Forex Trading: A Beginner’s Guide for 2019

Posted by Mehul Kothari | Published on 12 Jun 2019
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Forex Trading: A Beginner’s Guide for 2019

Trading in foreign currency is very easy and convenient in today’s time. Its popularity can be seen from the fact that forex trading has become a source of regular income for many people. However, forex trading for beginners can be tricky as they do not have sufficient experience of how does forex trading work. To assist the beginners, this article will highlight the basics of the forex trading, forex trading strategies, forex trading tips and much more.

Firstly, let us understand the meaning of forex.


Meaning of Forex

Forex, also termed as foreign exchange is a market place where currencies of various countries are traded. Currency trading takes place in pairs and the currency pair movement determines the value of one currency against another. For example, INR/USD currency pair measures the value of the Indian Rupee against the US Dollar. The first currency of the currency pair is termed as the “base currency” and the second currency is termed as the “quote currency”.

After understanding the meaning of Forex, let us now learn about how does forex trading work.


How Does Forex Trading Work

When you start trading in foreign currency, you will notice that “Bid” and “Ask” prices are quoted. The price at which you can buy the currency is called the bid price and the price at which you can sell it is called the ask price. In foreign currency trading, you can take two types of trade; long trade and short trade.

• Long Trade
When you purchase currency in the trade, you expect the currency pair to increase in its value so that you can make the profit by selling it at a higher price. This is known as a long trade.

• Short Trade
When you sell currency in the trade, you expect the currency pair to decline in its value so that you can make the profit by selling it at a lower price. This is known as a short trade.

Let us now understand how to start forex trading.


How to Start Forex Trading

To start forex trading, you must open an account with a registered broker like IndiaNivesh Ltd. Only with the help of a trading account, you can take the long and short trades. In order to open a trading account, you will need basic documents like account opening form, address proof, identity proof, income proof, passport size photograph, cancelled cheque or bank statement, PAN card, etc.

Since you now know about how to start trading in forex, it is important that you know about the right strategies also. Let us learn about forex trading strategies.


Forex Trading Strategies

Forex trading for beginners can be fruitful if they follow certain trading strategies. The trading strategies can help the beginner to make good returns. Some of the trading strategies are as follows:

• Day Trading Strategy
As the name suggests, the day trading strategy is meant for the same day trading. In this strategy, you will have to exit the trade before the end of the day (trading session). The main advantage of this trading strategy is that you are protected against adverse events that may happen overnight when the forex market is closed.

• Swing Trading
Swing trading involves making short term profits on the trade by holding the position for a few days. Monitoring the price movement on the bars after every half an hour or hour is helpful in this strategy.

• Scalping
Scalping is a trading strategy that uses tick charts. This trading strategy involves quick trades that last for just a few minutes. One can make profits in this strategy by playing for a few points by quickly beating the bid/offer spread.

• Positional Trading
Positional trading strategy involves maximising profits from a major shift in the price. This trading strategy requires a good amount of patience, discipline and knowledge about the market fundamentals.

After learning about forex trading strategies, let us learn some quick tips that can prove to be very helpful in forex trading for beginners.


Forex Trading Tips
• Before taking a trade, always understand the trend of the market.
• Avoid taking a trade against the market trend.
• Preserving capital is most important in forex trading. So stay focused and trade only when the opportunity for you arises in the market.
• Try to avoid trading in a foreign currency using borrowed money.
• Do not take a trade without putting a stop loss in place.
• Emotions have no place in forex trading.
• Always choose a methodology while trading and stay consistent with that.
• Always know your entry and exit points when you go long or short.
• Avoid being greedy in forex trading. Timely booking profits will help your capital to grow at a rapid pace.

The above mentioned forex trading tips shall help the beginners to become successful in the market. To encourage forex trading for beginners, we list down certain advantages of forex trading.


Advantages of Forex Trading
• It is a highly liquid market.
• It allows a wide range of currency pairs to be traded.
• Forex is a good hedging tool.
• Large profits can be made from the volatility in the forex market.
• It provides easy to enter and exit positions.

If you are a beginner in the forex market, IndiaNivesh Ltd. holds the expertise to guide you on the various topics regarding forex trading for beginners. You may get in touch with us to know how to start forex trading and much more.

