Stock Market
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What is stock market? stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. Holding a company's stock means that you are one of the many owners (shareholders) of a company, and, as such, you have a claim (albeit usually very small) to everything the company owns. A stock is represented by a stock certificate. This is a fancy piece of paper that is proof of your ownership. Being a shareholder of a public company does not mean you have a say in the day-to-day running of the business. Instead, one vote per share to elect the board of directors at annual meetings is the extent to which you have a say in the company. The management of the company is supposed to increase the value of the firm for shareholders. If this doesn't happen, the shareholders can vote to have the management removed--well, this is the theory anyway. In reality, individual investors like you and I don't own enough shares to have a material influence on the company. It's really the big boys like large institutional investors and billionaire entrepreneurs who make the decisions. The importance of being a shareholder is that you are entitled to a portion of the company's profits and have a claim on assets. Profits are sometimes paid out in the form of dividends. In case of liquidation, you'll receive what's left after all the creditors have been paid. This last point is worth repeating: the importance of stock ownership is your claim on assets and earnings. Saving Vs Investment Savings is accumulating your money, while investing is making that money work to earn more money. Savings and term deposits earn a fixed amount of interest, but investments like equity mutual funds or stocks have the potential to grow In simple words, saving is storing money safely, such as in a bank or money market account, for short-term needs such as upcoming expenses or emergencies. Typically, you earn a low, fixed rate of return and can withdraw your money easily. Savings are also usually more liquid. That is, you may quickly and easily convert your investment to cash. Investing is taking a risk with a portion of your savings such as by buying stocks or bonds, in hopes of realizing higher long-term returns. Unlike bank savings, stocks and bonds over the long term have returned enough to outpace inflation, but they also decline in value from time to time. The rate of returns and risk for savings are often lower than for other forms of investment. Return is the income from an investment. Risk is the uncertainty that you will receive an expected return and preservation of capital. Why to invest in stocks?
There are several reasons why you need to invest in stock market. 1. Historically, stocks have performed better than most other investments. This is a testament to the growth of the economy in the United States or India or United Kingdom or any other economically leading company today. For instance in USA, from 1955 to 1994, the average yearly return of a share of stock was approximately 10 percent. This means that if $10,000 were invested in stocks in 1955, and dividends and capital gains were reinvested instead of kept, this $10,000 would have been worth about $444,000 by 1994. Athens Stock Exchange increased by 142.49% between 1997 and 2003, compared to a return of 47.56% if your savings had increased in line with the deposit rate over the same period. 2. A share of common stock is ownership in a company. It entitles the holder to a claim on assets as well as a fraction of the profits that the company generates. Too often, investors think of shares as simply a trading vehicle, and they forget that stock represents the ownership of a company. 3. By investing, we increase the overall wealth of an economy. As companies compete, they increase productivity and develop products that can make our lives better. 4. Stock market is also a good platform for small investors. Small investors have an advantage over institutional investors because small investors can afford to be long-term oriented. The big money managers are under extreme pressure to get high returns every. Their performance is often so scrutinized that they can't invest in opportunities that take some time to develop. Individuals have the ability to look beyond temporary downturns in favor of a long-term outlook. Stock Index, Options and Futures Index is a statistical measure of change in an economy or a securities market. In the case of financial markets, an index is essentially an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage changes is more important that the actually numeric value. Stock index is defined as the index of the market prices of a particular group of stocks. Example: NASDAQ composite index, NSE index etc. Mr. Charles Dow created the first, and consequently, most widely known index back in May of 1896. At that time, the Dow index contained 12 of the largest public companies in the United States. Most indexes weight companies based on market capitalization. If a company's market cap is $1,000,000 and the value of all stocks in the index is $100,000,000, then the company would be worth 1% of the index. These types of systems are made possible by computers--most are calculated by the minute and so are very accurate reflections of the market. Option Option is the right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock , commodity , currency, index, or debt, at a specified price (the strike price) during a specified period of time. Futures Futures means a financial contract that obligates the buyer (seller) to purchase (sell and
deliver) financial instruments or physical commodities at a future date, unless the holder's position is closed prior to expiration. In other words, futures trading is a zero-sum game. Futures contracts are forward contracts, meaning they represent a pledge to make a certain transaction at a future date. The exchange of assets occurs on the date specified in the contract. Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearinghouses. Also, in order to insure that payment will occur, futures have a margin requirement that must be settled daily. Murphy's Laws in Stock Markets Developing Trading Strategies Sometimes it takes several years to recognize the obvious. The simpler it looks, the more problems it hides. Buying Stocks If anything can go wrong, it will. If anything can't go wrong, it will. If you know something can go wrong, and take due precautions against it, something else will go wrong. You will never run out of things that can go wrong. Failure is the opportunity to begin again more intelligently. The less you do, the less can go wrong. You can never tell which way the train will go by looking at the track. Always assume that your assumption is invalid. Selling Stocks You never know how soon it is too late. When things go wrong, don't go with them. If you are in a hole, stop digging. Following Trading Strategies Being punctual means only that your mistake will be made on time. A good place to start from is where you are. To learn from you mistakes, you must realize that you are making mistakes. Experience is what causes you to make new mistakes instead of old ones. The best defense against logic is ignorance.
