What is a long term investment

What is long term investment:

Growth in revenues, operating profits and net earnings is integral to fundamentally strong companies. 
Revenue growth indicates strong demand for a a company's products and the pricing power it commands in the market. Growth in operating profits indicates cost efficiencies through expenditure cotrol. Improvement in net earnings or profits is an indicator of wealth creation for shareholders. To identify robust stocks, these financial parameters need to be evaluated over an extended period of time.

In Long term investment financial experts advise investors to hold stocks for long enough around five years to allow their prices to align with their intrinsic or fair values. This is because in the long run, the fair value of a stock is largely a factor of its fundamental metrics profits and cash flows.

Where invest money for long term investment:

Investing is a purchase of assets with an objective to generate regular income, profit or capital appreciation, which can be sold in future.
There are multiple long term investing products like real estate, bonds, equities, gold etc. With varied features and benefits. Choosing the right product is most critical party of investing process. One should carefully analyse attributes of the asset before investing in an assets.

Liquidity:

In Long term investment liquidity of an investment is the most important thing that an investor should watch out for putting money in any product. Listed share of a comapny is easy to sell than a property which is located in an elite area. Thus equities are liquid investment while real estate is an illiquid investment.

Risk:

Risk is the second factor that an investor should consider before investing. Risk means the chance of not meeting the expected return from investment.

Return:

Return means the actual profit we make on our investment. Return can be interest, dividend or profit on the investment. Different assets have different return potential. Empirically, it has been noted that equities give more return than other assets.

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What is momentum trading

Momentum trading definition:

Momentum trading is a system of buying stocks that have had high return over the past three to one year, and selling those that have had poor return over same period.

In momentum trading while no consensus exists about the validity of this strategy, economists have trouble reconciling this phenomenon, using the efficient market hypothesis.

Momentum trading strategies often involve disprortionately trading in stocks with high bid ask spreads and so it is important to take transactions cost into account When evaluating momentum profitability.

The existence of momentum trading is a market anomaly, which finance theory struggles to explain. The difficulty is that an increase in assets price, in and of itself, should not warrant further increase

Ideas Behind momentum trading 

Momentum trading is based on the
empirical observation that there is persistence in an assets performance. An assets that has performed well in the past tends to perform well in the future, and an asset that has performed poorly in the future.

Types of momentum trading:

1. Cross sectional momentum trading 
2. Time series momentum trading 

• Cross sectional momentum trading:

This type of of momentum trading has received that past attention in the literature and is often applied to stocks.

• Time series momentum trading:

In time series momentum trading examines an assets past return without considering the past return of othe assets.

Requirements for success as a momentum trader:

In momentum trading trader require high level of focous and attention. They must remain steadfast when they have caught a bit of momentum in the right direction but target has yet to be reached. In this ways, these traders exercise huge degrees of discipline.

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what is a scalping trading

Scalping trading:

Scalping is a trading style specializing in taking profit on a small price changes, generally soon after a trader has been entered and has become profitable. It requires a trader to have a  strict exit strategy, because one large loss could eliminate the many small gains the trader has worked to obtain. Having the right tools, such as a live feed, a direct access brocker and the stamina to place many trades is required for this strategy to be successful.

Scalping trading instead to take as many small profits as possible, not allowing them to evaporate. This is the opposite of the let your profit run mindset. Scalping trading results by increasing number of winners and sacrificing the size of the wins.

The main premises of scalping are:

• Smaller moves are easier to obtain: A bigger imbalance of supply and demand is needed to warrant bigger changes.
• Lessened exposure limits risk: A brief exposure to the market diminishes the probability of running into an adverse event. Scalping trading can be adopted as a primary or supplementary style of trading. 

Scalping trading as primary style 

A pure scalper trader will make a number of trades a day. Perhaps in the hundreds. A scalper trader will mostly utilize one minute charts since the time frame is small.

Types of scalping 

The first type of scalping trading is referred to as "market making", whereby a scalper tries to capitalize on the spread by simultaneously posting a bid and an offer for a specific stock. 

 The other two style are based on a more traditional approch and require a moving stock where prices changes rapidly. 

The second type of scalping trading is done by purchasing a large number of shares that are sold for a gain on very small price movement.