 


Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Investment Tips – Stock Market investment Tips in India

Posted by Mehul Kothari | Published on 11 Jun 2019

The desire of making huge money has always lured investors to the stock market. However, making money in equities is not all that easy. Investing in the stock market requires skills, knowledge, patience and discipline. Apart from these four important factors, you also need to do a great amount of research and hold a sound understanding of the market.The stock market is the only place which holds the potential to double your money or even more in a few years. For that to happen, you must invest smartly. In this article, we will give a lowdown on some of the money investment tips for making an investment in the stock market. These investment tips will not only help you in taking good investment decisions but also in building a good portfolio of investment. Stock Market Investment TipsThe stock market investment tips are as follows:• Keep a Check on EmotionsOne of the common mistakes that investors make in the stock market is that they are unable to control their emotions. Often they take decisions on the basis of short term price movements especially during an adverse event. Controlling your emotions in a volatile market will not only help in holding the investments but also in not taking any illogical decisions. Therefore, controlling emotions is an important investment tip because it protects you from selling the shares when the price movement is adverse. Adopting a practical approach in the stock market will help your investments to grow and save you from unnecessary losses. • Invest After Understanding FundamentalsOne of the important smart investment tips is to invest in the company only after conducting a good analysis. Always remember that you are not just investing in the stock, you are investing in the business model of the company. Before making an investment, always do your research about the fundamentals of the company. You must look at its current valuation, balance sheet, expected future growth, quality of management, P/E multiples, etc. By doing the right analysis, you can find good stocks for long term investment. • DiversificationDiversification is one of the key investment tips while building a portfolio. The very famous saying, “never put all your eggs in one basket” holds true in the stock market as well. You must never invest all or most of your money in a single stock. Diversification is the best possible way to manage risk in the stock market. You should invest in stocks of different companies in different industries or sectors so that any negative news or event in one industry or sector does not dent the value of your portfolio. Diversification allows you to recover your losses even when one sector or industry underperforms. Therefore, it would not be wrong to say that diversification of the portfolio is one of the most important things to do while building a portfolio for the long term. • Know Your Risk AppetiteThe next investment tip while making an investment in the stock market is to understand your risk tolerance. It is a known fact that the stock market is subject to certain risks and you must be prepared to take them because the percentage of returns that can be made here are unmatched. Managing and knowing the risk in the stock market is essential because it is a volatile place and you must stay firm during times of panic or adverse events. You will be able to better manage your risks if you stay cool during the times of financial uncertainty and take decisions analytically. • Avoid LeverageAnother important investment tip is to avoid leverage to execute your stock market strategy. Leverage means borrowed money and it should never be used to trade or invest in the stock market. Trading or investment done with leveraged money looks great when the stock goes up or you make a profit but it can prove to be fatal when the situation is opposite. When you borrow the money, you have to pay the interest along with the principal amount. In addition, if you make losses, the liability further increases. Therefore, if you are looking to invest for the long term, smart investment tip would be to avoid leverage.The above-mentioned share market investment tips will help you in investing money for the long term. These tried-and-true investment tips can help you boost your chances for long-term success.Apart from the above tips, there are a few more things that you as a trader or investor in the stock market should take care of. These are:• It is very important to make informed decisions before investing in any stock. Do proper research about the company, its management, past revenues, future prospects, etc. Conducting sufficient due-diligence before investing will help you better understand the future. • Another important thing is to educate yourself about the stock market. Learn about the different kinds of trading strategies, risks involved, market movements, trends, how to read charts among other things. Once you know the basics of the stock market, you will be in a better position to take investment decisions. • Never be greedy with your expectations. Don’t expect the market to always work in your favour. The stock market is unpredictable and highly volatile. So, determine your entry and exit points before investing. It is also advisable to put a stop loss in place which can help you avoid unnecessary losses. • Avoid herd mentality in the stock market. Meaning, don’t be influenced by the actions of others. If everybody around you is investing in a particular stock, it is not necessary that you also follow the same. Invest only if you are convinced that the company you are investing in is good and will fetch you returns. • It is important to regularly monitor your portfolio. Since the stock market is highly volatile, any news or major economic event can impact the prices of your shares. If you cannot personally review your portfolio due to time constraint or lack of knowledge, you may seek help from professionals.If you require more money investment tips or smart investment tips, you may contact a reputed broker like IndiaNivesh Ltd. With our years of experience in the financial market, you will certainly get many share market investment tips that can help you in building a diversified portfolio.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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ULIP vs Mutual Funds – Which Investment gives you better returns?

