bombay stock market

8/21/2019 Bombay Stock Market

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Bombay Stock Market
http://upload.wikimedia.org/wikipedia/commons/9/99/Bombay-Stock-Exchange.jpg


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STOCK MARKET

TRADING

The phrase Stock Market Trading is commonlyused to encompass both the physical location forbuying and selling (trading) stocks as well as theoverall activity of the market within a certaincountry. When we hear an expression such asThe stock market was down today it refers to thecombined stock market trading activity of many

stock exchanges i.e. the New York StockExchange (NYSE), Nasdaq etc. in the UnitedStates.

Stock Exchange is the term for the physicallocation where the actual activity of stocktrading/share trading or investing in stocks takesplace. Most countries have many different stockexchanges and usually a particular company'sstocks are traded on only one exchange,although large corporations may be listed inseveral different locations.

Bombay Stock Exchange 2
http://www.stock-trading-explained.com/


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Stock Exchanges

Stock exchanges exist throughout the world. It is possible to buy or sell stocks on any of them by

having trading accounts with the various stock trading programs. You can also get stock trading

information from these exchanges. The only restriction is the opening hours of each exchange. For

example, NYSE and Nasdaq allow stock market trading operations from 9:30 a.m. to 4:00 p.m.

Eastern Time from Monday to Friday. Other exchanges have similar opening hours based on their

local time. If you want to trade on the Hong Kong Stock Exchange your order will be executed

sometime between 9:30 p.m. and 4:00 a.m. New York time. The major stock exchanges of the world are located in Japan (Tokyo Stock Exchange), India

(Bombay Stock Exchange), Europe (London Stock Exchange, Frankfurt Stock Exchange, SWX

Swiss Exchange), the People's Republic of China (Shanghai Stock Exchange) and the United States.

The major exchanges in the US are the NYSE, Nasdaq, and Amex.

By providing a centralized, ready market for the exchange of securities, stock exchanges greatly

facilitate the financing of business through flotation of stocks and bonds. However, speculative stock

market trading can sometimes accentuate the instability of an economy. The reality of the GreatDepression was emphasized by the stock market crash in 1929. The interstate sale of securities and

certain stock exchange practices in the United States are regulated by federal laws administered by

the Securities and Exchange Commission.



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Stock market tradingclosely follows the economy of a country. When theeconomy is doing well, the market is bullish. Bull markets occur during times ofhigh economic production, low unemployment and low inflation. Bear markets, onthe other hand, follow downtrends in the economy. When inflation andunemployment see an upturn, stock prices start falling. Hence, to keep investmentssafe, savvy investors track various economic indices, stock trading information, andstock market trends.

Fluctuations in stock prices are also driven by supply and demand, which in turnare determined to a large extent on investor psychology. Seeing a stock rise in pricemay cause investors to jump on the bandwagon and this rush to buy drives the priceeven faster. A falling price can have the same effect. These are short termfluctuations. Stock prices tend to normalize after such runs. Hence, to predictpossible upturns or downturns in the stock markets, it becomes imperative to trackand analyze stock trading information. The stock exchange is only one of manyopportunities to invest. Other popular markets include the Foreign ExchangeMarket (FOREX), the Futures Market, and the Options Market.

The FOREX is the biggest (in terms of value of trades) investment market in theworld. FOREX traders buy one currency against another and can profit from smallchanges in value. Most FOREX trades are entered and exited in one 24 hour span,and traders have to keep a close watch on the market in order to make profitabletrades.


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Futures & Options

The Futures Market is a market of contracts to buy and sell

goods at specified prices and times. It exists because buyersand sellers of goods wish to lock in prices for futuredelivery, but market conditions can make the actual futurescontract fluctuate considerably in value. Most investors inthe futures market are not interested in the actual goods -only in the profit that can be realized in trading thecontracts.

The Options Market is similar to the Futures Market in thatan option is a contract that gives you the right (but not theobligation) to trade a stock at a certain price before aspecified date. They can be traded on their own or

purchased as a form of insurance against price fluctuationswithin a certain time frame.

All three of these markets are quite risky and requireconsiderable knowledge and experience to preventsubstantial losses. They also require close attention tomarket movements. Stock Investments, on the other hand,

are less risky because movements of the market are usuallygradual. Although short term investment strategies arepossible, most view stocks as long term investments. Butwhatever your financial objectives may be, try to trackstock trading information. This will help you in maximizingyour profits and keeping your investments safe.