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position trading

Position trader:

A position trader is someone who holds a position, usually stocks, for the long term; from week to month, and eve years. 

Position trader do not trade actively and the fewer trades they make in a years, the closer they are to becoming buy and hold long term investors.

Why investors use position trading:

The basic tenet of stock market analysis is that stock move in trends. Once a trend starts, it is likely to continue. Trader make profits by recognizing a trend early, buying a stock for the duration of the trend, and selling as soon as it has run it's course. Both position trading and swing trading are based on trend following; the difference is in the trends duration.

Position traders will look at long term analysis such as the 300 day moving average to identify the primary trend. 

Position trading for everyone?

All investors and traders should match their trading style with their own personal goals, and each style has its pros and cons. The first consideration must be the reason you are investing in first place.

Summary 

As with seemingly everything in the financial arena, the strategy of position trading comes with upside and downsides. 

Many individuals find the possibility of realising sizable gains through catching a trend attractive, while others are leery of being exposed to possibility of a widespread financial collapse.

 

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Future trading

Future Trading:

A future trading is an agreement between two parties means a buyer and seller. To sell an asset at a specified future date and price. Each futures contract represents a commodity. The most widely traded commodity future trading, for example, is crude oil, which has a contract unit of 1,000 barrels. Each future contract of corn, on the other hand, represents 5,000 bushels.

Future trading is similar in many ways to in terms of their usefulness whe hedging or speculating. If you are interested in learning more about future trading.

Future trading were originally designed to allow farmers to hedge against changes in the prices of their crops between planting and when they could be harvested and brought to market. While farmer and end users continue to use future trading to hedge against risk, investors and traders of all types use future trading for the purpose of speculation to profit by betting on the asset will move 

While the future trading focused on agricultural commodities such as livestock and grains, the market now includes contracts linked to wide variety of assets, including precious metal(gold), industrial metals(aluminium), energy(oil) and stocks.

Risk mitigation 

Although future trading is oriented towards a future time point, their main purpose is to mitigate the risk of default by either party in intervening period.

In this vein, the future exchange requires both parties to put up initial cash, or a performance bond, know as the margin.

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Long term trading

Long term trading:

Long term trading refers to extended period of time that an asset is held. Depending on the type of security, a long term asset can be held for one year or more than 10 years and more. 

Generally speaking, long term investing for individuals is often thought to be in the range of at least five to ten years of holding time, and there is no absolute rule.

Breaking down of Long term trading :

The media frequently advises people to invest for long term but determining whether or not an investment is long term trading is very subjective.

Long term trading in companies:

A long-term investment is found on the asset Side of company's balance sheet, stock bonds, real estate and cash, that it intends to hold for more than a year.

When a firm purchase shares of stock as investments, determining whether to classify it as short term or long term affects the way those assets are valued on the balance sheet. 

Individual Long term trading:

According to the Financial industry Regulatory authority. Investors who are planning for a large multi year expense such as retirement can work to reach their financial goals by thinking of long term in the following way:

For many people, the number one long term goal is a financially secure retirement. But it's also a goal with a long time horizon. When your goal is paying for school, for example, you think in terms of paying costs of for four years .

But when you think about retirement, you have to think in terms of managing expenses for more years that you will be living after retirement. 

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what is swing trading

What is swing trading :

A swing trading is a speculative trading strategy in financial market where tradable assets is held for between one and more days in an effort to profit from price changes .A swing trading position is typically held longer than a day trading position,but shorter than buy and hold investment strategies that can be held for months or years. Profits can be sought by either buying an asset or short selling .

Methods of swing trading 

Using a set of mathematically based objective rules for buying and selling is common method for swing traders to eliminate the subjective, emotional aspects, and labor-intensive analysis of swing trading. The trading rules can be used to create a trading algorithms.

Sampler rule based trading approaches include Alexander elder strategy, which measures the behavior of an instrument price trend using three different moving average of closing price. The instrument is only traded long when three averages are aligned in an upward direction, and only traded short when the three averages are moving downward. 

Identifying when to enter and when to exit a trade is the primary challenge for all swing trading strategies. However, swing traders do not need perfect timing to buy at the very bottom and sell at the very top of price oscillations to make profit. Small consistent earning that involve strict money management rules can compound returns over time. 

