Monday, 23 April 2018

How to Make Money in NSE Stock Market

Options to Make Money in Stock Market:


Everyone can make money in Stock Market in following ways:-

  • Investment (Delivery Based Trade)
  • Speculation (Intraday and Derivatives Positions)
  • Hedging and Arbitrage
  • Margin Funding
  • Dividend Income

Investment:


Those who want to hold a stock for a few days or few months or a few years, they have to take delivery of the stock. Such stocks are bought through trader’s stock broker, which is then transferred to trader’s demat account, where it stays in electronic form, and trader can get a statement of it on monthly or quarterly basis, as opted by trader, which shows the balance of stocks trader will hold in demat account. This option is for such people who want to buy shares as per the spare amount they have at hand. One must always remember, that trader cannot employ buy and forget strategy in case of shares.

In Investment Strategy, we have to take care of the shares. For Example : When we sow the seeds, we have to take care of it. Later it will grow into a big tree and stand fruits. Same in the case with investment in stock/share market. If fruits are not get in time, they will rot, in same way,one has to learn to book profits on time to make good profits on investments. If proper monitoring and care is taken,stocks can give extraordinary returns in the long term. Moreover, One can also do BTST and STBT in stocks that traders are holding for longer periods.

Speculation:

Speculation can be done by taking intraday speculation as well as derivatives positions.

Intraday Speculation:


In Intraday Trading, a stock is bought and sold on the same day, with the profit or loss. Delivery is not taken in this case. Major aim of intraday trading is to try and take advantage of intraday movements speculated by various stocks. If trading is done after proper study, with the monitoring through intraday charting software, it can result into positive cash flows. But If trading is done unsystematically, it becomes gambling.


In Intraday Trading at the end of the day position is to be compulsorily squared off, whether the end result is positive (profit)or negative(loss). One must never take delivery to avoid in intraday loss. But unfortunately, most people when suffer from intraday loss they end up taking delivery which is not always advisable. If one does not have the adequate holding capacity, losses can increase due to this.

Derivative Speculation:

Derivatives are the monetary mechanism that are linked to a particular economic pointer or indicator or commodity and through which exact financial risks can be traded in financial markets in their be in possession of right. The assessment of a financial derivative derives from the cost of an underlying item, such as the index.

There are two primary forms of derivatives:

  • Futures
  • Options



Futures:


The Future Contracts are a concurrence between two persons to buy or sell an asset at a certain time in the future at an assured price. Future Contracts are special types of forward contracts in the sense that the earlier are standardized exchange-traded contracts.
Futures Terminology:

Lot Size:

Every Future Contract has a specific lot size. At a given time, there are 3 months contract open to trade. For example, if current month is April, then futures for April, May and June month are available to trade.

Expiry:


Every Future Contract expires on the last trading Thursday of the month. So those don’t sell their future before last trading Thursday, their lots get squared off at the closing price on the expiry day.

Margins:

One has to pay initial margins to buy a future. It could be anywhere from 10% to 25% in a normal market conditions, and the margins could rise in volatile markets.

Mark-to-Market:


After buy the future, mark to market is calculated daily based on the difference of closing price from buy price.
If the difference is positive, then the amount gets credited in trader’s account. If the difference is negative, one has to pay the respective mark to market.
After the position is squared off, if its in positive, one gets the profit and margins back. If its in negative, and if one has paid mark to market losses at regular intervals, then one gets the margin back.
If one fails to pay the mark to market losses, those losses are cut from the initial margins, and the surplus left is paid back.





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