Technical Kit Final

Awareness of Investments in Financial Markets
Chapter 1
Definition of Stock Exchange
The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as anybody of
individuals, whether incorporated or not constituted for the purpose of assisting, regulating
controlling the business of buying, selling or dealing in securities. Stock exchange could be a
regional stock exchange whose area of operation/jurisdiction is specified at the time of its
recognition or national exchanges, which are permitted to have nationwide trading since
inception. NSE was incorporated as a national stock exchange.
Meaning of stock market
A Stock exchange or securities market is an organized market where listed securities are
purchased & sold for investment or speculation.
In other words
• A stock exchange is an entity that provides "trading" facilities for stock brokers and
traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities
for issue and redemption of securities and other financial instruments, and capital events
including the payment of income and dividends. Securities traded on a stock exchange
include shares issued by companies, unit trusts, derivatives, pooled investment products
and bonds.
STOCKS
• A stock is a certificate that certifies ownership of a certain portion of a firm.
• When a firm issues new shares of stock, it does not add to its debt. Instead, it brings in
additional “owners” who supply it with funds.
( www.starfing.com ) Page 1
STOCK EXCHANGES IN INDIA
BSE (SENSEX 30)
• Started on 01 January, 1986
• Value-weighted index
• Consists of the 30 largest and most actively traded stocks
NSE(NIFTY 50)
The 50 stocks that were most favored by institutional investors in the 1960s and 1970s.
MCX (Multi Commodity Exchange)
The Multi Commodity Exchange of India Limited (MCX), India’s first listed exchange, is a
state-of-the-art, commodity futures exchange that facilitates online trading, and clearing and
settlement of commodity futures transactions
MCX offers trading in varied commodity futures contracts across segments including bullion,
ferrous and non-ferrous metals, energy, agri-based and agricultural commodities
Commodities traded on the exchanges
Agri products:
Jeera , Pepper, chilli, turmeric, guar seed, guar gum, soya bean sugar, maize
Precious metals:
Gold, Silver, Platinum
Base Metals:
Copper, Nickel, Lead, Zinc, Aluminum, Tin
Energy: Crude oil, Natural gas
NCDEX (National Commodities &Derivatives Exchange)
National Commodity & Derivatives Exchange Limited (NCDEX) is an online

multi commodity exchange based in India
This unique parentage enables it to offer a bouquet of benefits, which are currently in short
supply in the commodity markets. The institutional promoters and shareholders of NCDEX are
prominent players in their respective fields and bring with them institutional building experience,
trust, nationwide reach, technology and risk management skills.
NCDEX is regulated by Forward Markets Commission (FMC) in respect of futures trading in

commodities. Besides, NCDEX is subjected to various laws of the land like the Companies Act,
Stamp Act, Contracts Act, Forward Commission (Regulation) Act and various other legislations,
which impinge on its working.
Chapter 2
Forex market
What is The Currency Market?
The FOREX is an acronym of The Foreign Exchange Market also called The Currency Market.
What is traded in the Currency Market?
Money, as simple as that!
Currencies are bought and sold freely. This is the simultaneous buying of one currency and the
selling of another.
For instance, you have some inside information that leads you to think that the Euro will go up,
you want to buy the Euro pair (or EUR/USD). When you buy the EUR/USD pair you are
actually buying the EUR and selling the US dollar. When you buy the EUR it is also said that
you are “long” the EUR. When you sell the EUR it is also said that you are “short” the EUR.
More than 80% of the volume is generated by what we call the seven major currencies:
 TheUS dollar (USD)
 The Euro (EUR)
 The British Pound (GBP)
 The Swiss Franc (CHF)
 The Canadian dollar (CAD)
 The Australian dollar (AUD)
 The Japanese Yen (JPY)
Benefits of Trading Currency
Trading the Currency market has several advantages over other financial markets. Amongst the
most important are: liquidity, it’s a 24hr market, leverage trading (margin), low transaction costs,
low minimum investment, specialized trading, you can trade from anywhere and others.
Accessibility– It’s no wonder that the Currency market has the trading volume of 3 trillion a day
‐ all anyone needs to take part in the action is a computer with an internet connection.
Liquidity-The foreign exchange market is the largest financial market in the world with a daily
turnover of just over $3 trillion! Now apart from being a really cool statistic, the sheer massive
scope of the Currency market is also one of its biggest advantages. The enormous volume of
daily trades makes it the most liquid market in the world, which basically means that under
normal market conditions you can buy and sell currency as you please. You can never be in a jam
for currency to buy or stuck with currency that you can’t unload
24hr Market -The Currency market is open 24 hours a day, so that you can be right there
trading whenever you hear a financial scoop. No need to bite your fingernails waiting for the
opening bell.
Narrow Focus – Unlike the stock market, a smaller market with tens of thousands of stocks
to choose from, the Currency market revolves around more or less eight major currencies. A
narrow choice means no rooms for confusion, so even though the market is huge, it’s quite easy
to get a clear picture of what’s happening.
The Market Can’t Be Cornered- The colossal size of the Currency market also makes
sure that no one can corner the market. Even banks don’t have enough pull to really control the
market for a long period of time, which makes it a great place for the little guy to make a move.
CURRENCY MARKET HOURS – INDIAN TIME ZONE
Currency Market center Opens time Close time

Time Zone
Sydney, Australia Australia /Sydney 3.30 AM 11.30 AM
Frankfurt, Germany Europe/ Berlin 11.30 AM 7.30 PM
London, Great Britain Europe/ London 12.30 PM 8.30 PM
America/ New
New york, United States 5.30 PM 1.30 AM
york
Tokyo, Japan Asia/Tokyo 4.30 AM 12.30 PM
Chapter 3
Investment Basics
What is Investment?
The money you earn is partly spent and the rest saved for meeting future expenses. Instead of
keeping the savings idle you may like to use savings in order to get return on it in the future. This
is called Investment.
Why should one invest?

One needs to invest to:
 earn return on your idle resources
 generate a specified sum of money for a specific goal in life
 make a provision for an uncertain future
One of the important reasons why one needs to invest wisely is to meet the cost of Inflation.
Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs
to buy the goods and services you need to live. Inflation causes money to lose value because it
will not buy the same amount of a good or a service in the future as it does now or did in the
past. For example, if there was a 6% inflation rate for the next 20 years, a Rs. 100 purchase today
would cost Rs. 321 in 20 years. This is why it is important to consider inflation as a factor in any
long-term investment strategy. Remember to look at an investment's 'real' rate of return, which is
the return after inflation. The aim of investments should be to provide a return above the inflation
rate to ensure that the investment does not decrease in value. For example, if the annual inflation
rate is 6%, then the investment will need to earn more than 6% to ensure it increases in value. If
the after-tax return on your investment is less than the inflation rate, then
your assets have actually decreased in value; that is, they won't buy as much today as they did
last year.
When to start Investing?

The sooner one starts investing the better. By investing early you allow yourinvestments more
time to grow, whereby the concept of compounding (aswe shall see later) increases your income,
by accumulating the principal and the interest or dividend earned on it, year after year.
The three golden rules for all investors are:

 Invest early
 Invest regularly
 Invest for long term and not short term
Types of investor
 Aggressive
 Conservative
Chapter 4
Types of Investment
What are various options available for investment?
One may invest in:
Physical assets like real estate, gold / jewelers, commodities etc.
and/or
Financial assets such as fixed deposits with banks, small saving instruments with post offices,
insurance/provident/pension fund etc or securities market related instruments like shares, bonds,
debentures etc.
What are various Short-term financial options available for investment?

Broadly speaking, savings bank account, money market/liquid funds and fixed deposits with
banks may be considered as short-term financial investment options:
Savings Bank Account is often the first banking product people use, which offers low interest
(7%-8% p.a.), making them only marginally better than fixed deposits.
Money Market or Liquid Funds are a specialized form of mutual funds that invest in extremely
short-term fixed income instruments and thereby provide easy liquidity. Unlike most mutual
funds, money market funds are primarily oriented towards protecting your capital and then, aim
to maximize returns. Money market funds usually yield better returns than savings accounts, but
lower than bank fixed deposits.
Fixed Deposits with Banks are also referred to as term deposits and minimum investment
period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk
appetite, and maybe considered for 6-12 months investment period as normally interest on less
than 6 months bank FDs is likely to be lower than money market fund returns.
What are various Long-term financial options available for investment?

Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and
Debentures, Mutual Funds etc.
Post Office Savings: Post Office Monthly Income Scheme is a low risk saving instrument,
which can be availed through any post office. It provides an interest rate of around 8% per
annum, which is paid monthly. Minimum amount, which can be invested, is Rs. 1,000/- and
additional investment in multiples of 1,000/-. Maximum amount is Rs. 3,00,000/- (if Single) or
Rs. 6,00,000/- (if held Jointly) during a year. It has a maturity period of 6 years. Premature
withdrawal is permitted if deposit is more than one year old. A deduction of 5% is levied from
the principal amount if withdrawn prematurely.
Public Provident Fund: A long term savings instrument with a maturity of 15 years and interest
payable at 8% per annum compounded annually. A PPF account can be opened through a
nationalized bank at anytime during the year and is open all through the year for depositing
money. Tax benefits can be availed for the amount invested and interest accrued is tax-free. A
withdrawal is permissible every year from the seventh financial year of the date of opening of the
account and the amount of withdrawal will be limited to 50% of the balance at credit at the end
of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of
the preceding year whichever is lower the amount of loan if any.
Company Fixed Deposits: These are short-term (six months) to medium-term (three to five
years) borrowings by companies at a fixed rate of interest which is payable monthly, quarterly,
semiannually or annually. They can also be cumulative fixed deposits where the entire principal
along with the interest is paid at the end of the loan period. The rate of interest varies between 6-
9% per annum for company FDs. The interest received is after deduction of taxes.
Bonds: It is a fixed income (debt) instrument issued for a period of more than one year with the
purpose of raising capital. The central or state government, corporations and similar institutions
sell bonds. A bond is generally a promise to repay the principal along with a fixed rate of interest
on a specified date, called the Maturity Date.
Mutual Funds: These are funds operated by an investment company which raises money from
the public and invests in a group of assets(shares, debentures etc.), in accordance with a stated
set of objectives. It is a substitute for those who are unable to invest directly in equities or debt
because of resource, time or knowledge constraints. Benefits include professional money
management, buying in small amounts and diversification. Mutual fund units are issued and
redeemed by the Fund Management Company based on the fund's net asset value (NAV), which
is determined at the end of each trading session. NAV is calculated as the value of all the shares
held by the fund, minus expenses, divided by the number of units issued. Mutual Funds are
usually long term investment vehicle though there some categories of mutual funds, such as
money market mutual funds which are short term instruments.
‘Equity’/Share?
Total equity capital of a company is divided into equal units of small denominations, each called
a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided into
20,00,000 units of Rs 10each. Each such unit of Rs 10 is called a Share. Thus, the company then
is12said to have 20,00,000 equity shares of Rs 10 each. The holders of such shares are members
of the company and have voting rights.
What is a ‘Debt Instrument’?

Debt instrument represents a contract whereby one party lends money to another on pre-
determined terms with regards to rate and periodicity of interest, repayment of principal amount
by the borrower to the lender. In the Indian securities markets, the term ‘bond’ is used for debt
instruments issued by the Central and State governments and public sector organizations and the
term ‘debenture’ is used for instruments issued by private corporate sector.
What is a Derivative?
Derivative is a product whose value is derived from the value of one or more basic variables,
called underlying. The underlying asset can be equity, index, foreign exchange (forex),
commodity or any other asset. Derivative products initially emerged as hedging devices against
fluctuations commodity prices and commodity-linked derivatives remained the sole form of such
products for almost three hundred years. The financial derivatives came into spotlight in post-
1970 period due to growing in stability in the financial markets. However, since their emergence,
these products have become very popular and by 1990s, they accounted for about two thirds of
total transactions in derivative products.
What is a Mutual Fund?

A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board of India)
that pools money from individuals/corporate investors and invests the same in a variety of
different financial instruments or securities such as equity shares, Government securities, Bonds,
debentures etc. Mutual funds can thus be considered as financial intermediaries in the investment
business that collect funds from the public and invest on behalf of the investors. Mutual funds
issue units to the investors. The appreciation of the portfolio or securities in which the mutual
fund has invested the money leads to an appreciation in the value of the units held by investors.
The investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual
Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest
in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper
and government securities. The schemes offered by mutual funds vary from fund to fund. Some
are pure equity schemes; others are a mix of equity and bonds. Investors are also given the option
of getting dividends, which are declared periodically by the mutual fund, or to participate only in
the capital appreciation of the scheme.
Chapter 5
Fundamental analysis
Fundamental analysis is a method of forecasting the future price movements of a financial
instrument based on economic, political, environmental and other relevant factors and statistics
that will affect the basic supply and demand of whatever underlies the financial instrument.
Factors affecting the capital market
Inflation and interest rates
Rupee deprecation
FII and DII activities
Fiscal Deficit
Monetary policy
Commodity market
Definition of 'Inflation'
The rate at which the general level of prices for goods and services is rising, and,
subsequently, purchasing power is falling. Central banks attempt to stop severe inflation,
along with severe deflation, in an attempt to keep the excessive growth of prices to a
minimum.
Inflation
It is an economic concept which reflects rise in the price of goods over a period of time. A
movie ticket was for a few paisas in old time. Now it is worth Rs.50. This is what inflation is,
The price of everything goes up. Because the price goes up, the salaries go up. If u really
thinks about it, inflation makes the worth of money reduce. What you could buy in old time
for Rs 10, now a days you will not be able to buy for rs400 also. The worth of money has
reduced.
Now just for sake of understanding assume that somebody decided in his childhood to save
50paise thinking, that one day when he becomes big, he will go for a movie. Many years pass.
The year now is 2013. He goes to the theater and asks for a ticket. HE offers ticket booth guy
at the theater 50paise and asks for a ticket. Worth booth guy says, “I am sorry sir, the ticket is
worth Rs.50. You will not be able to even buy a “paan” with the 50paise!!”
The moral of the story is that, the worth of the 50 paisa reduced dramatically. 50paise could
buy a whole lot when the guy was kid. Now, 50paise cant but nothing. This is inflation.
Firstly: Do not keep your money stagnant. IF you just save money by putting if you’re safe it
will lose value over time. If you have Rs.1000 in your safe today and you keep it there for
10years or so, it will be worth a lot less after 10years. If you can buy something for Rs1000
today, you will probably required Rs.1500 to but it 10years from now. So do not keep money
locked up in your safe.
Always invest money: If you can't think where to invest your money, then put it in a bank.
Let it grow by gaining interest But-whatever you do, do not just lock your money up in your
safe and keep it stagnant. If you do this, you will be losing money without even knowing it.
The more money you keep stagnant the more money you will be losing.
Secondly: When investing, you have to make sure that the rate of return on your investment
is higher than the rate of inflation.
What is the rate of inflation?

