Why and how volume is important in share trading?

The volume of trade is a measure of securities (shares, bonds, options, futures and/or commodities) traded during a day. In other words total number of buyers and sellers exchanging securities over a period of time, which is usually a day.

importance of volume

In other words, it means the total number of shares that changed hands between the buyer and seller. Their volume is high if shares are more actively traded. Conversely, their volume is low if shares are not much traded or not traded at all.

Must Read: Top ten-day trading secrets for beginners

Say for example if share volume of the day for a particular company was 1,00,000. It meant that there were 1,00,000 sold by someone and bought by someone on that day. Combining all the listed companies whose share had been traded is called volume of the exchange.

The volume gives only the information of market activity and liquidity. A higher trade volume for a specific company means higher liquidity, and the share is active. For example, usually, blue chip companies have high trade volume and penny stocks have low trade volumes. You can also get the list of high trade volume companies from any stock advisory company.

Though volume alone does not provide any important information as such, when volume data is read in conjunction with support and resistance levels, plays an important part.

Must Read: All time stock trading techniques that you should follow

Data regarding volume trades of a share is available on the exchange website. Along with its present price. It is for a day, 5 days, 1 month, 3 months, 6 months and 1year are available, of all listed company at the exchange. Or else you can get from firms providing nifty future tips.

Example – Let us take a scenario that company breaks a ‘resistance level’ and moving up further. And since it has broken through the critical level, prices are expected to go up more in the future.

Volume traded on the day is suppose 3.5 lacs were exchanged. Assuming, the company under consideration on a normal day trades 10 lacs shares. Now traded volume, which is 3.5 lacs is way below average. That means big traders are not trading. Next, say if traders decide that they are bearish on the share. They sell their lot and cause panic. You can get volume list from firms providing nifty option tips. And share prices go down the next day. Vice versa is also true. This is the importance of volume.

Volume is one of the important factors for technical analysis. They work both for resistance and support levels. Generally speaking if the price is showing an upward trend, volume should also rise, and vice versa.

Must Read: How to take first step to make money in share market?

For Free Share Tips Visit: https://goo.gl/2nhRwT

Top ten day trading secrets for beginners

Before we come down to secrets of day trading for beginners let us exactly know what day trading is all about. A day trader holds the market position for a short period of time. Usually, he buys and sells shares on the same day.

day trading secrets

But if the circumstances are unfavorable, and depending on the broker, can hold for T+1 or T+2 or T+3 days. “T” here stands for trading. Day trader takes the advantage of volatility of the share market during the trading day. Or sometimes a day or two.

Must Read: All time stock trading techniques that you should follow

At the turn of the century, when online trading came into existence. Many new traders jumped into available online trading platforms. They did not apply the tried and tested strategies. Many started trading to make good and easy money. They traded without much knowledge or efforts. And the results were not much encouraging. This online concept without much knowledge and efforts saw many going in for a loss. This brought the bad name to day trading.

Though day trading is neither simple nor complicated.  Once you learn the rules based on certain strategy. You can look forward to possibly judge the market moves to some extent.

Top ten day trade secrets for beginners

  1. Identifying entry and exit points

Look for the situation where the demand and supply are extremely unbalanced. You can use these as your entry point.

If the number of sellers is more but there are stilling buyers, prices are about to go higher. But if the number of sellers is more but the buyers are not willing to buy, prices are about to go lower.

Identifying these turning points by candlestick chart and historical example. You can choose your entry and exit point.

Must Read: How to pick a good stock for intraday trading?

  1. Determine yours upper and lower cutoff level

If you buy and hold shares for a longer duration, you should decide how much profit you wish from that script. And how much loss you will be able to bear if things do not turn up according to your expectation. That is identifying higher and lower cutoff points.

Stick to the plan you made. Do not be greedy is prices move further than you expected. Though you can increase your stop loss to a higher level. Especially in the market which is in bull run phase.

  1. Set your targets for risk reward ratio

When a beginner starts trading he may lose some trades and may gain from some trades. He should be mentally prepared for both, not only for one. In the initial period he may set a target for every three profit he should get one losses trade. As he gets the experience he may change the ratio to five favorable to one unfavorable.

