Download File

Investment Vs Trading
Investment Basics
Why People Invest in Financial Markets
• To achieve financial goals
• To increase income
• To gain wealth and feeling of security
Based on long term / short term financial goals
investments could have
• Targeted Rupee amount
• Targeted maturity date
Investment Vs Trading
• They are often thought of as interchangeable
actions while they are not
• Commonality is the application of capital in
the pursuit of profits
• Investing is more open ended; trading is close
ended with exit targets
• With the same process and stock, intention and
definition of objectives separate trading from
investing
Investing
• When savings are put buy stock that will
earn a decent amount of income and/or
go up in value over time
• Decisions are made for the longer term.
Stock is bought because it is valuable now
or likely to become more valuable in the
future
Trading
• Time the market — buying low and selling
high as quickly as possible
• Successful
trading
requires
close
attention to price trends, insight to
market movements and the courage to
make quick decisions
Do not trade like an investor
or invest like a trader
INVESTING v/s TRADING
• Buy and
hold/wait for
the markets
to come
back
• Never Buy or
hold/wait for
the market to
come back
INVESTING v/s TRADING
• Averaging
• Never
Average
INVESTING v/s TRADING
• Never use a
stop
• Never trade
without a
stop loss
INVESTING v/s TRADING
• Never short
the market
• Shorting is a
integral part
of trading
INVESTING v/s TRADING
• Focus on the
fundamentals
• Focus on
Technical
Parameters
Which One is Better?
• Both the styles have numerous arguments in
favor and in against. A client should stick to its
goal and investment objectives.
•
HOWEVER combining both would be an
excellent ‘style’ diversification. Obviously one
should not miss the opportunity when market
offers it on any given day.
The winning Combination
1. Have clarity in terms of investment objectives
2. Set targets / rules for opening and closing the
position, closely follow the calls.
3. Define exposure. Follow it and manage it
closely.
Portfolio : An Example
Investment Positional Day Trade Exposure
Trade
100%
0
0
100%
80%
20%
0
100%
80%
10%
10%
130%
• Before going for a transaction ask this very
basic question:
What type of transaction this is?
Decide Before Ordering
• Investments
• Positional Trade
• Intra-day
Investments
• Few months to few years
• Fundamental Factors
• BUY & HOLD till the theme & under
valuation persists
• Let long term remain long term and do
not book short term profits.
Products
• Inquire Research Reports
• Updates, Visit & Result Notes
• MOSt Value
• Results Preview
Positional
• Overnight to few days
• Technical Factors
• May not be in Sync with Fundamental
factors
• Always make use of STOP-LOSS loss
levels
• Should not be converted into Long-term
Investments- HFCL, GTL etc..
Positional
• Market Diary
• Awacs or Derivative Products
Intra-day
• Same day square-off
• Technical Factors
• May not be in Sync with Fundamental
factors : Remember MAY 17th
• Always make use of STOP-LOSS loss
levels
• Should not be converted to Positional or
investments
Product Grid
Investors are advised by dedicated relationship managers through various
advisory products
Market Analysis
Technical Analysis
Regular
Yearly
Fundamental
Research

Inquire
Company & Sector
reports

Quarterly
Results
Preview

Monthly
MOSt
Momentum
Daily


MOSt
Commodity
Futures
Weekly Guide
Mutual


Morning
Calls

Derivativ
e Strategy

Market
Hours

Market
Information & Intraday Calls
Market
Dairy

Pivot
Points

MOSt
Market Action

Wealth
Creation report

Budget
Coverage

India
Strategy
MOSt
Value

Weekly

Thematic Research
MOSt
MOSt
Morning Research
Mathematics of Trading
IntradayAssumptions
• Success Ratio of not more
than 60-65%
• Reward –Risk Ratio of 2:1
• For an expected profit of
Rs.2, you are accepting a
risk of losing Re.1
Succes No. of
Total Loss
s
times
StopRatio
loss(Re.
1)
is hit
No. of
Profit
times
Earned
(Re.2) is
earned
Net
Position
40%
6
6*1=Rs.6
4
4*2=Rs.8
+Rs.2
50%
5
5*1=Rs.5
5
5*2=Rs.1
0
+Rs.5
60%
4
4*1=Rs.4
6
6*2=Rs.1
2
+Rs.8
70%
3
3*1=Rs.3
7
7*2=Rs.1
4
+Rs.11
If you know where you're going and why,
you will
Thank You