- As we said earlier, the prices of everything go up over time and this phenomenon is called
inflation. The question is: By how much do the prices go up? At what rate do the prices go
up? The rate at which the prices of everything go up is called the "rate of inflation". For
example, if the price of something is Rs.100 this year and next year the price becomes
approximately Rs. 104 then the rate of inflation is 4%. If the price of something is Rs.80 then
after a year with a rate of inflation of 4% the price go up to (80 x 1.04) = 83.2 So, when you
make an investment, make sure that your rate of return on the investment is higher than the
rate of inflation in your country. In our county India, for the year 2005-2006 the rate of
inflation was 4% (Which is really low and amazing!) and it went up to 12% in 2008-09. This
rate keeps changing every year.
The finance minister generally gives the official statement on the inflation rate of the country
for a particular year.
What is the rate of return?
The rate of return is how much you make on an investment. Suppose you invest Rs.100 in the
market and over a year, you make Rs. 1-20; then-you rate of return is 20%. If you invest
Rs.100 in the market today and you make money at a 3% "rate of return" in one year you will
have Rs. 103. But now, since the rate of inflation is at 4%, an item costing Rs.100 today will
cost Rs.104 a year from now. So what you can buy with today's Rs.100, you will only be able
to buy with Rs.104 a year from now. But the Rs.100 that you invested has grown only at a 3%
rate of return and so it is worth Rs.103. In effect, you are losing money! So in conclusion, the
rate of return on your investments, have to be higher than the rate of inflation. Now one can
observe that how inflation eats into your money, You would not even know about it and your-
money would sit-loosing Value-for no fault of yours.
A. Fiscal Policy
Fiscal policy is an additional method to determine public revenue and public expenditure. In
the recent years importance of fiscal policy has increased due to economic fluctuations. Fiscal
policy is an important instrument in the modern time. According to Arthur Smithies fiscal
policy is a policy under which government uses its expenditure and revenue programme to
produce desirable effects and avoid undesirable effects on the national income, production
and employment.
Instruments of Fiscal Policy
1. Public expenditure
2. Taxes
3. Public debts
The above mentioned instruments are used by the public authorities to achieve desirable level
of production, consumption and National Income. During inflationary trend more and more
taxes are levied on the community. In this way, purchasing power of the people can be
decreased and desirable price level is achieved. During inflation public expenditure is
decreased so that all in -production may decrease high prices and-increase the value of
money. During deflationary period taxes are reduced and public expenditure is increased. In
this way incentives to invest are increased and national income begins to rise. For economic
development public debts are necessary. In under developed countries, due to insufficient
resources economic development is not possible. Public loans are drawn internally and
externally.
B. Monetary policy:
Monetary policy is the process by which the government, central bank, or monetary authority
of• a country controls (i) the supply of money, (ii) realiability of money, and (iii) cost of
money or rate of interest, in order to attain a set of objectives oriented towards the growth and
stability of the economy. Monetary policy is referred to as either being an expansionary
policy, or a contractionary policy, where an expansionary_ policy _ increase-the iiia7siipply
of 'Money in the economy, and a contractionary policy decreases the total money supply.
Expansionary policy is traditionally used to combat unemployment in a recession by lowering
interest rates, while contractionary policy involves raising interest rates in order to combat
inflation. Monetary policy is contrasted with fiscal policy, which refers to government
borrowing, spending and taxation. Monetary policy rests on the relationship between the rates
of interest in an economy, that is the price at which money can be borrowed, and the total
supply of money. Monetary policy uses a variety of tools to control one or both of these, to
influence outcomes like economic growth, inflation, exchange rates with other currencies and
unemployment. A policy is referred to as contractionary if it reduces the size of the money
supply or raises the interest rate. An expansionary policy increases the size of the money
supply, or decreases the interest rate. Furthermore, monetary policies are described as
follows: accommodative, if the interest rate set by the central monetary authority is intended
to create economic growth; neutral if it is intended neither to create growth nor combat
inflation; or tight if intended to reduce inflation.
Monetary tools with central bank:
CRR
Cash Reserve Ratio is a bank regulation that sets the minimum reserves each bank must hold
to customer deposits and notes. These reserves are designed to satisfy withdrawal demands,
an would normally be in the form of fiat currency stored in a bank vault (vault cash), or with
central bank. The reserve ratio is sometimes used as a tool in monetary policy, influencing the
country': economy, borrowing, and interest rates. Cash reserve Ratio (CRR) in India is the
amount o funds that, the banks have to- keep with RBI. If RBI decides to increase the percent
of this, the "available amount with the banks comes down. RBI is using this method (increase
of CRR rate) to drain out the excessive money from the banks.
SLR
Statutory Liquidity Ratio or SLR refers to the amount that all banks require to maintain in
cash or in the form of Gold or approved securities. Here by approved securities we mean,
bond and shares of different companies. This Statutory Liquidity Ratio is determined as
percentage of total demand and percentage of time liabilities. Time Liabilities refer to the
liabilities, which the commercial banks are liable to pay to the customers on there anytime
demand. The liabilities that the banks are liable to pay within one month's time, due to
completion of maturity period, are also considered as time liabilities. In India, Reserve Bank
of India always determines the percentage of Statutory Liquidity Ratio. There are some
statutory requirements for temporarily placing the money in Government Bonds. Following
this requirement, Reserve Bank of India fixes the level of Statutory Liquidity Ratio. At
present, the minimum limit of Statutory Liquidity Ratio that can be set by the Reserve Bank is
25%. in a way ensures the solvency of commercial
• By determining Statutory Liquidity Ratio, Reserve Bank of India, in a way, compels the
commercial banks to invest in government securities like government bonds.
If any Indian Bank fails to maintain the required level of Statutory Liquidity Ratio, then it
becomes liable to pay penalty to Reserve Bank of India. The defaulter bank pays penal
interest at the rate of 3% per annum above the Bank Rate, on the shortfall amount for that
particular day. But, according to the Circular, released by the Department of Banking
Operations and Development, Reserve Bank of India; if the defaulter bank continues to
default on the next working day, then the rate of penal interest can be increased to 5% per
annum above the Bank Rate.
Repo
Repo rate is the rate at which banks borrow funds from the RBI to meet the gap between the
demand they are facing for money (loans) and how much they have on hand to lend. If the
RBI wants to make it more expensive for the banks to borrow money, it increases the repo
rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo
rate.
Reverse Repo
This is the exact opposite of repo rate. The rate at which RBI borrows money from the banks
(or banks lend money to the RBI) is termed the reverse repo rate. The RBI uses this tool when
it feels there is too much money floating in the banking system.
If the reverse repo rate is increased, it means the RBI will borrow money from the bank and
offer them a lucrative rate of interest. As a result, banks would prefer to keep their money
with the RBI (which is absolutely risk free) instead of lending it out (this option comes with a
certain amount of risk). Consequently, banks would have lesser funds to lend to their
customers. This helps system the flow of excess money into the economy. Reverse repo rate
signifies the rate at which the central bank absorbs liquidity from the banks, while repo
signifies the rate at which liquidity is injected.
Bank Rate
This is the rate at which RBI lends money to other banks(or financial institutions) . The bank
rate signals the central bank's long-term outlook on interest rates. If the bank rate moves up,
long-term interest rates also tend to move up, and vice-versa. Banks make a profit by
borrowing at a lower rate and lending the same funds at a higher rate of interest. If the RBI
hikes the bank rate (this is currently 6 per cent), the interest that a bank pays for borrowing
money (banks borrow money either from each other or from the RBI) increases. It, in turn,
hikes its own lending rates to ensure it continues to make a profit.
FDI: Foreign direct investment is that investment, which is made to serve the business
interests of the _ . investor in a company, which is in a different nation distinct from the
investor's country of origin. A parent business enterprise and its foreign affiliate are the two
sides of the FDI relationship. Together they comprise an MNC. The parent enterprise through
its foreign direct investment effort seeks to exercise substantial control over the foreign
affiliate company. 'Control' as defined by the UN, is ownership of greater than or equal to
10% of ordinary shares or access to voting rights in an incorporated firm. For an
unincorporated firm one needs to consider an equivalent criterion. Ownership share

