Fastest Method To Choose Stocks Of NSE & BSE Registered Companies
Here I have summarised the story of share market trading activity for an individual. The following topics are explained here.
- Types of share Trading.
- Fundamental & Technical Analysis
- Open Demat Account
- Way to find some good Stocks
- Some Graphs for visualization of Stock movement
- Info about Debt Ratio, PE, EPS, Market Cap. etc
- About RSI, MA, MACD, VWAP, etc.
Ist Part
Any type of purchasing in SENSEX or NIFTY (Both are controlled by SEBI India) comes under Trading. Combinedly, both are termed as Stock Market.
Companies are registered themselves in SEBI for the collection of money from people for their expansion plan or repay of loans. There are various types of Trading available in the stock market.
Intra Day Trading:- Same-day purchase and sale of stocks come under this category. It is the most challenging activity amongst all trading activities.
Delivery Based Trading:- Here you can free to buy & sell stocks at your benefit. There is no condition of selling stocks on the same day.
Forex Trading:- Here you can trade foreign currencies. It is the trading of currencies of different countries against each other.
Commodity Trading:- Virtually buy & sell Gold, Copper, oil (Hard Commodities) & agricultural products such as wheat, coffee, cocoa, fruit, and sugar (Soft Commodities).
Futures and Options:-Particular lot of shares have bought & sold similar to Intraday trading in this system. On a very small margin, a big lot of shares buy or sell here.
Mutual Funds:- Here you hire a Fund Manager for the investment of money in Share Bazar.
2nd Part
But here I am explaining only about DELIVERY BASED TRADING or Cash Trading.
CASH TRADING: It is done on the basis of Fundamental Analysis & Technical Analysis. Fundamental Analysis is more relevant for Investing purposes means buying for the long term.
But Technical analysis is more suitable for intraday or Swing/BTST Trading means Buying stocks for a very short time.
Fundamental Analysis: It gives information about Company status means its Market Capitalization, Debt condition, Earning, operating cash status, PE, EPS, CAGR, PBR, etc.
Technical Analysis: It is the fastest way to find price movement action means an increase of stock price within a very short time. Parameters for technical analysis are RSI, MACD, VWAP, Bolinger Band,AVWAP,MA, etc.
3rd Part
STEP I:- First you open a Demat Account in any Bank or with a discount broker agency such as Zerodha, upstox, 5paisa, etc. Here you can register via the online process. Discount Brokerage agency charges very little for every operation at the stock market & very easy to operate. Zerodha is the best in this segment.
4th Part
Start Learning about the stock market:-Start buying a business newspaper such as The Economics Tims, Business Standard, The Businessline, etc.
Download some useful Apps in your smartphone such as Moneycontrol, screener, stockedge, market Gurukul etc.
Make your virtual Portfolio after signing in these applications. Now add names of companies for the investment proposal & start noting down their daily movement.
If u are serious to learn without any cost, subscribe to youtube channels such as nitin bhatia, vivek bajaj,nktalks, etc. They are excellent to teach you without any biased view of the market.
5th Part
Step III – The fastest method for shorting stocks:-Fundamental and Technical analysis is the best method for choosing any company for investment. But it takes time.
So I have mentioned three graphs of Avanti Feeds, Rain industry & Can homes.
They are continuously showing growth in the pace of time.
This type of graph is the symbol of a growing business model.
By using these patterns of growth, you easily find out suitable companies for investment. After choosing companies, you have to apply below mentioned Most basic Criteria for investment.
6th Part
Fundamental Analysis
PE Ratio (= Current Market Rate/Earnings per Share) – First collect this ratio for 3-5 years from any reputed apps or direct from the NSE website. Then calculate the average value. If PE Ration is in between 0 to 8 and more than 18, avoid investing in such companies. PE Ratio in between 8 to 18, most suitable company for long-term investment.
ROR or ROCE (Rate of Return or Return on Capital Employed) For investment purposes, an average of 3-5 years should be more than 20 %.
Debt to Equity Ratio (= Total Debt/ Equity): – It must be less than 1 for safe investing.
Promoters or Owners’ shareholding will minimum 40% of total shares.
Many times Promoters or Owners take a loan from the bank against their share, it is called Pledging. If Promoters or Owners take the pledge against his share, avoid such companies for investing purposes.
CAGR ( Compound Annual Growth Rate)(= End Value of Investment/ initial value of Investment):-It must be more than 10% for safe investing. For example if you invested Rs. 10,000.00 in share of particular company in 2014 and value increased to Rs. 19,500.00 in 2017. Then for CAGR = [{(19500/10000) power (1/ 3 (no. of years)} – 1] = [{(1.95) power 0.33} – 1] = 1.2493 -1 = 0.2493 = 24.3 %
7th Part
Technical Analysis
i) Relative Strength Index (RSI):- It is an indicator of stock price movement. 60 to 80 comes under buying zone. More than 80 means stock is in the overbought zone, the price may fall in short term. Less than 60 means, the stock is not ready to move.
ii) Moving Average Convergence Divergence:- The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.
A nine-day EMA is called the “signal line”. It is plotted on top of the MACD line, which can function as a trigger for buy and sell signals. The Color of the Signal line is Red & for MACD is black.
EMA is a parameter that includes price movement with volume in a certain time period.
iii) VWAP: The Volume Weighted Average Price is an indicator, which averages the closing prices during the given time period. It combines price range with volume. But it is a lagging indicator because it is based on previous data.
iv) AVWAP: – The Anchored VWAP indicator another version of VWAP to identify areas of support and resistance on the chart. After analyzing AVWAP, you get a buy & sell signal.
V) Bollinger Band:- Bollinger bands compare the prices, whether they are high or low on a relative basis. Bollinger Bands use 2 parameters, Period and Standard Deviations. There is an upper & lower band for different time periods & a middle band for standard deviations.
Small & Mid-Cap Companies: – As per new rules of SEBI, Companies having a capitalization of more than 3500 Crore to 8500 Crore Rs.come under MID CAP Company Segment. Companies below than Market CAP 3500 crore Rs. come under Small Cap Companies. The earlier dividing range between Mid & small is 1000 Crore Rs.
NOTE: – Above mentioned all information is only for knowledge purposes. Before any type of stock investment, you must take advice from your financial adviser. We are not responsible for any type of financial loss due to your investment in the share market.
I have mentioned links for investing in the stock market. Ideal portfolio for the stock market.
DISCLAIMER
Above shown images used for illustrative purposes only. No Copyright infringement intended.