If you enjoy what you are doing, you are probably wrong. About Diversification Things go wrong all at once, but things go right gradually. Customer Service of Financial Sites If you don't know the answer, someone will ask the question. You don't have to explain something you never said. If you want to make enemies, try to change something. Be kind to everyone you talk with. You never know who's going to be on the jury. Never be too right too often. The only changes that are easily adopted are changes for the worse. The less you have to do, the slower you do it. Always do exactly what your boss would do if he knew what he was talking about. The e-mail never comes when you have nothing to do. The less you say, the less you have to retract. Indian Stock Market Thee origination of the Indian securities market may be traced back to 1875, when 22 enterprising brokers under a Banyan tree established the Bombay Stock Exchange(BSE). Over the last 125 years, the Indian securities market has evolved continuously to become one of the most dynamic, modern and efficient securities markets in Asia. Today, Indian markets conform to international standards both in terms of structure and in terms of operating efficiency. Structure and size of the markets Today India has two national exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Each has fully electronic trading platforms with around 9400 participating broking outfits. Foreign brokers account for 29 of these. There are some 9600 companies listed on the respective exchanges with a combined market capitalisation near $125.5bn. Any market that has experienced this sort of growth has an equally substantial demand for highly efficient settlement procedures. In India 99.9% of the trades, according to the National Securities Depository, are settled in dematerialised form in a T+2 rolling settlement environment. In addition, trades are guaranteed by the National Clearing Corporation of India Ltd (NSCCL) and Bank of India Shareholding Ltd (BOISL), Clearing Corporation houses of NSE and BSE respectively. The main functions of the Clearing Corporation are to work out (a) what counter parties owe and (b) whatcounter parties are due to receive on the settlement date. Furthermore, each exchange has a Settlement Guarantee Fund to meet with any unpredictable situation and a negligible trade failure of 0.003%. The Clearing Corporation of the exchanges
assumes the counter-party risk of each member and guarantees settlement through a finetuned risk management system and an innovative method of online position monitoring. It also ensures the financial settlement of trades on the appointed day and time irrespective of default by members to deliver the required funds and/or securities with the help of a settlement guarantee fund. What is Demat?
Dematerialization or "Demat" is a process whereby your securities like shares, debentures etc, are converted into electro data and stored in computers by a Depository.
Demat has resulted in the elimination of possible mutilated certificates, lost certificates, postal delays and counterfeit shar Now it is safe, secure and convenient buying, selling and transacting stocks without suffering endless paperwork and dela You can convert your securities to electronic format with a Demat Account.
Securities registered in your name are surrendered to depository participant (DP) and these are sent to the respective companies who will cancel them after "Dematerialization" and credit your depository account with the DP. The securities o Dematerialization appear as balances in your depository account. These balances are transferable like physical shares. I later date, you wish to have these "demat" securities converted back into paper certificates, the Depository helps you to d
Depository functions like a securities bank, where the dematerialized physical securities are traded and held in custody. T facilitates faster, risk free and low cost settlement. Depository is much like a bank and perform many activities that are sim to a bank. Following table compares the two. Holding a demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, provides easy receipt of public issue allotments. There are many advantages of holding a demat account. A few important ones' are as below. Shorter settlements thereby enhancing liquidity No stamp duty on transfer of securities held in demat form. No concept of Market Lots.
Change of name, address, dividend mandate, registration of power of attorney, transmission etc. can be effected across companies held in demat form by a single instruction to the DP. A few features of a Demat account are: Dematerialisation of Securities Settlement of Securities traded on the exchange as well as off market transactions Pledging and Hypothecation of Dematerialised Securities Electronic credit in public issue Receipt of non-cash benefits in electronic form Remat (Rematerialization) The process of converting your Electronic holding back to physical holding of securities termed as Rematerialiazation.