amounting to less than that stated above is termed as portfolio investment and is not
categorized as FDI. Foreign direct investment may be classified as Inward or Outward.
Foreign direct investment, which is inward, is a typical form of what is termed as 'inward
investment'. Here, investment of foreign capital occurs in local resources.
The factors propelling the growth of Inward FDI comprises tax breaks, relaxation of existent
regulations, loans on low rates of interest and specific grants. The idea behind this is that, the
long run gains from such a funding far outweighs the disadvantage of the income loss
incurred in the short run. Flow of Inward FDI may face restrictions from factors like restraint
on ownership and disparity in the performance standard. Foreign direct-investment, which is
outward, is also referred to as "direct investment abroad". In this case it is the local capital,
which is being invested in some foreign resource. Outward FDI may also find use in the
import and export dealings with a foreign country. Outward FDI flourishes under government
backed insurance at risk coverage.
FII: Foreign institutional investor means an entity established or incorporated outside India
which proposes to make investment in India. Positive tidings about the Indian economy
combined with a fast-growing market have made India an attractive destination for foreign
institutional investors. SEBI have prescribed norms to register FIIs and also to regulate such
investments flowing in through FIIs. These investors are generally called as HOT MONEY
because of the instable nature of their investment as they withdraw their investment whenever
they sense any economic or political instability in the country. Hence they are not reliable as
long term investor. They bring foreign money to the economy but can take away that money
back with same pace. These investors invest in listed companies that the exit becomes easy
for them and investment size is often less than 5% of the total outstanding equity of the
company in order to avoid mandatory disclosers to SEBI and exchanges. They do invest more
than 5% in some cases but in that they have to inform the exchange as per the discloser rules.
Chapter 6
Factors affecting the Global market
'Inflation'
As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the
inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year.
Most countries' central banks will try to sustain an inflation rate of 2-3%.
Definition of 'Interest Rate'
The amount charged, expressed as a percentage of principal, by a lender to a borrower for

the use of assets. Interest rates are typically noted on an annual basis, known as the annual
percentage rate (APR). The assets borrowed could include, cash, consumer goods, large
assets, such as a vehicle or building. Interest is essentially a rental, or leasing charge to the
borrower, for the asset's use. In the case of a large asset, like a vehicle or building, the
interest rate is sometimes known as the "lease rate". When the borrower is a low-riskparty,
they will usually be charged a low interest rate; if the borrower is considered high risk, the
interest rate that they are charged will be higher.
'Interest Rate'
Interest is charged by lenders as compensation for the loss of the asset's use. In the case of
lending money, the lender could have invested the funds instead of lending them out. With
lending a large asset, the lender may have been able to generate income from the asset
should they have decided to use it themselves.
Using the simple interest formula:
Simple Interest = P (principal) x I (annual interest rate) x N (years)
Borrowing $1,000 at a 6% annual interest rate for 8 months means that you would owe
$40 in interest (1000 x 6% x 8/12).
Using the compound interest formula:
Compound Interest = P (principal) x [ ( 1 + I(interest rate) N (months) ) - 1 ]

Borrowing $1,000 at a 6% annual interest rate for 8 months means that you would owe
$40.70.
The interest owed when compounding is taken into consideration is higher, because
interest has been charged monthly on the principal + accrued interest from the previous
months. For shorter time frames, the calculation of interest will be similar for both
methods. As the lending time increases, though, the disparity between the two types of
interest calculations grows.
Definition of 'Foreign Institutional Investor - FII'
An investor or investment fund that is from or registered in a country outside of the one in
which it is currently investing. Institutional investors include hedge funds, insurance

companies, pension funds and mutual funds.
'Foreign Institutional Investor - FII'
The term is used most commonly in India to refer to outside companies investing in the
financial markets of India. International institutional investors must register with the
Securities and Exchange Board of India to participate in the market. One of the major
market regulations pertaining to FIIs involves placing limits on FII ownership in Indian
companies.
Definition of 'Fiscal Policy'
Government spending policies that influence macroeconomic conditions. Through fiscal

policy, regulators attempt to improve unemployment rates, control inflation, stabilize
business cycles and influence interest rates in an effort to control the economy. Fiscal
policy is largely based on the ideas of British economist John Maynard Keynes (1883–
1946), who believed governments could change economic performance by adjusting tax
rates and government spending.
'Fiscal Policy'
To illustrate how the government could try to use fiscal policy to affect the economy,
consider an economy that’s experiencing a recession. The government might lower tax
rates to try to fuel economic growth. If people are paying less in taxes, they have more
money to spend or invest. Increased consumer spending or investment could improve
economic growth. Regulators don’t want to see too great of a spending increase though, as
this could increase inflation.
Another possibility is that the government might decide to increase its own spending – say,
by building more highways. The idea is that the additional government spending creates
jobs and lowers the unemployment rate. Some economists, however, dispute the notion
that governments can create jobs, because government obtains all of its money from
taxation – in other words, from the productive activities of the private sector.
One of the many problems with fiscal policy is that it tends to affect particular groups
disproportionately. A tax decrease might not be applied to taxpayers at all income levels,
or some groups might see larger decreases than others. Likewise, an increase in
government spending will have the biggest influence on the group that is receiving that
spending, which in the case of highway spending would be construction workers.
Fiscal policy and monetary policy are two major drivers of a nation’s economic
performance. Through monetary policy, a country’s central bank influences the money
supply. Regulators use both policies to try to boost a flagging economy, maintain a strong
economy or cool off an overheated economy.
Definition of 'Monetary Policy'
The actions of a central bank, currency board or other regulatory committee that determine
the size and rate of growth of the money supply, which in turn affects interest rates.
Monetary policy is maintained through actions such as increasing the interest rate, or
changing the amount of money banks need to keep in the vault (bank reserves).
'Monetary Policy'
In the United States, the Federal Reserve is in charge of monetary policy. Monetary policy
is one of the ways that the U.S. government attempts to control the economy. If the money
supply grows too fast, the rate of inflation will increase; if the growth of the money supply
is slowed too much, then economic growth may also slow. In general, the U.S. sets
inflation targets that are meant to maintain a steady inflation of 2% to 3%.
Chapter 7
IMPORTANT ECONOMIC INDICATORS
Industrial Production.
Gross Domestic Product
PMI
Tankan Large Manufactures Index Tankan
Interest Rate Announcement
ISM Manufacturing Index
ISM Non-Manufacturing Index
ADP Non-farm Employment Change
Retail Sales Consumer Prices Index (CPI) Employment Change.
Unemployment Rate
Existing Home Sales Consumer 5
IFO Business Climate Index
Durable Goods Orders
Sales
Trade Balance KOF Leading Indicators

Consumer Sentiment German Industrial Production
NZIER Business Confidence FOMC Meeting Minutes
Producers' Price Index (PPI)
Industrial Production
Its importance: Industrial production is a sign of economic welfare. If industries produce a lot of
products, the economy and the currency of the specific country will be stronger than countries
with lower production rates and growth. Industries producing smaller numbers of goods affect
the currency and the overall economy of the market and this reflects a weaker currency. What
does it count: This indicator quantifies the value of the products produced by factories, mineral
companies and other organizations.
Gross Domestic Product

Its importance: A strong increase of the Gross Domestic Product indicates a strong economy and a
strong currency. A country which has a comparable lower Gross Domestic Product indicates both a
weaker economy and a weaker currency.
What does it count: It quantifies the value of products and services that are produced in any
country’s economic market.
PMI
Its importance: Companies tend to spend their money on investments during a growth or at a
boom of an economic life-cycle of a country. An increasing PMI indicates a strong economy,
which leads to an even more powerful currency of the specific country.
What does it count: It quantifies the efficiency of the markets, employment and accounting situation
of the industrial sector.
Tankan Large Manufactures Index
Its importance: Japan manufactures products (either high-tech products or cars), in an economy
which is export oriented. If large industries of Japan do perform well, this is a good sign for Japan’s
economy and eventually for the Japanese yen (JPY). What does it count: The business conditions for
large manufacturing and services industries.
Interest Rate Announcement
Why it is important: Interest rates are the primary guide for a country’s currency value. This is
because world’s investors seek the most profitable currencies to invest their money in. High prices
result in powerful currencies and low prices to weaker currencies. What does it count: The short-
term country’s interest rates.
ISM Manufacturing Index
Why it is important: Companies tend to spend and invest much more during a period of an
economic boom. An increasing ISM indicates a powerful economy, which indicates an even
stronger currency. A decreasing ISM indicates a weaker economy which in turn indicates a
weaker currency. An indication above the level of 50 indicates a growing economy, while an
indication below 50 is an indication of an economic downturn. What does it count: The
purchasing power of manufacturing industries.
ISM Non-Manufacturing Index
Same as ISM Manufacturing Index with the difference that it counts the service sector industries.
ADP Non-farm Employment Change
Why it is important: High levels of employment are powerful indicators of economic welfare. If
employment is at high levels, the economy must then be powerful, or at a growing stage. If
employment rate is at low levels, the economy will probably be weak, or to a contraction phase.
The indicator ADP is reliable since it measures with accuracy the exact number of government
employment numbers. What does it count: Non-farmers (people that are not employed in the
farming sector) private business. It measures the level of employment positions for non-farmers
in the United States.
Retail Sales
Why it is important: The trade balance indicates the movement of the currency. If an economy
exports more than imports, then the demand of the currency of the specific economy will increase,
increasing the value of the currency. If an economy imports more that what it exports, the demand
for the country’s currency will decrease, decreasing the value of the currency. What does it count:
The difference between imports and exports of the country.
Consumer Prices Index (CPI)
What it is important: The cost of consumer goods is an indicators of inflation. If inflation is