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What are stocks?

Before you delve into the intricacies of the stock market, the first thing you should understand iswhat exactly a stock is. Stocks, which are also known as shares, are portions of companies that

people can buy, and therefore own part of the company. But even though you may own a part of a

company, only those who have invested a lot of money into the company have any real say in howthe company is run.

There are two different types of shares: preferred shares and common shares. When you invest incommon shares, there is a greater risk of losing part or even all of the investment that you have putinto the company should the company stop functioning. Why is this? Because creditors, bondholders and preferred shared holders have a higher rank than the common shareholders, and becauseof this they will get the first chance to get some of the money they have put in if the company goesout of business. By the same token, the investors who have preferred shares have a higher standingthan the ones with common shares, but still have to get in line behind the creditors when it comes tohow much of the company they own, or getting paid if the company goes out of business. In additionto having more of a say in the company decisions than those who have common shares, investorswho have preferred shares can also look forward to higher dividends.

There are two ways to purchase stocks - investors can either use a brokerage, or buy their stocksthrough Direct Investment Plans or Dividend Reinvestment plans.

If you decide to purchase stocks through a brokerage, you can go one of two ways. If you are goingto trust the experts to do the right thing, and leave it in their hands, then you should go with theservices of a full service brokerage. But, if money is a consideration and you don't want to spend the

money on a full service brokerage, you can go with a discount brokerage. Even though discountbrokerages cost less than full service brokerages, they don't offer the same amount of assistance thatthe full service brokerages do.

If you decide to invest using a Direct Investment Plan or a Dividend Reinvestment Plan, check tomake that the company that you are interested in investing in offers such plans because not all of thecompanies do.



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History of the Stock Exchange

One of the biggest misconceptions is that the first stock exchange in America was the New York Stock Exchange.But those who think that this is true might be surprised to find out that the first stock exchange in America wasactually in Philadelphia, PA, and it was founded in the year 1790. The very famous New York Stock Exchange wasnot founded until two years later, in 1792.

Another thing that you hear talk about with regards to the stock exchange is Wall Street. Sometimes people wonderhow it got its name. That is actually a very interesting story. Back in 1653, a twelve foot stockade was built by theDutch settlers to guard against British and Native American attacks. The sturdy wall stood for over 30 years, until1685. At that time, the wall was torn down and a street was built in it's place - hence the name Wall Street.

The stock market has evolved greatly over the past few centuries. From its humble beginnings in Philadelphia, PA,to the New York Stock Exchange, which is known world wide, the stock market has grown in leaps and bounds.That's not to say that there haven't been problems. Most everyone has heard of the great stock market crash of 1929.There are now steps that the government has taken to prevent such a large crash from happening again, but thatdoesn't mean that the possibility still isn't there.

The stock market is a place where you can make a lot of money but you can also lose a lot of money as well. If youhave decided that you want to try investing in the stock market, it's a good idea to do some research and get advicefrom people that you trust and who are already investing in the stock market. But be careful, because if you don'tinvest wisely you can lose a lot of money. Be wise with your investments and take the time to do your homework.This will help you to make the right decision when it comes to your investments. A stock exchange, share market orbourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to tradecompany stocks and other securities. Stock exchanges also provide facilities for the issue and redemption ofsecurities as well as other financial instruments and capital events including the payment of income and dividends.The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooledinvestment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there.Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physicalplace, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions.Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition donein the primary market and subsequent trading is done in the secondary market. A stock exchange is often the mostimportant component of a stock market. Supply and demand in stock markets is driven by various factors which, asin all free markets, affect the price of stocks. There is usually no compulsion to issue stock via the stock exchangeitself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market forsecurities.



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TYPES OF STOCK MARKET

TRADING EXPLAINED

The stock market is a reliable indicator of theactual value of companies which issue stock.Values of stocks are based on verifiable financialdata such as sales figures, assets and growth. Thisreliability makes the stock market a good choice

for long term investing

well-run companiesshould continue to grow and provide dividendsfor their stockholders.

The stock market also provides opportunities forshort-term investors. Market skittishness cancause prices to fluctuate quite rapidly andinvestor psychology can cause prices to fall or

rise

even if there is no financial basis for thesevariations. How does this happen? News reports,government announcements about the economy,and even rumors can cause investors to becomenervous or to suspect that a company willincrease in value. When the price starts to fall orrise, other investors will jump on the bandwagon,causing an even faster acceleration in price.