Must Read: How to control investment loss in share market?

  1. Patient is the key

It is not necessary to trade every day. Often it is seen that successful traders trade only and only when the opportunity meets certain criteria that they have set.

They may be in the market and maybe even in front of their computers, observing the market, but still, do not trade. They do not trade just to do something. First, they plan their trades and then trade according to their plan.

  1. Follow trading in a disciplined way

Trading in an impulsive way can be dangerous. It is the worst type of behavior. You need to have a trading plan and should stick to it whatever the condition may be.

If you are greedy you will hold on to your position for too long. If you are fearful than you might not think of holding for a second and sell the shares. In both the conditions, you will not be able to make the substantial profit.

  1. Sell/buy according to as planned

Successful traders are disciplined and work according to their plan. They act quickly when the opportunity presents itself. They automate their order placing. It is because they are disciplined and have worked on their plan minutely.

In case they are wrong in their judgment or calculations they opt out immediately, thereby saving themselves from the major loss.

Must Read: How to make a winning trading plan in just 11 steps?

  1. Always trade with surplus funds

Successful traders do not use their capital at one go. That is if they have capital of Rs. 1,00,000/- They will use Rs. 1000 to Rs. 2000 for one trade. They may have many trades of these small amounts.

Most of their capital that is around Rs 80,000/- or so they will save it for retirement or long-term investment. The big part of their capital they use for long duration positions. They may use this occasionally for trades that are 101% sure will be in their favor.

  1. Diversify your holding

You should have a day trading budget. That is how much total amount you will use for day trading today. Set aside 2 to 10 percent for some emergency buying when a better opportunity arises. See that you do not exceed your position. Always buy shares of different sectors or industry.

Must Read: Why should you diversify your share portfolio?

  1. Dabble in other avenues

Do not limit yourself only to stocks. You can diversify into forex, future, and options also. These asset classes display the same volatility as stocks. Often one of them will give better opportunity than the other. Like when stocks rise, gold decreases and vice versa.

  1. Experience is the best teacher

Trading like any other business has its share of gain and losses. When trades are not in your favor, examine what is going wrong. Did you stick to your plan or diverted from the path. If needed make some minor amendments to your future plans.

All time stock trading techniques that you should follow

There are successful and unsuccessful traders. If you take successful traders, one thing is common in all. And that is they have an edge. They have the same information, see the same TV channel, read the same magazine as others do. The difference lies in knowing how to act when the signal shows on the screen. A stock trading techniques that should be followed religiously.

All time stock trading techniques that you should follow

Beginner or unsuccessful traders take a decision on an impulse. Trading every now and then. A successful one will act only when the signal shows on his screen, otherwise, he will wait patiently.

Successful traders know what to do and when to do. For a beginner trader, it is a huge hurdle. They do not have the patience to wait and have no self-control.

Stock trading techniques that should be followed 

Certain principles and rules have to be followed for successful trading. Below here are given five techniques.

  1. Prepare your trading plan in advance.

Like any exams or competitive sports, need regular effort. Though an exam is for three hours, it takes a year of preparation. Similarly, sportsmen/women train for years for the event, which hardly takes few hours.

Same thing applies to trading. You may be trading for few hours, maybe twice or thrice in a week, but the preparation takes a lot of time. You have to make a definite plan for your trading. As during trading prices move very fast, you have to have your plan handy. If you make a plan during trading, it will lead to confusion, what to buy, what to sell, and things like that. This will lead to losses. This will lead to decreased self-confidence.

Must Read: How to make a winning trading plan in just 11 steps?

  1. Traders approach towards trading

A successful trader has the passion for trading. Trading is his love of life for him. It is a business. How one approaches trading decides how one will succeed. A relaxed approach to trading will result in ordinary results. If one has businessmen like approach, that is giving thought to all aspects of trading. Then he can be assured of the ideal result.

Businessmen like approach mean giving attention to every small detail. Writing each and every transaction minutely and in details. They take complete responsibility irrespective of the outcome.