How to open a demat account? Demat account can be opened through one of the several authorized banks or financial institutions. You can check your holding online, using the Internet banking facilities of these banks. Holding a demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments. In most of the banks, an individual account can be opened resident or non-resident category depending upon the resident status of the applicant. Visit the following banks with online Internet banking facility who also provide the facility to open a demat account. You can view the instructions and signup with one of them to open a demat account. ICICI Bank - http://www.icicibank.com HDFC Bank - http://www.hdfcbank.com Bank of Punjab - http://www.bankofpunjab.com Standard Charted Bank of India - http://www.standardchartered.com IDBI Bank - http://www.idbibank.com HSBC - http://www.hsbc.co.in Union Bank of India - http://www.unionbankofindia.com etc.
Stock Market Softwares Below are details and links to some of the popular online and offline stock market analysis softwares. 1. Equis Metastock. www.equis.com Founded in 1982, Equis develops and markets the award-winning MetaStock range of products, which are the premier brand in the charting and technical analysis arena. The MetaStock product suite targeted toward the individual investor includes both real-time and end of day variants of the software along with data subscriptions, plug-ins and third party products. Equis also provides graphics and technical analysis components to the Reuters product line, which serves professional traders in the world's largest financial institutions.
2. StockCharts.com. http://stockcharts.com StockCharts.com was founded in 1999 to help online investors obtain and use financial information more effectively. You can sample most of our charting services free of charge by clicking on the "Free Charts" tab above. Our interactive charts give you the same analytical power found in software packages costing $500 or more. Newsletter subscribers typically pay $100+ per year for the advice and commentary we provide free of charge. In October of 2002, we were thrilled when author John Murphy, probably the most recognized name in the field of technical analysis, joined our team. The integration of John's market commentary and technical expertise with our charting tools gives our users access to the best online financial analysis on the Web. 3. SmartStock 2.0 http://www.gold-software.com/download1083.html This is a very good tool for managing an individual investors investments in the Indian stock market, for National Stock Exchange(NSE) and The Stock Exchange, Mumbai (BSE) . Products based on Cost Averaging, Technical analysis 4. AptiStock http://www.aptistock.com/ AptiStock is the free stock market analysis software for every level of stock market traders. It helps traders to be more success in the stock market trading by helping the traders to know when is the right timing to enter the market and when to avoid trading so that to preserve the hard earn money when the market is changing trend. 5. Stockaplus.com http://www.stockaplus.com This software provides huge stock research link library, One-click access, advanced watchlist, read web, market map, browser watch, Signal chart, glance chart, detail chart, chart analyzer, free quote download, and more... Stock Market Charts Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word "securities" refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities, futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis. While technical analysts use charts almost exclusively, the use of charts is not limited to just technical analysis. Because charts provide an easy-to-read graphical representation of a security's price movement over a specific period of time, they can also be of great benefit to fundamental analysts. A graphical historical record makes it easy to spot the effect of key events on a security's price, its performance over a period of time and whether it's trading near its highs, near its lows, or in between. Basically a price chart is a sequence of prices plotted over a specific timeframe. In statistical terms, charts are referred to as time series plots.