increasing, the Central Bank will most probably increase interest rates. If it does so, this will lead
to a weakening of the country’s currency.
What does it count: The cost of a consumer goods basket.
Employment Change
Why it is important: If the number of employment opportunities is increasing, is an indication of

a powerful economy. If the economy is weakening, CAD will probably remain strong. If the
number of employment opportunities is decreasing, is an indication of economic recession. If the
economy is contracting, CAD will most probably lose from its value against other currencies.
What does it count: The number of new employment positions created in a country.
Unemployment Rate
Why it is important: If unemployment is low, CAD will probably gain value. If unemployment is
high, CAD will probably lose value.
What does it count: County’s unemployment rate.
Existing Home Sales

Why it is important: Existing home sales is an indicator of economic welfare. During economic
booms, people tend to buy houses. During an economic recession less people tend to buy houses.
What does it count: The annual number of existing home sales, which had been sold during the last
month.
Consumer Confidence
Why it is important: If consumers feel secure and confident with country’s economic climate,
then most probably they will spend money which in turn help the economy to become more
powerful. If consumers are unconfident about a country’s economic climate then they will reduce
their spending, worsening even more the economic condition of the country, saving their money
for “time of emergency”. What does it count: The consumer’s trust for a country’s economy.
IFO Business Climate Index

What it is important: Businessmen and especially all those who are at the danger of a bankruptcy
know very well about a country’s business climate and how it affects their businesses. If these
businessmen trust the economy, then this is a good sing that the economy is performing well. If
they do not trust the economy, then this is a sign of an economy’s poor performance. What does
it count: The psychology of the business men, retail and wholesale sales.
Durable Goods Orders
Why it is important: If all businesses are convinced that the economy is powerful, they will be more
willing to buy more consumer goods on a long-term basis. If consumer good markets are at a high
level then this is a positive indication of both the economy and the currency. If not then this is a bad
indication for both the economy and the currency. What does it count: The value of orders placed for
consumer goods (these goods have a life) horizon of more than three years, like for example heavy
industry equipment).
New Home Sales
Why it is important: New home sales is an indicator of economic welfare. During periods of
economic expansion, most people tend to buy new houses. During periods of economic
recession, less people tend to buy new houses. What does it count: The annual new home sales
figure, which had been sold during the last month.
Trade Balance
Why it is important: The trade balance shows the movement of money. If an economy exports
more than imports, the demand for the county’s currency will increase, increasing at the same
time the value of the currency. If an economy imports more than exports, then the demand for the
country’s currency will decrease, decreasing at the same time the value of the currency. What
does it count: Difference between a country’s imports and exports.
KOF Leading Indicators

Why it is important: KOF illustrates the power of an economy. If the economy is powerful, the
currency most probably will also be strong. Otherwise the opposite will occur. What does it
count: The combination of 25 indicators, consumer’s confidence, interest rates etc
Consumer Sentiment
Why it is important: If consumers feel confident with the country’s economic condition, then
most probably they will spend money which support and make the economy stronger. If
consumer’s confidence is low, then most probably will prefer to safe their money rather than
spend them for “time of emergency”.
What does it count: The level of consumer’s confidence and trust to the US economy.
German Industrial Production

Why it is important: Industrial manufacturers tend to produce more during economic expansions and
less during economic contractions. Strong industrial production is a powerful indicator of economic
condition and a strong currency. Given that Germany is the biggest industrial producer in the
European Union, German industrial production is an indication of the health of the European
Union’s general economy. What does it count: Value of goods produced by industrial manufacturers.
NZIER Business Confidence

Why it is important: If leading businessmen are optimistic for the current and future economic
situation, then the economy is said to be at a good stage and the value of New Zealand’s currency
will generally increase. What does it count: Business situation in New Zealand based on research of
country’s business leaders.
FOMC Meeting Minutes
Why it is important: Minutes of meeting offer an indication to the internal projects of the Federal
Commission of Open Market (FOMC). Investors continuously look for indications which
illustrate future interest rates decisions. What does it count: The expectations of the members of
the Federal Commission of Open Market (FOMC).
Producers' Price Index (PPI)

Why it is important: Investors can have a good estimate of inflationary measures in an economy
where the producers pay the cost of materials. If inflation increases, then the Central Bank will
possibly increase the interest rates, which in turn increase the value of the currency. What does it
count: The prices producers pay for materials and services.
Chapter 8
Technical Analysis
Technical analysis is a method or forecasting prices movement using historic data analysis. All of
the market’s basic principles are reflected in real data. Thus, a market’s basic principles and
several factors like for example different experts opinions, investors fears and expectations, and
market participants psychology, do not need to be studied.
History repeats itself and thus any market movement can be highly predictable, in the form of
charts, diagrams and patterns. These patterns, which are created from price movements and price
fluctuations, often give buy or sell signals for traders. The main aim of technical analysis trading
is to predict any possible pattern or any new signal which reflect the current market by
examining previous similar patterns and their effects which occurred in the past.
Prices move in trends or within trends. Technical analysts basically do not believe that price
fluctuations are random and unpredictable. Prices can move in any of the following three
directions: upwards, downwards or side-ways. As soon as a pattern is identified it usually lasts
for a period of time.
Technical analysis of any strategic technical analysis system include prices diagrams, volume
diagrams (they do not exist in the forex market because of extremely high daily volume) and
several other mathematical calculations and formulas demonstrating diagrams forecasting
models and markets behavior. All these mathematical calculations and modeling are used to
determine the strength that a particular pattern will continue to exist. Thus, instead of just using
price diagrams they also use a variety of other technical tools before reaching to an investment
decision and execute a transaction.
Like mentioned before, in all of your trades is highly recommended that you are extremely
disciplined when using technical analysis. Often, a trader will fail to sell or buy in a market even
if his technical analysis conclusion determined specific prices of entry and exit levels. This
happens because it is very difficult to identify and measure human psychology which affects the
market and therefore moves prices.
If you use technical analysis to determine your transactions entry and exit levels, you must be
extremely careful and disciplined in order to maintain and continue you own investment and
transactions strategy – system.
Technical analysis is based on three principles:

1. Market prices almost always reflect economic events.
This means that the real price on the platform fully reflects all economic events and all the
psychological factors that are known in the market and directly affect market prices. A pure
technical analyst is only interested for the price movements and not for the reasons that have
caused any price fluctuations.
1. Prices move in trends or within trends Technical analysis is used to determine the
behavior of the market.
In technical analysis there are three types of trends:
‘Bull market’ ‘The trend of the bull’ – an upward movement of the price (like an
attack move of a bull where the bull rises his horns upwards’
‘Bear market’ ‘The trend of a bear’ – a downward movement of the price (like an
attack move of a bear scratching you with its nails on its feet).
‘Flat’ or ‘range’ or ‘trend less’ or ‘side-ways’ market – the price does not reflect a
trend. It does not move upwards or downwards. Instead it moves into a certain level
of prices
During a bull trend, prices tend to rise quicker than fall. During a bear trend is exactly
the opposite; prices tend to fall quicker than fall.
The basic principles of price movements can be applied when identifying correctly
any kind of trend:
An active trend will keep occurring having a greater possibility to continue rather
than a trend reversal.
2. History repeats itself