Unsuccessful traders blame event or person in case of loss. Successful traders own the loss, as if, winning and losing is the part of the game. It is the winning attitude that is a differentiator. He moves on to next trade. Knowing it fully well that is one of the thousands of trades that he will be doing.

Must Read: When Is The Right Time To Buy Shares?

  1. Continuous improvement

Successful traders keep on improving their performance. They keep minute details of their every transaction. They keep track of all their strategies which have made a profit and which has made a loss. This helps them to pinpoint their loss-making strategies. They improve upon it. They also learn the strategy of trading and psychology aspect of it. This they incorporate in their future trades.

A successful trader is always a student of learning the market uncertainties. This helps him to be prepared for future uncertain that market can throw up. And is prepared to face it and knows how to react to the situation.

Must Read: How To Become Successful Stock Market Trader?

  1. Simple strategies

Successful traders have simple strategies. And they stick to it. Unsuccessful traders keep on jumping from one strategy to another. If they see they are not making enough profit.

Since unsuccessful traders have complex entry and exit strategy and jumping here and there, they mix up their strategies. This results in loss of faith in the strategy which he makes.

Successful traders have few and simple rules that he follows and trades. He has very clearly defined sets of rules for entry or exit. His chart patterns are simple.

Successful traders have a solid money management rules. He reduces his position in case of series of losses. Uses stop losses for all his trades. And has an idea of most gain he can get.

Must Read: How Does Stock Market Work?

  1. Taking losses in the stride

Successful traders are emotionally neutral in profit/loss situation. Though, not reacting to loss consumes more time and energy, than to search for right strategy. Being emotionally neutral in any situation comes after years of practice and hundreds of trades.

Successful traders follow a trend. For every ten trades, they assume that six trades will be a loss. An unsuccessful trader will be depressed by such a ratio. He will abandon the strategy immediately. He cannot take these losses in his stride.

Taking losses and learning to digest loss is an important part of trading.

Trading in a consistent manner, along with disciplined approach. And making minor required changes to the strategy after learning from losses. This will help in overcoming uncertainties in a long run.

Must Read: When to sell shares to make profit?

For Free Trading Tips Visit: https://goo.gl/2nhRwT

 

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How to start investing for a useful purpose?

Investing had become the need of every person in today’s fast moving life and ever-rising costs. The matter raises how to start investing for a useful purpose.

How to start investing for a useful purpose

One should have a clear purpose and reasons for investing. It is a very important if one wants to invest successfully. Investing just because everyone other person is investing, then you will be unsuccessful.

Bodybuilders go to the gym, as they have a purpose to have a muscular body or want to develop six pack abs. If one has no purpose, then investing can be difficult, tedious and even dangerous.

Investing for a useful purpose

If you have a goal then one can track his own progress. If one is going out of course then it can be corrected. Or if moving slow, then it can speed up. Here are two purpose.

  1. Retirement investment

It is not possible to predict, what will be the cost of living few years or decades from now. How much amount, one will need to maintain the present lifestyle in future. It is this uncertainty and future rate of inflation that makes us plan for the retirement.

In these uncertain times, the investment made today will come handy after retirement. Present investments will help one to make a solid path once one’s working years come to an end.

Must Read: What Is The Purpose Of Investment In Share Market?

If you have a number of years in your hand, your investments will have more years to grow. Remember you have to fight inflation too. You have not only to defeat inflation by just a few percentage points. But have to get a good lead over it, as your money will not be worth as it is of today.

Risk-taking capacity decreases as one gets older. That is in future you will be making investments in only those instruments which carry less risk. Instruments which carry less risk, returns are likewise less. Another side of the coin is if you start young you can take greater risk for greater gains.

Must Read: Why should you diversify your share portfolio?

Younger you start investments, earlier you learn about in’s and out’s of investments. Financial consultants are difficult to choose and are costly. So it is best that you manage investments yourself whenever possible.

If you are investing for retirement then it is a long-term investment. You will have to see for quality investment, which you buy and hold for long term. This will be your capital.

Your investment portfolio will be a mix of stocks, mutual funds, precious metals. And also FD, bonds, debentures, PPF and saving in a bank account. The proportions of mix change over time as you grow older. Moving from high-risk investments towards low-risk investments.