Posted by Mehul Kothari | Published on 12 Jun 2019

With increasing disposable income at hand and awareness of financial planning, more and more people are considering to invest their savings for a better and secured future. This has given rise to numerous financial products in the market. Today you will find a variety of financial instruments available in the market which offer promising returns. Selecting one or few options out of them can be a daunting task. Moreover, making the right choice of financial instrument is also important because you are putting in your hard earned income in these investment avenues and want your money to grow over time. To assist you with money investment tips, we have brought to you two of the popular investment products that have given good return to the investors over a span of time. They are Unit Linked Insurance Plans and Mutual Funds. In this article, you will understand the basic concepts of ULIP and mutual funds, ULIP plans vs. mutual funds, and much more.Let us begin by first understanding what is ULIP? What Is ULIP?Unit Linked Insurance Plan is a financial product that offers insurance policy along with investment in different investment avenues. The companies that provide ULIPs bifurcate your money into two parts. Some amount of money is used to provide you with the insurance policy and the remaining amount of money acts as an investment. As an investor, you can generate returns with the money invested by the company. The money is invested in debt instruments, equities, bonds, etc. The meaning of ULIP must have clarified every individual’s doubt about why should I invest in ULIP. Let us now understand what are mutual funds?What are Mutual Funds?Mutual Funds are the most popular investment option among investors. The mutual fund companies collect money from different investors and pool them to invest in various investment classes such as stocks, bonds, money market instruments and other assets. The mutual funds hire dedicated fund managers who look after all the investment decisions on your behalf. Thus, a mutual fund gives you access to a professionally managed portfolio making it an ideal choice for investors who do not know much about investing. All you need to do is, choose a mutual fund scheme depending on your financial goals and rest will be taken care of by the fund house. The mutual fund company structures and maintains your portfolio in a way to match your investment objectives. After understanding the meaning of both investment options, let us now learn about the difference between ULIP and mutual fund.Difference between ULIP and Mutual Fund / ULIP vs. mutual fund• When you buy a mutual fund, the motive is solely investment. On the contrary, when you buy ULIP, it gives you insurance cover and also acts as an investment.• When you wonder why should I invest in ULIP, the answer is simple – In case of ULIP, you are eligible for a deduction from your taxable income as per section 80C of the Income Tax Act. Whereas, in case of mutual funds only Equity Linked Saving Schemes (ELSS) are eligible for tax deductions.• Most mutual funds are liquid in nature. They can be withdrawn within a year. However, 1% of the fund value is deducted as exit load. On the other hand, ULIP is not so liquid in nature. Their liquidity is restricted due to a minimum lock-in period of 5 years.• The returns in mutual fund vary depending upon the performance of the stock market and risk factor. The mutual funds which have higher exposure to equity can generate higher returns because of the higher risk. Mutual funds with exposure to debt market give slightly lower returns. On the other hand, the returns from ULIPs are lower in comparison to mutual funds. This is because ULIPs provide insurance cover along with an investment avenue.• ULIPs offer insurance plans that cover the life of the policyholder and in case of an unfortunate event, it gives the assured sum of money to the policyholder’s family. But in the case of a mutual fund, there is no such insurance cover.• When a comparison is made between ULIP plans vs. mutual funds, it is important to consider the expenses. The expenses in ULIPs are higher in comparison to mutual funds. This is because, in the case of mutual funds, SEBI has capped the total expense ratio to 2.25% . No such limit exists for ULIPs.The above mentioned points suggest ULIP vs. mutual fund differences. Investors often have a question in mind i.e. why should I invest in ULIP or mutual fund. Well, to solve this doubt, we list down certain points that will help investors in taking the right investment decision.When You Can Invest In Mutual Funds• When the time horizon is short term or medium term.• When you want to invest in a highly liquid asset.• When you have a good risk appetite.• When you already have an insurance policy in place.When You Can Invest In ULIPs• When your investment horizon is for the long term.• When your risk appetite is low.• When your aim is to save a good amount of tax.• When you want insurance policy along with the investment. Therefore, before taking any investment decision about ULIP vs. mutual fund, you must consider the above mentioned points. You can even purchase these plans from a reputed broker like IndiaNivesh Ltd. They can further assist you in the money investment tips and can guide you on various investment options available to you.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • Financial Markets - Overview, Structure, and Types
    Posted by Rushabh H. Mehta | Published on 06 Mar 2020