Diagrams and charts have been studied and classified for more than 100 years and the
way that many patterns are repeated again and again leading to the conclusion that
human psychology changes and repeats itself during time. A number of academic
studies of the financial markets support that technical analysis has a confident and
fully dedicated audience-supporters especial among active traders who defend the
practicality aspect of technical analysis and believe that it can be profitable since
there are scientific studies which support technical analysis.
Another Perspective of Basic Principles:
There are numerous Principles that can apply to the nature of how stock trade. The three most
basic principles are:
 Supply and Demand:

 Trends:
 Repetition:
Charts and Patterns

Types of charts
There are several types of charts which are used to represent the movement of stock prices. Most
popular charts are mentioned below:
 Line Chart
The most basic of the four charts is the line chart because it represents only the closing
prices over a set period of time. The line is formed by connecting the closing prices over
the time frame. Line charts do not provide visual information of the trading range for the
individual points such as the high, low and opening prices. However, the closing price is
often considered to be the most important price in stock data compared to the high and
low for the day and this is why it is the only value used in line charts.
 Bar Charts
The bar chart expands on the line chart by adding several more ley prices of information
to each data point. This vertical line represents the high and low for the trading period,
along with the closing price. The close and open are represented on the vertical line by a
horizontal dash. The opening price on a bar chart is illustrated by the dash that is located
on the left side of the vertical bar. Conversely, the close is represented by the dash on the
right. Generally, if the left dash (open) is lower than the right dash (Close) then the bar
will ne shaded black, representing an up period for the stock, which means it has gained
value. A bar that is colored red signals that the stock has gone down in the value over that
period. When this is the case, the dash on the right (close) is lower than the dash on the
left (open).
 Candlestick Charts
The candlestick chart is similar to a bar chart, but it differs in the way that it is visually
constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing
the period’s trading range. The difference comes in the formation of a wide bar on the
vertical line, which illustrates the difference between the open and close. And, like bar
charts, candlesticks also rely heavily on the use of colors to explain what has happened
during the trading period. A major problem with the candlestick color configuration,
however, is that different sites use different standards; therefore, it is important to
understand the candlestick configuration used at the chart site you are working with.
There are two color constructs for days up and one for days that the price falls. When the
price of the stock is up and closes above the opening trade, the candlestick will usually be
white or clear. If the stock has traded down for the period, then the candlestick will
usually be red or black, depending on the site.
If the stock’s price has closed above the previous day’s close but below the day’s open,
the candlestick will be black or filled with the color that is used to indicate an up day.
READING JAPNEESE CANDLESTICK
In the Seventeenth century, the Japanese developed a method to analyze the price of rich
contracts. This technique is called "candlestick charting. Steven Nison is credited with
popularizing the candlestick chart and has become recognized as the leading authority on the
interpretation of the system.
Candlesticks chart the price fluctuations of a product. A candlestick can represent any period of
time. A currency trader's software can provide charts representing anywhere from five minutes to
one week per candlestick.
Candlestick charts do not involve any calculations. They simply chart price movements in a
given time period. Each candlestick displays four important pieces of information, which show
the price fluctuations during the time period of the candle. In much the same way as the more
widely-known bar chart, a candle give us the opening price, the closing price, the highest price
and the lowest price of the time period. Candlesticks are easier to use because they more clearly
demonstrate the relationship between the opening and closing prices.
Because candlesticks display the relationship between the open, high, low and closing prices,
they cannot be used to chart securities that have only closing prices.
The interpretation of candlestick charts is based on patterns. Currency trader5 use primarily the
relationship of the highs arid lows of the candlewicks over a given time period. However, some
patterns can be identified to anticipate price movements. There are two types of candles: the
bullish pattern candle and the bearish pattern candle.
A white or empty body displays the bullish candle pattern. It occurs when prices open near the
low price and close near the period's high price.
A black or filled body displays the bearish candle pattern. It occurs when prices open near the
high price and close near the period's low price.
Bullish Candlestick Formations
Hammer - The hammer is a bullish pattern if it occurs after a significant downtrend. If the line
occurs after a significant uptrend, it is called a hanging man. A small body and a long wick
identify a hammer. The body can be clear or filled in.
Piercing Line - This is a bullish pattern. The first candle is a long bear candle followed by a long
bull candle. The bull candle opens, lower than the bear's low but closes more than halfway above
the middle of the bear candle's body.
Bullish Engulfing Lines - This pattern is strongly bullish if it occurs after a significant
downtrend (it may serve as a reversal pattern). It occurs when a small bearish (filled-in) candle is
engulfed by a large bullish (empty) candle.
Morning Star - This is a bullish pattern signifying a potential bottopn. The star indicates a
possible reversal and the bullish (empty) candle confirms this. The star can be a bullish (empty)
or a bearish (filled-in) candle.
Bullish Doll Star - This star indicates a reversal and a doji indicates indecision. Thus, this
pattern usually indicates a reversal following an indecisive period. You should wait for a
confirmation before trading a doji star.
Bearish Candlestick Formations
Long Bearish Candle - A long bearish candle occurs when prices open near the high and close
lower near the low.
Hanging Man - This pattern is bearish if it occurs after a significant uptrend. If this pattern
occurs after a significant downtrend, it is called a hammer. A hanging man is identified by small
candle bodies and a long wick below the bodies (can be either clear or filled in).
Dark Cloud Cover This is a bearish pattern. The pattern is more significant if the second
candle.'s body is below the center of the previous candle's body.
Bearish Engulfing Lines - This pattern is strongly bearish if it occurs after a significant uptrend
(it may serve as a reversal pattern). It occurs when a small bullish (empty) candle is engulfed by
a large bearish (filled-in) candle.
Evening Star - This is a bearish pattern signifying a potential top. The star indicates a possible
reversal and the bearish (filled-in) candle confirms this. The .star can be a bullish (empty) candle
or a bearish (filled-in) candle.
Doji Star - This star indicates a reversal and a doji indicates indecision Thus, this pattern usually
indicates a reversal following an indecisive period. One should wait for a confirmation (like a
evening star) before trading a doji star
Shooting Star - This pattern suggests a minor reversal when it appears after a rally. The star's
body must appear near the low price, and the candle should have a long upper wick.
Neutral Candlestick Formations
Spinning TOPS - This is a neutral pattern that occurs when the distance between the high and
low, and the distance between the open and close, are relatively small.
Doji - This candle implies indecision. The open and close are the same.
Double Doji - This candle (two adjacent doji candles) implies that a forceful move will follow a
breakout from the current indecision.
Harami - This pattern indicates a decrease in momentum. It occurs when a candle with a small
body falls within the area of a larger body. This example a bullish (empty) candle with a large
body is followed by a small bearish (filled-in) candle. This implies a decrease in the bullish
momentum.
Reversal Candlestick Formations
Lona-ledoed Doji - This candle often signifies a turning point. It occurs when the open and close
are the same, and the range between the high and the low is relatively large.
Dragonfly Doll - This candle also signifies a turning - point. It occurs when the open and close
are the same, and the low is significantly lower than the open, high and closing prices.
Gravestone Doll - This candle also signifies a turning point. It occurs when the open, close and
low prices are the same, and the high is significantly higher than the open, close and low prices.
Head and Shoulders
This is one of the most popular and reliable chart patterns in technical analysis. Head and
shoulders is a reversal chart pattern that when formed, signals that the security is likely to move
against the previous trend. As you can see Figure 1, there are two versions of the head and
shoulders chart pattern. Head and Shoulders top (Shown on the left) is a chart pattern that is
formed at the high of an upward movement and signals that the upward trend is about to end.
Head and Shoulders bottom, also known as inverse head and shoulders (shown on the right) is
the lesser known of the two, but is used to signal a reversal in a downtrend.
Both of these head and shoulders patterns are similar in that there are four main parts: Two
shoulders, a head and a neckline. Also, each individual head and shoulder is comprised of a high
and a low. For Example, in the head and shoulders top image shown on the left side in Figure 1,
the left shoulder is made up of a high followed by a low. In this pattern, the neckline is a level of
support or resistance. Remember that an upward trend is a period of successive rising highs and
