only the disclosed quantity will be shown on the market screen.
Trailing Stop Loss - is a type of day trading order that lets you set a maximum value or percentage of loss you can incur on a trade. If the security price rises or falls in your favor, the stop price moves with it. If the security price rises or falls against you, the stop stays in place.
Turnover - (Sell price + Buy Price) * Quantity
STT - Securities Transaction Tax, 0.1% of turnover.
Sebi Charges - 10 * Turnover(in Crores).
ATR - Average True Range. (Volatility Index)
Facts
NSE and BSE are the two main stock exchanges in India.
XMSEI, formerly known as MCX-SX, is an exchange for commodities, like gold, silver, grains, in India.
SEBI, Securities and Exchange Board of India, is the regulatory body of the stock market.
NSDL (National Securities Depository Ltd) and CDSL (Central Depository Service Ltd) are the two depositories in India, whose work is to convert physical shares into dematerialized shares, has the list of all the buyers and sellers, and also has the broker's account.
Dividend
We get dividends from a stock like interest from an FD.
The dividend is paid according to the Face Value of the share.
The dividend is not tax-free from now onwards.
It is the company’s decision to pay dividends or not.
The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price.
Volume
- Volume is the number of shares that were traded (sold and bought) over a given period of time. The more active a share, the higher would be its volume.
- Consider volumes as a means to gain insights into how other participants perceive the market.
- Always check if the volume is lower or greater than the average volume.
PE Ratio
You should compare PE from the sector of the company or its competitor, if the P/E is low it means that it is undervalued and if it is high then it is overvalued.
A lower PE may mean bad news about the company and a higher PE may mean2 investors' confidence.
Trend
A trend is the overall direction of a market or an asset's price. There is an uptrend, downtrend, and sideways trend.
Never buy in a downtrend.
Avoid investing in a sideways trend.
You should Buy in an uptrend unless you see a reason for the fall. If there are 5-6 consecutive highs then it is less possible to be a high again.
Patterns
- If the price rises above the resistance, there is a probable uptrend coming. If the price falls below the support, there is a probable downtrend coming.
- If you see a morning star pattern at the end of a downtrend this can be the sign of the following uptrend, and the opposite for the evening star.
- If you see a continuous uptake in the trend that is maybe some trick.
- One should avoid trading based on subdued short candles.
- Large Candle = Trend Reversal and Enter Trade.
- Never But in Gap-Up Opening.
- Never Sell in Gap-Down Opening.
- Enter after 10am.
- If a stock brokes support it will become its resistance.
- Never trade based on Good/Bad News.
- Inverted Hammer - Sellers are Heavy (Sell).
- Hammer Candle - Sellers Weak (Buy).
- Large Candle + S&R = Trend reversal.
- VWAP (Vol Weighted Average Price) - Sum(Price * Volume) / Total Volume in a given time. When closing of the candle above VWAP, then cross-check using MACD. When the candle is away from VWAP or you are late do not trade.
Laws and Rules
- Brokers auto square off before 20 min of market close for trading, but Zerodha does it before 10 min.
- 9: 15 am to 3:30 pm is the market time.
- From 9:00 am to 9:15 there is a pre-opening market session, which was started to stop the big fluctuations in the beginning of the market time which leads to the loss of small investors.
- An investor must give a mandatory disclosure to the company if he holds more than 5% of the shares.
- For securities to be eligible to trade in the secondary markets, it should be held in electronic or dematerialized form.
- Traded shares are transferred to the Demat account after 2 business days[T+2], which is called the settlement system.
Orders
- MIS - Margin Intraday Square off (Intraday)
- CNC - Cash and Carry (Delivery)
- NRLM - Normal (F&O, commodities, currencies)
- Market Order - Buy at Current Market Price (CMP)
- Limit Order - It is an order to buy or sell a stock at a specific price or better.
- Stop-loss can be defined as an advance order to sell an asset when it reaches a particular price point. It is used to limit loss or gain in a trade.
- Stop Loss Limit is a combination of both limit and stop-loss market orders.
- Bracket Order is 3 orders in one - Buy, Target, and Stop-Loss.
- Cover Order - You have to take stop-loss.
- AMO - After Market Order.
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