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The capital market is further sub-divided into different types of financial markets. Let's understand –   Let’s understand each type of financial market in details – Money market The money market is a marketplace for short-term borrowing and lending. Securities that have a maturity period of less than a year are traded on money markets. The assets traded in money markets are usually risk-free and are very liquid. Since the maturity period is low, the risk of volatility is low, and the returns are also low. Money market instruments are debt oriented instruments with fixed returns. Some common examples of money market instruments include Treasury Bills, Certificates of Deposits, Commercial Papers, etc. Capital market Contrary to the money market is the capital market, which deals in long-term securities. Securities whose maturity period is more than a year are traded on the capital market. Capital market trades in both debt and equity-oriented securities. Individuals, companies, financial institutions, NRIs, foreign institutional investors, etc. are participants of the capital market. The capital market is divided into two sub-categories which are as follows – Primary market Also called the New Issue Market, the primary market is that part of the capital market, which is engaged in the issuance of new securities. The newly issued securities are then purchased from the issuer of such securities directly. For instance, if a company offers an IPO (Initial Public Offering) and sells its shares to the public, it forms a part of the primary capital market. Investors directly buy the shares from the company, and no middlemen are involved. Similarly, if an already listed company issues more shares, called Follow-on Public Offerings (FPO), such shares can be bought by investors directly from the company. 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These include the following – Commodity market This market deals in the trading of a commodity like gold, silver, metals, grains, pulses, oil, etc. Derivatives market Derivative markets are those where futures and options are traded. Foreign exchange market Under a foreign exchange market, currencies of different countries are traded. This is the most liquid financial market since currencies can be easily sold and bought. The rate fluctuations of currencies make them favourable for traders who look to book profits by buying at a lower rate and selling at a higher one. Bond market Bond market deals in trading of Government and corporate bonds, which are offered by Governments and companies to raise capital. Bonds are debt instruments that have a fixed rate of return. Moreover, bonds also have a specific tenure, and the bond market is, thus, not very liquid. 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It is the central bank of India entrusted with the formulation of monetary policies, credit policies, and foreign exchange policies, among others. Banks and financial institutions have to abide by RBI's rules and regulations to work in the financial market. Securities and Exchange Board of India SEBI is the primary regulator of the capital market, which consists of both the primary as well as the secondary capital market. Trading done in the capital market is governed under SEBI's rules and laws. Insurance Regulatory and Development Authority IRDA governs the rules and regulations which are to be followed by insurance companies and their intermediaries. Thus, IRDA is a regulator of the insurance market, both life, and general insurance market. Financial markets today have evolved and have become quite competitive with the participation of multiple players. They directly play a part in the growth of India's economy and allows investors and borrowers to trade in financial products and services in an easy and smooth manner. To take advantage of the Financial markets and varied investing opportunities, consider the team at IndiaNivesh, which is well-versed with types of markets and regulatory bodies.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • SIP – Different Types of Systematic Investment Plans in India
    Posted by Mehul Kothari | Published on 15 Jan 2020