There are several reasons why you need to invest in stock market. 1. Historically, stocks have performed better than most other investments. This is a testament to the growth of the economy in the United States or India or United Kingdom or any other economically leading company today. For instance in USA, from 1955 to 1994, the average yearly return of a share of stock was approximately 10 percent. This means that if $10,000 were invested in stocks in 1955, and dividends and capital gains were reinvested instead of kept, this $10,000 would have been worth about $444,000 by 1994. Athens Stock Exchange increased by 142.49% between 1997 and 2003, compared to a return of 47.56% if your savings had increased in line with the deposit rate over the same period. 2. A share of common stock is ownership in a company. It entitles the holder to a claim on assets as well as a fraction of the profits that the company generates. Too often, investors think of shares as simply a trading vehicle, and they forget that stock represents the ownership of a company. 3. By investing, we increase the overall wealth of an economy. As companies compete, they increase productivity and develop products that can make our lives better. 4. Stock market is also a good platform for small investors. Small investors have an advantage over institutional investors because small investors can afford to be long-term oriented. The big money managers are under extreme pressure to get high returns every. Their performance is often so scrutinized that they can't invest in opportunities that take some time to develop. Individuals have the ability to look beyond temporary downturns in favor of a long-term outlook. Stock Index, Options and Futures Index is a statistical measure of change in an economy or a securities market. In the case of financial markets, an index is essentially an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage changes is more important that the actually numeric value. Stock index is defined as the index of the market prices of a particular group of stocks. Example: NASDAQ composite index, NSE index etc. Mr. Charles Dow created the first, and consequently, most widely known index back in May of 1896. At that time, the Dow index contained 12 of the largest public companies in the United States. Most indexes weight companies based on market capitalization. If a company's market cap is $1,000,000 and the value of all stocks in the index is $100,000,000, then the company would be worth 1% of the index. These types of systems are made possible by computers--most are calculated by the minute and so are very accurate reflections of the market. Option Option is the right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock , commodity , currency, index, or debt, at a specified price (the strike price) during a specified period of time. Futures Futures means a financial contract that obligates the buyer (seller) to purchase (sell and
deliver) financial instruments or physical commodities at a future date, unless the holder's position is closed prior to expiration. In other words, futures trading is a zero-sum game. Futures contracts are forward contracts, meaning they represent a pledge to make a certain transaction at a future date. The exchange of assets occurs on the date specified in the contract. Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearinghouses. Also, in order to insure that payment will occur, futures have a margin requirement that must be settled daily. Murphy's Laws in Stock Markets Developing Trading Strategies Sometimes it takes several years to recognize the obvious. The simpler it looks, the more problems it hides. Buying Stocks If anything can go wrong, it will. If anything can't go wrong, it will. If you know something can go wrong, and take due precautions against it, something else will go wrong. You will never run out of things that can go wrong. Failure is the opportunity to begin again more intelligently. The less you do, the less can go wrong. You can never tell which way the train will go by looking at the track. Always assume that your assumption is invalid. Selling Stocks You never know how soon it is too late. When things go wrong, don't go with them. If you are in a hole, stop digging. Following Trading Strategies Being punctual means only that your mistake will be made on time. A good place to start from is where you are. To learn from you mistakes, you must realize that you are making mistakes. Experience is what causes you to make new mistakes instead of old ones. The best defense against logic is ignorance.
If you enjoy what you are doing, you are probably wrong. About Diversification Things go wrong all at once, but things go right gradually. Customer Service of Financial Sites If you don't know the answer, someone will ask the question. You don't have to explain something you never said. If you want to make enemies, try to change something. Be kind to everyone you talk with. You never know who's going to be on the jury. Never be too right too often. The only changes that are easily adopted are changes for the worse. The less you have to do, the slower you do it. Always do exactly what your boss would do if he knew what he was talking about. The e-mail never comes when you have nothing to do. The less you say, the less you have to retract. Indian Stock Market Thee origination of the Indian securities market may be traced back to 1875, when 22 enterprising brokers under a Banyan tree established the Bombay Stock Exchange(BSE). Over the last 125 years, the Indian securities market has evolved continuously to become one of the most dynamic, modern and efficient securities markets in Asia. Today, Indian markets conform to international standards both in terms of structure and in terms of operating efficiency. Structure and size of the markets Today India has two national exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Each has fully electronic trading platforms with around 9400 participating broking outfits. Foreign brokers account for 29 of these. There are some 9600 companies listed on the respective exchanges with a combined market capitalisation near $125.5bn. Any market that has experienced this sort of growth has an equally substantial demand for highly efficient settlement procedures. In India 99.9% of the trades, according to the National Securities Depository, are settled in dematerialised form in a T+2 rolling settlement environment. In addition, trades are guaranteed by the National Clearing Corporation of India Ltd (NSCCL) and Bank of India Shareholding Ltd (BOISL), Clearing Corporation houses of NSE and BSE respectively. The main functions of the Clearing Corporation are to work out (a) what counter parties owe and (b) whatcounter parties are due to receive on the settlement date. Furthermore, each exchange has a Settlement Guarantee Fund to meet with any unpredictable situation and a negligible trade failure of 0.003%. The Clearing Corporation of the exchanges
assumes the counter-party risk of each member and guarantees settlement through a finetuned risk management system and an innovative method of online position monitoring. It also ensures the financial settlement of trades on the appointed day and time irrespective of default by members to deliver the required funds and/or securities with the help of a settlement guarantee fund. What is Demat?
Dematerialization or "Demat" is a process whereby your securities like shares, debentures etc, are converted into electro data and stored in computers by a Depository.
Demat has resulted in the elimination of possible mutilated certificates, lost certificates, postal delays and counterfeit shar Now it is safe, secure and convenient buying, selling and transacting stocks without suffering endless paperwork and dela You can convert your securities to electronic format with a Demat Account.