Eventually the market will correct itself, but forsavvy short-term investors who watch the marketclosely, these price changes can offeropportunities for profitable trading.



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Position Traders

Position trading is the longest term trading style of the three. Stocks could be held for a

relatively long period of time compared with the other trading styles. Position traders expectto hold on to their stocks for anywhere from 5 days to 3 or 6 months. Position traders are

watching for fundamental changes in value of a stock. This information can be gleaned from

financial reports and industry analyses. Position trading does not require a great deal of time.

An examination of daily reports is enough to plan trading strategies. This type of trading is

ideal for those who invest in the stock market to supplement their income. The time needed to

study the stock market can be as little as 30 minutes a day and can be done after regular work

hours.

Swing Traders

Swing traders hold stocks for shorter periods than position traders generally from one to

five days. The swing trader is looking for changes in the market that are driven more by

emotion than fundamental value. This type of trading requires more time than position trading

but the payback is often greater. Swing traders usually spend about 2 hours a day researching

stocks and executing orders. They need to be able to identify trends and pick out trading

opportunities. They usually rely on daily and intraday charts to plot stock movements



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Day Traders

Day trading is commonly thought of as the most risky way to play the stock market. This may be

true if the trader is uneducated, but those who know what they are doing know how to limit their risk

and maximize their profit potential. Day trading refers to buying and selling stock in very short

periods of timeless than a day but often as short as a few minutes. Day traders rely on information

that can influence price moves and have to plot when to get in and out of a position. Day traders

need to be rational and analytical. Emotional buyers will quickly lose money in this type of trading.

Because of the close attention needed to market conditions, day trading is a full-time profession



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Stock Option Trading

Call Options

A contract to buy is called a 'call option'. The buyer of a call optionhopes the price of the underlying stock will rise, allowing him to buyit at less than market value. The seller of the call option expectsthat the price of the stock will not rise, or at least is willing toaccept a partial loss of profits made from selling the call option.

For example: An investor buys a call option on IBM with a 'strikeprice' (the price the stock can be bought) of $50. The current priceof IBM stocks is $40 and the cost of the call is $5. If the price risesabove $55 (strike price + cost of call) the buyer could exercise hisright to buy and make a profit by reselling on the open market. Theseller would still gain from the increase in price from $40 to $55plus the $5 he made by selling the call. If the price remains below$55 the call would not be exercised and the seller would profit by$5 per share and the buyer would lose his $5 per share.

Stock option trading is permitted on select stocks. The stock options(buy/sell) detail the name of the stock, the strike price (the pricethe stock can be bought or sold at), the expiration date and thepremium (the price of the option itself). After the expiration theoption cannot be exercised and is worthless. Options have a valueand are actively traded. An option to buy Microsoft, for example, islisted like this:

MSFT Jan '06 22.50 Call at $2.00

This tells us that an option to buy 1 share of Microsoft at $22.50before the third Friday in January 2006 can be bought for $2.00.Options usually expire on the third Friday of the specified month,and they are usually traded in lots of 100. To buy this particularoption you would have to pay $200 (plus brokerage fees).

Stock options trading refers totrading of contracts to buy (or sell) a

stock for a certain price at a certain

time in the future. Buyers of stock

options have the right to buy the

stock at the specified price, but they

are not obligated to exercise their

option. Sellers of options have theobligation to sell the underlying

stock if the buyer of the option

wishes to exercise it.



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Put Options

An option to sell a stock is called a 'put option'.This gives the holder the right (but not theobligation) to sell a particular stock within a

certain time period at a certain price. In thissituation the buyer is expecting the price of thestock to fall but does not want to sell outright incase the price rebounds. The seller feels that theprice is stable or is willing to acquire the stock atthe low price.

For example: An investor buys a put option onMicrosoft with a 'strike price' (the price the stockcan be sold) of $35. The current price ofMicrosoft is $40 and the cost of the put is $5. Ifthe price falls below $30 (strike price + cost ofput) the buyer could exercise his right to sell at ahigher price than market. The seller would have

to buy the stock at the higher-than-market pricebut any losses are offset by the $5 he made byselling the put. If the price remains above $30the put would not be exercised and the sellerwould profit by $5 per share and the buyerwould lose his $5 per share.



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Principles of Stock Option Trading

As can be seen, stock option trading can be used to protect against loss or as aninvestment opportunity in their own right. They are generally used as part of astock trading strategy which combines the purchase of stock with the purchaseof options.