rising lows. The head and shoulders chart pattern, therefore, illustrates a weakening in a trend by
showing the deterioration in the successive movements of the highs and lows.
Double Tops and Bottoms
This chart pattern is another well-known pattern that signals a trend reversal-it is considered to
be one of the most reliable and is commonly used. These patterns are formed after a sustained
trend and signal to chartists that the trend is about to reverse. The pattern is created when a price
movement tests support or resistance levels twice and is unable to break through. This pattern is
often used to signal intermediate and long-term trend reversals.
In the case of the double top pattern in Figure 3, the price movement has twice tried to move
above a certain price level. After two unsuccessful attempts at pushing the price higher, the trend
reverses and the price head lower. In the case of a double bottom (shown on the right), the price
movement has tried to go lower twice, but has found support each time. After the second bounce
off the support, the security enters a new trend and head upward.
Triangles
Triangles are some of the most well- known chart patterns used in technical analysis. The three
types of triangles, which vary in construct and implication, are the symmetrical triangle,
ascending and descending triangle. These chart patterns are considered to last anywhere from a
couple of weeks to several months.
The symmetrical triangle in Figure 4 is a pattern in which two trendiness converge toward each
other. This pattern is neutral in that a breakout to the upside or downside is a confirmation of a
trend in that direction. In an ascending triangle, the upper trendline is flat, while the bottom
trendline is upward sloping. This is generally thought of as a bullish pattern in which chartists
look for an upside breakout. In a descending triangle, the lower trendline is flat and the upper
trendline is descending. This is generally seen as a bearish pattern where chartists look for a
downside breakout.
Moving Averages
Most chart patterns show a lot of variation in price movement. This can make it difficult for
traders to get an idea of a security’s overall trend. One simple method traders use to combat this
is to apply moving averages. A moving average is the average price of a security over a set
amount of time. By plotting a security’s average price, the price movement is smoothed out.
Once the day-to-day fluctuations are removed, traders are better able to identify the true trend
and increase the probability that it will work in their favour.
Types of Moving Averages
There are a number of different types of moving averages that vary in the way they are
calculated, but how each average is interpreted remains the same. The calculations only differ in
regards to the weighting that they place on the price data, shifting from equal weighting of each
price point to more weight being placed on recent data. The three most common types of moving
averages are simple, linear and exponential.
 Simple Moving Average (SMA)
This is the most common method used to calculate the moving average of prices. It simply
takes the sum of all of the past closing prices over the time period and divides the result by
the number of prices used in the calculation. For example, in a 10 – day moving average, the
last 10 closing prices are added together and then divided by 10. As you can see in Figure 1,
a trader is able to make the average less responsive to changing prices by increasing the
number of periods used in the calculation. Increasing the number of time periods in the
calculation is one of the best ways to gauge the strength of the long – term trend and the
likelihood that it will reverse.
Many individuals argue that the usefulness of this type of average is limited because each point
in the data series has the same impact on the result regardless of where it occurs in the sequence.
The critics argue that the most recent data is more important and, therefore, it should also have a
higher weighting. This type of criticism has been one of the main factors leading to the invention
of other forms of moving averages.
 Linear weighted Average
This moving average indicator is the least common out of the three and is used to address the
problem of the equal weighting. The linear weighted moving average is calculated by talking the
sum of all the closing prices over a certain time period and multiplying them by the position of
the data point and the dividing by the sum of the number of periods. For example, in a five – day
linear weighted average, today’s closing price is multiplied by five, yesterday’s by four and so on
until the first day in the period range is reached. These numbers are then added together and
divided by the sum of the multipliers.
 Exponential Moving Average (EMA)
This moving average calculation uses a smoothing factor to [place a higher weight on recent data
points and is regarded as much more efficient then the linear weighted average. Having an
understanding of the calculation is not generally required for most traders because most charting
packages do the calculation for you. The most important thing to remember about the
exponential moving average is that it is more responsive to new information relative to the
simple moving average. This responsiveness is one of the key factors of why this is the moving
average of choice among many technical traders. As you can see in Figure 2, a-15-period EMA
rises and falls faster than a 15 – period SMA. This slight difference doesn’t seem like much, but
it is an important factor to be aware of since it can affect returns.
Major Uses of Moving Averages
Moving averages are used to identify current trends and trend reversals as well as to set up
support and resistance levels.
Moving averages can be used to quickly identify whether a security is moving in an uptrend or a
downtrend depending on the direction of the moving average. As you can see in Figure 3, when a
moving average is heading upward and the price is above it, the security is in an uptrend.
Conversely, a downward sloping moving average with the price below can be used to signal a
downtrend.
Another method of determining momentum is to look at the order of a pair of moving averages.
When a short – term average is above a longer- term average, the trend is up. On the other hand,
a long – term average above a shorter – term average signals a downtrend movement in the trend.
Moving average trend reversals are formed in two main ways: when the price moves through a
moving average and when it moves through moving average crossovers. The first common signal
is when the price moves through an important moving average. For example, when the price of a
security that was
In an uptrend falls below a 50-period moving average, like in Figure 4, it is a sign that the
uptrend may be reversing.
The other signal of a trend reversal is when one moving average crosses through another. For
example, as you can see in Figure 5, if the 15- day moving average crosses above the 50- day
moving average, it is a positive sign that the price will start to increase.
If the periods used in the calculation are relatively short, for example 15 and 35, this could signal
a short – term trend reversal. On the other hand, when two averages with relatively long time
frames cross over (50 and 200, for example), this is used to suggest a long – term shift in trend.
Another major way moving averages are used is to identify support and resistance levels. It is not
uncommon to see a stock that has been falling stop its decline and reverse direction once it hits
the support of a major moving average. A move through a major moving average is often used as
a signal by technical traders that the trend is reversing. For example, if the price breaks through
the 200-day moving average in a downward direction, it is a signal that the uptrend is reversing.
Moving averages are a powerful tool for analyzing the trend in a security. They provide useful
support and resistance points and are very easy to use. The most common time frames that are
used when creating moving averages are the 200-day, 100-day, 50-day, 20-day and 10-day. The
200-day average of a quarter of a year, a 20-day average of a month and 10-day average of two
weeks.
Moving averages help technical traders smooth out some of the noise that is found in day- to-day
price movements, giving traders a clearer view of b the price trend. So far we have been focused
on price movement, through charts and averages, in the next section; we’ll look at some other
techniques used to confirm price movement and patterns.
On- Balance Volume
The on- balance volume (OBV) indicator is a well – known technical indicator that reflects
movements in volume, It is also one of the simplest volume indicators to compute and
understand.
The OBV is calculated by taking the total volume for the trading period and assigning it a
positive or negative value depending on whether the price is up or down during the trading
period. When price is up during the trading period, the volume is assigned a positive value, while
a negative value is assigned when the price is down for the period. The positive or negative
volume total for the period is then added to a total that is accumulated from the start of the
measure.
It is important to focus on the trend in the OBV – this is more important than the actual value of
the OBV measure. This measure expands on the basic volume measure by combining volume
and price movement.
Stochastic Oscillator
The stochastic oscillator is one of the most recognized momentum indicators used in technical
analysis. The idea behind this indicator is that in an uptrend, the price should be closing near the
lows of the trading range, signalling downward momentum.
The stochastic oscillator is plotted within a range of zero and 100 and signals overbought
conditions above 80 and oversold conditions below 20. The stochastic oscillator contains two
lines. The first line is the %K, which is essentially the raw measure used to formulate the idea of
momentum behind the oscillator. The second line is the %D, which is simply a moving average
of the %K. The %D line is considered to be the more important of the two lines as it seen to
produce better signals. The stochastic
oscillator generally uses the past 14 trading periods in its calculation but can be adjusted to meet
the needs of the user.
Relative Strength Index