  1. Setting up small financial goals

Financial goals can be of short-term too, like buying a computer or high-end TV. The medium-term like going for a holiday abroad. Or buying a new car, alteration /modification at home, changing complete furniture, etc.

Investments can be also made to enhance your employment income. And help you buy those things that you want. Since investment changes with investor’s desired goal. It is not like retirement investments. It is a mix of the long and short-term.

Must Read: How to take first step to make money in share market?

Like, if your aim is to buy high-end TV you will need short-term investment. But if you plan to buy a home than long-term investments will be needed.

Investment strategy should be in the line of your goal. That is if you wish to buy a high-end TV, in a year’s time than your investment strategy will be different. And if you wish to buy a new car or go for a trip abroad then your investment strategy will be different.

The most important thing is to set your goals first. Plan how much budget you will need. Once your goal and time frame is set. Other purposes like celebrating birthdays in a posh manner. Or other expenses which seem more important at that instant time can be cut down or decreased.

Must Read: How to earn regular second income from stock market?

It is exciting and challenging to achieve financial goals. You will be more motivated to learn about investments which give you better returns.

For Free Investment Tips Visit: https://goo.gl/2nhRwT

How to recognize a dividend paying company?

When the company makes a profit, it distributes a part of its earning among shareholders. Amount (percentage) and date of distribution is decided by the board of directors and paid to a class of its shareholders. The dividend is usually paid by cash (cheque or ECS), usually once in a financial year.

How to recognize a dividend paying company

The most important factor in determining a dividend is company’s net profit. The company will earn a good profit if it is a dominant player in its sector or industry. And also if it has a durable competitive advantage, and is ahead of its peers.

Let us see which all companies will pay dividends and how to identify those companies. You can also make money in share market without investment.

There are certain characteristics that one should look for identifying dividend paying company. Let’s see them one by one.

  1. Free cash flow of the company

Total cash generated by the company, during a financial year is cash flow. After deducting all the expenses etc, the company is left with some cash. This cash is called free cash flow. The free cash flow by the company can be used to either expand its operation or pay dividends. After covering their future expenses. If some cash still remains then this cash is paid to shareholders as a dividend.

What should the dividend investor look for? He should look for cash flow history of 5 to 10 years. He should also see for its dividend per share for the same time duration. If both are rising at an almost same rate, then the investor should go for it.

Must Read: How to take the first step to make money in share market?

  1. Dividend history of the company

Company paying an irregular dividend should not be trusted. Because one cannot be sure that it will pay a dividend in future or not. The company should have a long history of stable and regular dividend payment.

See the history of the company for last decade or so. Analyze the trend of dividend yield. It should be part of your portfolio if it has given stable or rising dividend yield. Dividend history can be seen at the website of all the stock exchange in India where you can invest your money.

  1. Debt of the company

The company borrows money from market or bank for its expansion or other business needs. Many companies have huge borrowing on their books. This borrowed payment sometimes is very high and takes away a huge part of profits. If profits are decreased then it is not possible for the company to pay a dividend. It is in the interest of investors to avoid these companies.

A slight increase in interest rates will decrease/wipe out company’s profit. Even if the board of directors of the company wishes to give a dividend. They cannot give, because of the shortage of funds.

Not only in share market but also commodities trading companies can be considered on same lines. Commodity trading tips for beginners can be had from agents/brokers of commodity exchanges.

Conclusion

See to it that your portfolio is diversified across sectors. This reduces the risk, as some sector performs best and some perform worst, at a given period of time.

Must Read: How to earn regular second income from the stock market?

One should never over-exposure the investment in only one company and one sector only. Some sectors perform contradictory to each other. Like when share market is on high ROI path, gold is at low ROI path, and vice versa.

Plan for dividend income should be made during working years as it needs time to grow. Patience, research, and regular investment help you achieve your targets.

Dividend income is one of the best passive sources of income. It provides the investor with regular and steady cash flow when other sources of income are dried up. It can be a source of regular income during retired life. One can see forward to rich, wealthy and worry-free life.