For example, in a bull (rising) market you could buy stocks and call options andsell put options. This allows you to take full advantage of rising stock prices the stocks you buy will rise in value, the call options will allow you to buystock at less than market prices, and if the market dips and the buyer of your

put option exercises it, you can pick up additional stocks at low prices. If thebuyer does not exercise the option, you make money from the sale of theoption.

Conversely, in a bear market, you can sell stocks, sell calls, and buy puts tolimit losses and generate profits. Unstable markets can use a mixture of putsand calls to maximize profit potential.



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Successful Stock Market Trading

Stock Market Trading requires Patience, Discipline, Focus, and the right mental attitude. Without these

you will not be successful at stock trading.

The successful investor that you want to become is a future projection of yourself that you have to growinto. Growth implies expansion, learning, education. You must create a new version of yourself.

Your goal has to be to learn how to think like a successful trader, instead of learning how you can

make more money by learning more about the markets. Your attitudes and beliefs about being

wrong, losing money, is what causes most losses, not technique or market knowledge.

The best traders have acquired a mental attitude that allows them to trade without fear, which keeps them

from becoming reckless and committing fear - based errors. Once the fear is gone you no longer willbe subconsciously distorting information, hesitating, jumping the gun, or hoping.

Fear is the source of 95 percent of the errors you are going to make. You can not be in the flow if you are

consistently making errors. You will make errors as long as you are afraid that what you what or

what you expect won't happen.

Of course what helps you to achieve this proper attitude is a successful trading system. After all, if you

are consistently losing until you wipe out your capital you will eventually give up on stock market

trading. Combine a successful trading system with the right attitude and the sky is the limit.



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Stock Broker

Stock Brokers handle most of the buying and selling on the stock market, and the average investor

will use a brokerage service to handle his trades. There is a broad range of brokerage services

available. There are brokers who offer many services for aiding their clients meet their investment

goals. These 'full-service brokers' can give advice about which stocks to buy and sell and often have

full research facilities for analyzing market trends and predicting movements.

These perks are not free

full service stock brokers charge the highest commission rates in theindustry. Whether or not you decide to use a full-service broker depends on your level of self-

confidence, your knowledge of the stock market and the number of trades you regularly make.

Investors who wish to save on commission fees can use a 'discount stock broker'. These brokers

charge much lower commissions but don't offer advice or analysis. Investors who like to make their

own trading decisions and those who make many trades often use discount brokers for their

transactions. Some traders may use both types

there is no reason why you can't have two brokers.



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STOCK TRADING STRATEGIES

There are two basic ways to trade the stock market shooting in the barrel or using effective stock

trading strategies to determine which stocks to buy, when to sell, and how to protect your

investment dollars. Needless to say, strategies outperform barrel shooting by a large margin. There

are, however, hundreds of stock market trading strategies to choose from. Of all of these, there are

a couple of tried and trued methods that have worked well for investors over many years. The

newbie investor is advised to investigate some of these basic strategies and see for himself how

they perform. New stock trading strategies can be explored once the basic ones are well-

understood.



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Hedging - A good Stock Market

Investing Strategy

Hedging is a one of the better stock trading strategies to follow if your objective is capital

protection. Hedging is a way of protecting an investment by reducing the risks involved in holding a

particular stock. The risk that the price of the stock will drop can be offset by buying a put option

that allows you to sell at the stock at a particular price within a certain time frame. If the price of the

stock falls, the value of the put option will increase.

If you have a broad portfolio, buying put options against individual stocks can be an expensive stockmarket investing strategy to follow. A better option may be to buy a put option on the stock market

itself. This protects you against general market declines. Another way to hedge against market

declines is to sell financial futures like the S&P 500 futures.



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Dogs of the DowStock market

trading strategies of the past

This is a strategy that became popular during the 1990s. The idea was to buy the best-value stocks in

the Dow Industrial Average by choosing the 10 stocks that have the lowest P/E ratios and the highest

dividend yields. The companies on the Dow Index are mature companies that offer reliable

investment performance. The idea is that the lowest 10 on the Dow had the most potential for growth

over the coming year.

A new twist on the Dogs of the Dow is the Pigs of the Dow. This stock market investing strategyselects the worst 5 Dow stocks by looking at the percentage of price decline in the previous year. As

with the Dogs, the idea is that the Pigs stand to rebound more than the others.


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