    Mutual funds now are a household name and building a mutual fund portfolio is synonymous with wealth creation. As the mutual fund industry continues to grow leaps and bounds, SIPs are considered one of the key growth drivers for this industry. SIPs help the investors to invest in a systematic and disciplined manners. Online SIP investments starting with Rs 500 per month (for few schemes min SIP amount is as low as Rs. 100 per month); digital distribution and hassle-free onboarding of investors, all have resulted in making an investment for SIPs most favoured investment option. To stay relevant with times and improvise their offerings, AMCs now offer many different types of SIP so that investors can choose the most suitable type of SIP for investment best suited to their individual needs and profile. Here are the different types of SIP investment available for investors- 1. Regular SIP One of the simplest and easiest forms of SIP investment is a regular SIP, wherein you invest a fixed amount at regular intervals. The time interval can be monthly, bi-monthly, quarterly or semi-annually. You can also choose daily or weekly SIPs, though it is not recommended in most cases. When you make your first SIP payment, you are required to choose your desired time interval, amount of the SIP and the tenure of the SIP. In a regular SIP, you cannot change the amount during the tenure of the investment. If you are a salaried employee, choosing a monthly SIP, usually in the first ten days of the month, once your salary is credited to your bank account is highly recommended. 2. Step-up SIP Without a doubt, SIPs help brings about financial discipline in your life. Over time, as your earnings increase, it is important to increase your investments as well so as to keep them aligned with your income level and financial goals. A step-up SIP, also termed as a top-up SIP, is an automated solution to increase your SIP contribution either by a fixed amount or a fixed percentage after a specific time. Using Step-up SIPs will help you reach achieve your goals faster and also help in long-term wealth creation. 3. Flexible SIP For investors with irregular income, even after being well aware of the benefits of SIPs, the biggest reason for not starting a SIP is not being able to keep up with the fixed periodic investments. A flexible SIP is a perfect solution for such investors as it gives the flexibility to start, pause, decrease or increase your SIP. Depending on your flow of funds, you can change the SIP amount seven days before the SIP date. In case, there is no intimation of change, then the default amount entered is deducted for the SIP. 4. Perpetual SIP Normally, when you choose a regular SIP, it has a fixed tenure, with a starting date and an end date. But, if you are unsure about how long you want to continue the SIP, you can opt for a perpetual SIP. In case of a perpetual SIP, you leave the end date column blank and you can redeem your SIP once you have reached your financial goal. If you opt for a perpetual SIP, then it is important that you monitor the returns of your investment, to keep a track of the fund’s performance over time. 5. Trigger SIP A trigger SIP is for seasoned investors, who have sound knowledge of the financial markets and are accustomed to tracking the market performance daily. Using a trigger SIP, an investor can choose an index level, a particular event or NAV to start the SIP. An investor can set trigger points for upside and downside conditions and can redeem the amount on achieving the pre-specified target. Investors can oscillate their investments between debt and equity schemes within the same fund house. A trigger SIP is recommended only for investors who have a thorough understanding of financial markets. 6. SIP with Insurance Insurance is an important part of financial planning. In order to make mutual fund offerings more lucrative, certain fund houses offer free insurance cover if you opt for SIPs with a longer duration. The initial cover is usually ten times the first SIP and gradually increases over time. This feature is only for equity mutual fund schemes. The term insurance offered is just an add-on feature and does not impact the performance of the fund. 7. Multi SIP The multi-SIP enables starting SIP investment in multiple schemes of a fund house through a single instrument. This facility can help investors to build a diversified portfolio. Investors can start SIP in various schemes using a single form and payment instruction, thereby reducing the paperwork involved.   CONCLUSION Over the last few years, SIP returns have earned investor confidence and are the most preferred investment option of retail investors. If you are unsure on how to choose the right SIP for you and want correct guidance, then consult our expert financial advisors at IndiaNivesh for best-suited SIPs for investments.

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  • Know What is Pre-Market Trading & How it Works in Share Market
    Posted by Mehul Kothari | Published on 21 Nov 2019

