Yesterday I had written that the current rising stock market is news based uptrend.

The question is how good news has to be that it keeps going up? Well, the answer is that there can be no news good enough that the markets will keep going up always.

WHY?

Well lets us go back to how stock markets work.

Very Simple Logic:

If Demand is more than Supply (there are more buyers than sellers), then the stock moves up.

Similarly, if Supply is more than Demand (there are more sellers than buyers), then the stock moves down. read more

When markets are near all-time high one should try to invest as little as possible. Or you can wait for a few days and then re-invest.

NSE as on 09-Nov-20:

NSE as on 09-Nov-20

Source: https://money.rediff.com/index.html

Why wait for a few days?

Because markets may retrace back / fall by about 2-3% and give you an opportunity to invest again.

When markets are at all-time high it is better to book profits and wait for a reversal back to mean.

Mean is the average of the numbers. It is easy to calculate – add up all the numbers, then divide by how many numbers there are. In other words, it is the sum divided by the count. read more

There is a limit to invest your money in stock markets. Yes, ideally you should save 20-25% of your income and out of that 40% can be invested in stock markets.

Still, I do not advocate investing too much money in stock markets?

Let me give you an example.

Vijay’s take-home salary is 1 lakh a month.

– 25% saving is 25,000
– 40% of 25000 is 10,000
– In a year Vijay can invest 10,000*12 = 1,20,000 in stock markets which in other word is 10% of his take-home salary.

Assuming his salary is same for the next 30 years, or he invested Rs.1,20,000 for the next 30 years in stock markets and makes a return of 25% a year. read more

In this article I will discuss when to trade Long Straddle and Long Strangle.

When should we trade Long Straddle and Long Strangle?

When the markets are volatile (very volatile) then Long Straddles and Long Strangles work well.

What is Long Straddle trade?

A Long Straddle is a combination of buying a call and buying a put, both with the same strike price and expiration. Together, they produce a position that should profit if the stock makes a big move either up or down. I have written in details about Long Straddle here that you can read. read more

Today I received an email from one of my subscribers that I believe most of the traders think most of the traders think the same way. So I have shared his email here.

What he believes?

That the stock operators and brokers control the stock market price action. Since they want traders to lose money – most of them play against them and operate the stock in such a way that it almost always hits the stop loss – thus making them money.

However, let me tell you that this is simply not true. Assuming that even if its true, stock price manipulation by any mean other than demand and supply is illegal in India. One day or the other they will get caught and their license will be cancelled. No broker can take a risk with their business license for a few thousands rupees a month. But the main reason is that stock brokers are just that stock brokers, they can help us to get a trade go through, they do not have access to main sources/resources where final transaction between a seller and a buyer is done. Therefore there is no way they can manipulate the prices. read more

This is INDIA VIX on 31-Aug-20 at 1.19 pm (Source: https://www.google.com/search?q=india+vix):

INDIA VIX 31-Aug-20
INDIA VIX 31-Aug-20

This is NSE on 31-Aug-20 at 1.24 pm Source: https://money.rediff.com/index.html:

NSE 31-AUG-20

Can you see that both are inversely proportional?

Check out this post where I had also given a caution of India VIX surging and NSE falling.

What can you make out from a surging India VIX?

That when India VIX surges NSE will fall and vice versa.

How can this help the directional traders?

Well, this will not help 100% of the times, but if from 11 to 11.45 am you see that India VIX is surging then you can short Nifty futures and if from 11 to 11.45 am you see that India VIX is filling then you can buy Nifty futures. However, this trading must be done Intraday only. Next day the situation can change and you may see the position reversing. read more

People all over the world do absolutely no planning on how much to invest in stock markets. They just keep investing on gut feelings, as much as possible, to recover losses. This is a poor money management skill. In this article I will help you learn how to properly plan investing in stock markets. This post will help you a lot to plan your investments in future in stock markets, especially if you are young.

Contrary to traditional belief, you do not need too much money to start investing in stock markets but you must know where to invest. In fact it is very important for a beginner not to invest too much money at the very beginning. It is important that you separate the cash that you want to invest in stock markets from what is needed to live a life. Never take a risk with the money you cannot afford to lose. read more

This article will help you to know how to start investing in stock markets. However there is a very high chance that you already have done mistakes and lost some money. In that case I suggest for now stop trading, learn and then trade.

I have got calls from traders who have lost Rs. 40 lakhs to up to 2 crores. So please do not lose so much money that it becomes hard to recover. Anything above 5 lakh loss is a red sign – you should stop trading here and start learning. I lost a bit more – approx 7 lakhs, but do not want you to lose that much. read more

The new margin rules for hedged future and options trades coming into effect from 01-June-20 reduced the margin required. It is very good for retail traders, as it reduces the unlimited risk of naked trading.

Here is a detailed very technical explanation by NSE – National Stock Exchange of India Ltd., on the reduced margin framework from 01-June-20:
https://www.theoptioncourse.com/NSE-New-Margin-Framework-01-June-20.pdf

Well, the above file will be a bit complicated to understand. I will try to explain in simple language. read more