Risk in swing trading 

Risk in swing trading are commensurate 

With market speculation in general. Risk of loss in swing trading typically increases in trading range.

Breakdown swing trading 

The trader must act quickly to find situations in which a stock has the extraordinary potential to move in such a short time frame. Therefore, swing trading is mainly used by at home and day traders. Large institutions trade in sizes too big to move in and out of stocks.

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What is intraday trading 2

Techniques of intraday trading:

The following are several basic strategies by which trader attempt to make profits.

Some of these approaches require shortingstocks instead of buying them:

The trader borrows stock from his broker and sells the borrowed stock, hoping that the price will fall and he will be able to purchase the shares at a lower price. There are several technical problems with short sales the broker may not have share to lend in specific issue.

Trending types of intraday trading :

Contrarian investing:

Contrarian investing is a market timing strategy used in all trading time frames. It assumes that financial instruments that have been rising  steadily will reverse and start to falling, or short sells a rising one, in the expectation that the trend will change.

Range trading:

Range trading is a trading style in which stockes are watched that have either been rising off a support price or falling off a resistance price. That is, every time the stock hits a high, it falls back the low, and vice versa. Such a stock is said to be "trading in a range", which is opposite of trading.  

Scalping:

Scalping was originally referred to as spread trading. Scalping is a small price gaps created by the bid ask spread are exploited by speculator.
Scalping highly liquid instruments for off the floor traders involves taking quick profits while minimizing risk.

Rebate trading:

Rebate trading is an equity trading style that uses ECN rebates as primary source of profit and revenue 

News playing:

The basic strategy of news playing is to buy a stock which has just announced good news, or short sell on bad news.

Price action:

Keeping things simple can also be effective methodology when it comes to trading. There are groups of traders know as price action traders who are a form of technical traders that rely on technical analysis but do not rely on conventional indicators to point them in the direction of trade or not. 

Artificial intelligence 

An estimate One third of stock trades in 2005 in US were generated by automatic algorithms 

 

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what is intraday trading

What is intraday trading:

Day trading means buying and selling financial instruments within a day is called intraday trading.
Strictly, day trading is within a day. Participants.

Characteristic of intraday trading :

Day traders use an intraday techniques know as scalping that usually has the trader holding a position for few hours or even minutes. 

Most day traders exit positions before the market closes to avoid unmanageable risk negative price gaps between one day's and next day's price at open. Another reason is to maximize day trading buying power. Other trader believe they should let the profits run, so it is acceptable to stay with a position after the market closes 

Profit and Risk:

Because of the nature of financial leverage and the the rapid returns that are possible, day trading results can range from extremely profitable to extremely unprofitable , and high risk profit traders can generate either huge percentage return or huge percentage losses. Because of the high profit or losses that day trading makes possible, these traders are sometimes portrayed as "bandits"or "gamblers"by other investors.

Day trading is risky, especially if any of the following is present while trading:

• Trading a losers game rather than a game that's at least winnable,
• Inadequate risk capital with the accompanying excess stress of having to survive 

The common use of buying on margin amplifies gain and losses, such that substantial losses or gains can occur in very short period of time. In addition,brockers usually allows bigger margin for day traders 

This is beginning of intraday trading. In next blog we will discuss various techniques of intraday trading .

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what is equity market

Definition of equity market : 

An equity market is market in which shares are issued and traded,either through exchange or over-the-counter markets. Also known as the stock market,it is one of the most vital areas of a market,it is one of the most vital areas of a market economy.

Breakdown Equity Market:

Equity market are the meeting point for buyers and sellers of stocks.

The securities traded in the equity market can be public stock, which are those listed on stock exchange, or privately traded stocks. Often, private stocks are traded through dealers, which is the definition of an over-the-counter market.

Trading in the Equity market :

In the equity market,investors bid for stocks by offering a certain price,and sellers ask for a specific price. When these two prices match. a sale occurs, the first investors bidding on the same stock. When this occurs, the first to get the stock. When a buyer will pay any price for stock, he or she is buying at market value similarly, when a seller will take any Price for the stock, he or she is selling at market value .