Securities registered in your name are surrendered to depository participant (DP) and these are sent to the respective companies who will cancel them after "Dematerialization" and credit your depository account with the DP. The securities o Dematerialization appear as balances in your depository account. These balances are transferable like physical shares. I later date, you wish to have these "demat" securities converted back into paper certificates, the Depository helps you to d
Depository functions like a securities bank, where the dematerialized physical securities are traded and held in custody. T facilitates faster, risk free and low cost settlement. Depository is much like a bank and perform many activities that are sim to a bank. Following table compares the two. Holding a demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, provides easy receipt of public issue allotments. There are many advantages of holding a demat account. A few important ones' are as below. Shorter settlements thereby enhancing liquidity No stamp duty on transfer of securities held in demat form. No concept of Market Lots.
Change of name, address, dividend mandate, registration of power of attorney, transmission etc. can be effected across companies held in demat form by a single instruction to the DP. A few features of a Demat account are: Dematerialisation of Securities Settlement of Securities traded on the exchange as well as off market transactions Pledging and Hypothecation of Dematerialised Securities Electronic credit in public issue Receipt of non-cash benefits in electronic form Remat (Rematerialization) The process of converting your Electronic holding back to physical holding of securities termed as Rematerialiazation.
How to open a demat account? Demat account can be opened through one of the several authorized banks or financial institutions. You can check your holding online, using the Internet banking facilities of these banks. Holding a demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments. In most of the banks, an individual account can be opened resident or non-resident category depending upon the resident status of the applicant. Visit the following banks with online Internet banking facility who also provide the facility to open a demat account. You can view the instructions and signup with one of them to open a demat account. ICICI Bank - http://www.icicibank.com HDFC Bank - http://www.hdfcbank.com Bank of Punjab - http://www.bankofpunjab.com Standard Charted Bank of India - http://www.standardchartered.com IDBI Bank - http://www.idbibank.com HSBC - http://www.hsbc.co.in Union Bank of India - http://www.unionbankofindia.com etc.
Stock Market Softwares Below are details and links to some of the popular online and offline stock market analysis softwares. 1. Equis Metastock. www.equis.com Founded in 1982, Equis develops and markets the award-winning MetaStock range of products, which are the premier brand in the charting and technical analysis arena. The MetaStock product suite targeted toward the individual investor includes both real-time and end of day variants of the software along with data subscriptions, plug-ins and third party products. Equis also provides graphics and technical analysis components to the Reuters product line, which serves professional traders in the world's largest financial institutions.
2. StockCharts.com. http://stockcharts.com StockCharts.com was founded in 1999 to help online investors obtain and use financial information more effectively. You can sample most of our charting services free of charge by clicking on the "Free Charts" tab above. Our interactive charts give you the same analytical power found in software packages costing $500 or more. Newsletter subscribers typically pay $100+ per year for the advice and commentary we provide free of charge. In October of 2002, we were thrilled when author John Murphy, probably the most recognized name in the field of technical analysis, joined our team. The integration of John's market commentary and technical expertise with our charting tools gives our users access to the best online financial analysis on the Web. 3. SmartStock 2.0 http://www.gold-software.com/download1083.html This is a very good tool for managing an individual investors investments in the Indian stock market, for National Stock Exchange(NSE) and The Stock Exchange, Mumbai (BSE) . Products based on Cost Averaging, Technical analysis 4. AptiStock http://www.aptistock.com/ AptiStock is the free stock market analysis software for every level of stock market traders. It helps traders to be more success in the stock market trading by helping the traders to know when is the right timing to enter the market and when to avoid trading so that to preserve the hard earn money when the market is changing trend. 5. Stockaplus.com http://www.stockaplus.com This software provides huge stock research link library, One-click access, advanced watchlist, read web, market map, browser watch, Signal chart, glance chart, detail chart, chart analyzer, free quote download, and more... Stock Market Charts Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word "securities" refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities, futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis. While technical analysts use charts almost exclusively, the use of charts is not limited to just technical analysis. Because charts provide an easy-to-read graphical representation of a security's price movement over a specific period of time, they can also be of great benefit to fundamental analysts. A graphical historical record makes it easy to spot the effect of key events on a security's price, its performance over a period of time and whether it's trading near its highs, near its lows, or in between. Basically a price chart is a sequence of prices plotted over a specific timeframe. In statistical terms, charts are referred to as time series plots.
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