Derivative Trading

Derivative trading can be done in two ways at Indian share market, Future and Option trading. In this type of trading you actually buy a contract that expires within a time limit generally it is one month or three month. In Indian stock market all derivative contracts expires on last Thursday of each month. In derivative segment stocks are bought and sold in lot. The number of stocks in a lot varies from one stock to other and the price of lot is derived by multiplying the number of stocks with the current price of stock in the market. The biggest advantage of derivative trading is that you can get the lot by investing only the 30 to 40% of the actual price of the stocks that you will be holding. Moreover, you can gain by short selling the stocks as well that means you can first sell the stocks at higher price and then make profit by getting the stocks at lower price. The brokerage for derivative trading is generally lower than the cash segment if you consider the amount of investment and the number of stocks you hold.

Margin Trading

In previous post we talked about Equity trading which is less riskior and you can hold stock till you want. The other type of stock trading is Marginal trading; it is generally used in day trading. In this type of trading you have to close deal by give time that is generally within very day of the trading. The biggest advantage of margin trading is that you need not invest the full value of the stocks that you trade in i.e. 5% or 10% of buying value of stocks. Though you can hold more stocks with the fund while doing margin trading. Another advantage of margin trading is that you can short selling of stocks. That Means you can gain by selling the stocks at higher price and then buying the on same day at lower rate. The Brokerage of margin trading is lower than delivery based trading.

Stock Trading

There are so many ways in which you can do stock market trading. Here we are presenting some most common type of stock trading.

Equity trading:
This is the most type of trading in stocks. In this segment you can buy stock of company through your broker. Once the request for buying stock is settled and payment is made the stocks are deposited in the Demate account of investor. The advantage of equity trading is that there is no time frame for selling stocks or closing the deal. You can always hold stocks till you want. Brokerage charge of equity segment is greater than the derivative segment. If you want good returns and do not want to take more risk this is a best way for you to invest in stock market.

Next session we discuss more about stock trading……

Stock Index, SENSEX And NIFTY

The stock market index functions as a indicator of the general economic scenario of a country. If stock market indices are growing, It indicates that the overall general economy of country is stable if however the index go down it shows some trouble in economy.

Types of Indices For the entire world ( global indices) For an entire continent ( regional indices – for example S&P Latin america 40) For an entire country ( national indices – for example Sensex & Nifty for India ) For a particular sector in a country – ( sectoral indices – for example BSE BANKEX which tracks top banking companies in India) For any other theme / group of economy / companies you want to track. ( example Dow Jones Islamic world market index)

Construction of Stock Index A stock index is created by choosing high performing stocks. Index can be calculated by two ways by considering the price of component stock alone. By considering the market value or size of the company called market capitalization method. Two main stock index of India are Sensex and Nifty. Both index gives general idea about whether most of the stocks have gone up or most of the stocks gone down. The SENSEX is an indicator of all major companies of the BSE and the Nifty is an indicator of all major companies of the NSE. Both Index represent the top stocks at National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The word Nifty can be taken from word national and fifty while Sensex abbreviated as Sensitive index. sensex and nifty, bse nse, stock market, Share Market India

NSE AND BSE

In previous post we have discussed about stock exchange.  Two main stock exchange of India are NSE and BSE. Here we will discuss about them briefly.

National Stock Exchange

National stock exchange in short NSE is the largest stock exchange of India and world third largest stock exchange in terms of number of trade. It is situated in Mumbai and was incorporated as a tax paying company in 1992. In April 1993 NSE was recognised as stock exchange under securities contract act 1956.    

The main objective behind NSE is to establish trading facility nationwide for all types of securities. NSE has national reach to major market segments like equity or capital markets, futures and options or derivatives market, Initial public offerings and so on.

Bombay Stock Exchange

Bombay stock exchange is the oldest stock exchange in Asia that was established in 1875. BSE located in Mumbai, It is world third largest stock exchange in terms of stock listing.

NSE's primary index is NSE NIFTY and BSE Primary index is BSE SENSEX. Nifty is also called fifty share index, 50 companies stocks are listed on Nifty. BSE SENSEX is also called 30 share index as 30 stocks are listed on this index.  Both indices are considered to measure market trend.