Basic of Stocks

What to expect?

• What is Stock?• How trading happens?• How to trade in stocks?• Kinds of Trades• Basic Terms and terminologies

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What is a Stock It’s a means to own a company. It is a kind of security. (The definition of ‘Securities’ as per the Securities

Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or

other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government.)

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Prerequisites for Trading

• We need to have DP(DEPOSITORY PARTICIPANT) account.

• We need to have a Trading account.

• And of course money

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How Trading Happens?

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Stock ExchangeEx : PSE,NYSE

People using terminal provided by their brokers

Which companies one can trade

• Ones which are listed in that exchange

• IPO• Secondary market

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Kinds of Trading

• Intra-day Trading• Delivery based Trading

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Intra-Day Trading

• Buying and Selling on the same day

• Brokerage will be different for intra-day and delivery based trading, intra-day being lesser

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Delivery Based Trading

• Buying and Selling are on different days

• Brokerage will be higher than intra-day

• There will be minimum delivery charges

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How to select stocks?

• Fundamental Analysis

• Technical Analysis

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What is fundamental Analysis?

• Analyzing a stock based on the fundaments of the country, the sector, and the company individually.

• It includes going through balance sheet and profit-loss statement of the individual company and checking various ratios.

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3 Important Ratios

• EPS : PAT – Dividend/ No of shares

• PE : Present share Price / EPS

• P/BV Present share price / Book value

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What is Technical analysis

• Forecasting the future direction of prices through the study of past market data, primarily price and volume. In its purest form, technical analysis considers only the actual price and volume behavior of the market or instrument.

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Basic definitions in Technical analysis

• Support : Where one buys

• Resistance : Where one sells

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Some tips for primary market

• Please Read DRHP

• Read about the promoter's group.

• Understand their business, and compare them With the companies listed already in market

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How Stocks Trade

• 1. Primary Market – where Securities are created by means of an IPO.

• 2. Secondary Market – what people are referring to when they talk about the stock market.

Some Exchanges

• Physical Locations – transactions are carried out on trading floor.

• Virtual – composed of a networks of computers where trades are made electronically.

Stock Markets

• The New York Stock Exchange “Big Board”• The Nasdaq• American Stock Exchange• London Stock Exchange• Hong Kong Stock Exchange

What Causes Stock Prices To Change?

• 1. Supply• 2. Demand

Buying Stocks

• 1. Using Brokerage • a. Full-service Brokerage• b. Discount Brokerage• 2. DRIPs and DIPs

The Bulls, Bears and The Farm

• 1. Bull Market – when everything in the economy is great, people are finding jobs, GDP is growing and stocks are rising.

• 2. Bear Market – when the economy is bag, recession is looming and stock prices are falling.

The Other Animals on the Farm

• 1. Chicken – are afraid to lose anything

• 2. Pigs – are high-risk investors looking for the big score in a short period of time.

Some Tips to newbie’s

• Execute couple of paper trades before you actually execute the real trade, we have many simulators and games available now

• Always follow strict entry and exit points• Always execute a limit order• Never buy and sell for full amount in one go, Spread it across a range, it will give much better

bottoms and tops• Never average a losing trade

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How to Read a Stock Table

How to Read a Stock Table

• Columns 1 & 2 – 52week HI and Low• Columns 3 – Comapany Name & Type of Stock• Column 4 – Ticker Symbol• Column 5 – Dividend Per Share• Column 6 – Dividend Yield• Column 7 – Price/Earnings Ratio• Column 8 – Trading Volume• Column 9 & 10 – Day High & Low• Column 11 – Close• Column 12 – Net Change