Companies sell stocks in order to get capital to grow their business. When a company offers stocks on the market,it means the company is publicly traded,  and each stock represent a piece of ownership. This appeals to investors,and when does well, it's investors are rewarded as the value of their stock rise. 
The risk comes when a company is not doing well, and its stock value may fall. Stock can be bought and sold easily and quickly, and the activity surrounding a certain stock impact its value. 

What is Equity market capitalization 

Equity market capitalization measures the total market value of an equity market. The measure is calculated by taking the market capitalization of all companies in the equity market and adding them together to arrive at the capitalization for the market as a whole . 

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What is derivative market

Definition:

The derivative market is a financial market for derivatives,finacial instruments like future contract or options,which are derived froms of assets.

Participants in derivative market

Participants in a derivative market can be segregated  into four sets based on their trading motives. 

• Hedgers
• Speculators
• Margin traders
• Arbitrageurs

Breaking down Derivative 

Originally,derivatives were used to ensure balanced exchange rates for goods traded internationally. With differing values of national currencies, international traders needed a system to account for these differences . Today, derivatives are based upon a wide variety of transactions and have many more uses. There are even derivatives based on weather data,such as the amount of rain or the number of sunny days in a region.

A speculator who expects the euro to appreciate compared to the dollar could profit by using a derivative that rises in value with euro. When using derivatives to speculate on the price movement of an underlying asset,the investor does not need to have an interest in the underlying asset. 

Next blog we will detailed discuss derivative market 

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what is call and put option in share market

What is call option and put option :

Call and put option are derivative investment ( their Price movement based on other financial product) . 

A call option is bought if trader expect the price of the underlying to rise within a certain time frame. A put option is bought if the trader expect the price underlying to fall within a certain time frame .Put, and calls can also be sold or written, which generates income,but gives certain rights to the buyer of the option .

Breaking Down the Call Option:

A call is an options contract that gives the buyer the right to buy the underlying asset at the strike price at any time up to the the expiration date .

The strike price at which an option buyer can buy the underlying asset. For example, a stock call option with a strike price of 10 means the option buyer can use the option to buy that at €10 before the option expire.

For example,if the stock is trading at €9 on the stock market, it is not worthwhile for the call option buyer to buy the stock at €10 because they can buy it for a lower price (€9) on the stock market. 

The call buyer has the right to buy a stock at the strike price for a set amount of time. If the price of the underlying moves above the strike price, the will be worth money (has intrinsic value). The trader can sell the option for a profit (this is what most calls buyers do), or exercise the option at expiry.

For these rights, the call buyer pays a "premium".

The call seller or writer of the option receive the premium. Writing call option is a way to generate income. The income from writing a call option is limited to the premium received through, while a caller buyer has unlimited profit potential.

One call option represent 101 shares or a specific amount of underlying asset. Call Price of the option and multiple it by 101(for stock).

Call option can be in the money, or out of the money. In the money means underlying asset price is above the call strike price. When you buy a call option, you can buy it in, At,or out of the money. At the money means the strike price and underlying asset Price are the same. Your premium will be larger for an in the money option .

In the Next blog i will tell you more about call and put option .

I hope guys this article is helpful for everyone. 

Thank you.. 

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what is commodity market trading

What is commodity market trading :
A commodity market is trades primary economy sector rather than manufactured .
In soft commodity include agricultural products such wheat, coffee ,cocoa and sugar .
And hard commodity include oil and gold

History of commodity market:

Commodity money and commodity market in crude early from are believed to have originated in summer between 4500 BC and 4001 BC. Sumerian first used claytokens sealed in a clay vessel, then clay writing to represent the amount for example the number of cow , to be delivered . These promises of time and date of delivery resemble future contract.

Commodity index funds:

A commodity index fund is a fund whose assets are invested in financial instruments based on. In just about every case the index is in fact a commodity future index. The first such index was the commodity research bureau (CRB) index, which began in 1958. It's construction made it unuseful as an investment index. 

how trading system works:

Software for managing trading has been available for several decades in various configurations. This includes software as a service . So called energy trading risk management includes software such as open link and Gibbon. 

I hope this article is helpful for everyone. 

In next post we will discuss how to start investing in commodity market 

Thanks you. 

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