    Most of us are aware that trading takes place on the stock exchange between 9.15am and 3.30pm. But what if we told you that it is only partially correct. Some trading (though low in volume) also takes place during the extended trading hour periods. Read on to know about more about this additional trading window and its significance. What is Pre-Market Trading Pre-market Trading is a global phenomenon and refers to trading that takes place before the usual trading hours. The usual trading hours for Indian stock markets is 9:15 am to 3:30 pm. Pre-open market stock trading is a special trading window of 15 minutes prior to the start of the working hours for the stock markets. Hence, the time frame between 9:00 am and 9:15 am is considered as the pre-open market session. This feature was first introduced by NSE and BSE in October 2010. The objective behind a pre-market trading It was observed that there was tremendous volatility in the first couple of minutes of trading hours. The core objective behind having a pre-market trading session is to stabilise the market especially when heavy volatility is expected due to some overnight major events or corporate announcements. These could be election results, reforms or new economic policies, declaration of mergers and acquisitions, delisting of shares, open offers, change (especially downgrading) in credit ratings, debt-restructuring, market rumours etc. The additional 15 minutes allows the stock markets to arrive at the right premarket stock price and not get carried away by external events or announcements. In India, premarket future or options trading is not permitted. Pre-market Trading Session – Breakdown of the 15 minutes The premarket trading period can be further bifurcated into three slots:Order Entry or CollectionThe Order Entry session starts at 9:00 am and lasts for eight minutes. The following activities are undertaken during this timeframe Placing of orders for purchase or selling of stocks Changes or modification in orders Cancellation of orders After 9:08am (i.e. completion of order entry session), orders are not accepted by the stock markets Order MatchThe Order Matching session starts at 9:08am and continues for the next four minutes. The following activities are undertaken during this timeframe Confirmation of orders placed during the Order Entry session Order Matching Calculation of stock opening price for the regular session that starts at 9:15am During the Order Match session, one cannot buy, modify, cancel or sell their orders. Limit orders (i.e. order quantity and price is specified) are given priority over the market orders (order quantity and price are not specified) during the execution time. Buffer TimeThe last three minutes of the premarket trading session (i.e. 9:12 am to 9:15 am) is considered as buffer time. This period is used to ensure a seamless transition to regular trading hours. Any abnormalities from the previous two slots are addressed during this time.   Calculation of Opening price during the pre-market stock trading session The opening price of the stock during this session is determined during the second phase i.e. Order Match session. It is done with the help of a specific methodology. This calculation method is referred to as the call auction methodology or the equilibrium price. The stock price which corresponds to the maximum quantity of tradable shares is known as the equilibrium price. It is a factor of demand and supply. The orders placed during the first eight minutes are matched at the equilibrium price and then traded accordingly. Some scenarios: If the highest tradable quantity corresponds to two different stock prices, then the stock price with the lower unmatched orders is taken as the equilibrium price. For example:   Stock Price Order (Buy) Order (Sell) Demand Supply Max Tradable Quantity Size Unmatched Orders (Demand minus supply) 105 1275 1160 25000 20000 20000 5000 99 2000 8000 20000 30000 20000 -10000   Though the maximum tradable quantity is same in both the cases, the equilibrium price will be considered as 105 as it has a minimum unmatched order size If the values of the highest tradable quantity and unmatched orders are same or equidistant, but they correspond to two different stock price, then the above methodology cannot be applied. In this case, the equilibrium price is taken as the stock price which is closer in value to the closing price of the previous day. For example, Stock Price Order (Buy) Order (Sell) Demand Supply Max Tradable Quantity Size Unmatched Orders (Demand minus supply) 105 1275 1160 25000 20000 20000 5000 99 2000 8000 20000 25000 20000 -5000 Assuming the closing price on the previous day was Rs. 110, then the equilibrium price in the above example will be Rs. 105.   What about orders that remain unmatched or are not traded in the pre-open session? Orders that are not traded or remain unmatched are carried forward to the general trading session. The opening price of these orders is determined in the following manner: Limit Orders i.e. orders wherein the price and quantity are already specified are carried forward at the same mentioned price Market Orders i.e. orders wherein the price and quantity are not specified are carried forward at: If the opening price was ascertained during the pre-open trading session but order not traded, then at the determined price If the opening price was not discovered, then they are carried forward at the previous day’s closing price   Stock Markets tend to be overwhelming for many investors. The concept of premarket trading can further compound the complexity level. However, as an investor, you should always remember that help is just around the corner. Professional experts like IndiaNivesh can help to simplify and demystify the entire process. The team at IndiaNivesh keeps a close eye on this Pre-market session to comprehend the mood and strength of the stock market. They track the pre-market stock prices and take the best decisions for your portfolio basis the market sentiments. Moreover, since they offer a wide range of services (broking, mutual funds, institutional equities, private equity, strategic investments, corporate advisory, etc.) they have a holistic view of the market and the economy. Their expert opinion can help you to amp up your investment game. You can read more about their offerings, vision and accomplishments on their website https://www.indianivesh.in/Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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