The relative strength index (RSI) is another one of the most used and well- known momentum
indicators in technical analysis. RSI helps to signal overbought and oversold conditions in a
security. The indicator is plotted in a range between zero and 100. A reading above 70 is used to
suggest that a security is overbought, while a reading below 30 is used to suggest that it is
oversold. This indicator helps traders to identify whether a security’s price has been
unreasonably pushed to current levels and whether a reversal may be on the way.
The standard calculation for RSI uses 14 trading days as the basis, which can be adjusted to meet
the needs of the user. If the trading period is adjusted to use fewer days, the RSI will be more
volatile and will be used for shorter term traders.
Moving Average Convergence Divergence
The moving average convergence divergence (MACD) is one of the most well known and used
indicators in technical analysis. This indicator is comprised of two exponential moving averages,
which help to measure momentum in the security. The MACD is simply the difference between
these two moving averages plotted against a centreline. The centreline is the point at which the
two moving averages are equal. Along with the MACD and the centreline, an exponential
moving average of the MACD itself is plotted on the chart. The idea behind this momentum
indicator is to measure short – term momentum compared to longer term momentum to help
signal the current direction of momentum.
MACD = Shorter term moving average – longer term
moving average
When the MACD is positive, it signals that the shorter term moving average is above the longer
term moving average and suggests upward momentum. The opposite holds true when the MACD
is negative - this signals that the shorter term is below the longer and suggest downward
momentum. When the MACD line crosses over the centreline, it signals a crossing in the moving
averages. The most common moving average values used in the calculation are the 26-day and
12-day exponential moving averages. The signal line is commonly created by using a nine-day
exponential moving average of the MACD values. These values can be adjusted to meet the
needs of the technician and the security. For more volatile securities, shorter term averages are
used while less volatile securities should have longer averages.
Another aspect to the MACD indicator that is often found on charts is the MACD histogram. The
histogram is plotted on the centreline and represented by bars. Each bar is the difference between
the MACD and the signal line or, in most cases, the nine –day exponential moving average. The
higher the bars are in either direction, the more momentum behind the direction in which the bars
point. As you can see in Figure 2, one of the most common buy signals is generated when the
MACD crosses above the signal line (blue dotted line), while sell signal often occur when
MACD crosses below the signal.
Fibonacci retracement
Fibonacci retracement is a very popular tool among technical traders and is based on the key
numbers identified by mathematician Leonardo Fibonacci in the thirteenth century. However,
Fibonacci sequence of numbers is not as important as the mathematical relationships, expressed
as ratios, between the numbers in the series. In technical analysis, Fibonacci retracement is
created by taking two extreme points (usually a major peak and trough) on a stock chart and
dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and
100%. Once these levels are identified, horizontal lines are drawn and used to identify possible
support and resistance levels. Before we can understand why these ratios were chosen, we need
to have a better understanding of the Fibonacci number series. The Fibonacci sequence of
numbers is a s follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. Each term in this sequence
is simply the sum of the two preceding terms and sequence continues infinitely. One of the
remarkable characteristics of this numerical sequence is that each number is approximately 1.618
times greater than the preceding number. This common relationship between every number in the
series is the foundation of the common ratios used in retracement studies.
The key Fibonacci ratio of 61.8% - also referred to as “the golden ratio” or “ the golden mean” –
is found by dividing one number in the series by the number that follows it. For example: 8/13 =
0.6153, and 55/89 = 0.6179.
The 38.2% ratio is found by dividing one number in the series by the number that is found two
places to the right. For example: 55/144 = 0.3819.
The 23.6% ratio is found by dividing one number in the series by the number that is three places
to the right. For example: 8/34 = 0.2352
For reason s that are unclear, these ratios seem to play an important role in the stock market, just
as they do in nature, and can be used to determine critical points that cause an asset’s price to
reverse. The direction of the prior trend is likely to continue once the price of the asset has
retraced to one of the ratios listed above. The following chart illustrates how Fibonacci
retracement can be used. Notice how the price changes direction as it approaches the support /
resistance levels.
In addition to the ratios described above, many traders also like using the 50% and 78.6% levels.
The 50% retracement level is not really a Fibonacci ratio, but it is used because of the
overwhelming tendency for an asset to continue in a certain direction once it completes a 50%
retracement.
Definition of 'Bollinger Band'
A band plotted two standard deviations away from a simple moving average developed by
famous technical trader John Bollinger.
In this example of Bollinger Bands®, the price of the stock is banded by an upper and lower
band along with a 21-day simple moving average.
'Bollinger Band'
Because standard deviation is a measure of volatility, Bollinger Bands® adjust themselves to the
market conditions. When the markets become more volatile, the bands widen (move further away
from the average), and during less volatile periods, the bands contract (move closer to the
average). The tightening of the bands is often used by technical traders as an early indication that
the volatility is about to increase sharply.
This is one of the most popular technical analysis techniques. The closer the prices move to the
upper band, the more overbought the market, and the closer the prices move to the lower band,
the more oversold the market.
Definition of 'Trend line'
A line that is drawn over pivot highs or under pivot lows to show the prevailing direction of
price. Trend lines are a visual representation of support and resistance in any time frame.
'Trend line'
Trend lines are used to show direction and speed of price. Trend lines also describe patterns
during periods of price contraction.
Trend Lines
Trend lines are probably the most common form of technical analysis. They are probably one of
the most underutilized ones as well.
If drawn correctly, they can be as accurate as any other method. Unfortunately, most traders
don’t draw them correctly or try to make the line fit the market instead of the other way around.
In their most basic form, an uptrend line is drawn along the bottom of easily identifiable support
areas (valleys). In a downtrend, the trend line is drawn along the top of easily identifiable
resistance areas (peaks).
How do you draw trend lines?
To draw trend lines properly, all you have to do is locate two major tops or bottoms and connect
them.
What’s next?
Nothing.
Uh h, is that it?
Yep, it’s that simple.
Here are trend lines in action! Look at those waves!
Types of Trends
There are three types of trends:
1. Uptrend (higher lows)

2. Downtrend (lower highs)
3. Sideways trends (ranging)
Here are some important things to remember about trend lines:

 It takes at least two tops or bottoms to draw a valid trend line but it takes THREE to
confirm a trend line.
 The STEEPER the trend line you draw, the less reliable it is going to be and the more
likely it will break.
 Like horizontal support and resistance levels, trend lines become stronger the more times
they are tested.
 And most importantly, DO NOT EVER draw trend lines by forcing them to fit the
market. If they do not fit right, then that trend line isn’t a valid one!
Definition of 'Pivot Point'
A technical analysis indicator used to determine the overall trend of the market over different
time frames. The pivot point itself is simply the average of the high, low and closing prices from
the previous trading day. On the subsequent day, trading above the pivot point is thought to
indicate ongoing bullish sentiment, while trading below the pivot point indicates bearish
sentiment.
'Pivot Point'
A pivot point analysis is often used in conjunction with calculating support and resistance levels,
similar to a trend line analysis. In a pivot point analysis, the first support and resistance levels are
calculated by using the width of the trading range between the pivot point and either the high or
low prices of the previous day. The second support and resistance levels are calculated using the
full width between the high and low prices of the previous day.
The reason why pivot points are so enticing?
It’s because they are OBJECTIVE.

Unlike some of the other indicators that we’ve taught you about already, there’s no discretion
involved.
In many ways, pivot points are very similar to Fibonacci levels. Because so many people are
looking at those levels, they almost become self-fulfilling.
The major difference between the two is that with Fibonacci, there is still some subjectivity
involved in picking Swing Highs and Swing Lows. With pivot points, traders typically use the
same method for calculating them.
Many traders keep an eye on these levels and you should too.
Pivot points are especially useful to short-term traders who are looking to take advantage of
small price movements. Just like normal support and resistance levels, traders can choose to
trade the bounce or the break of these levels.
Range-bound traders use pivot points to identify reversal points. They see pivot points as
areas where they can place their buy or sell orders.
Breakout traders use pivot points to recognize key levels that need to be broken for a move
to be classified as a real deal breakout.
As you can see here, horizontal support and resistance levels are placed on your chart. And look
– they’re marked out nicely for you! How convenient is that?!
Here’s quick rundown on what those acronyms mean:
PP stands for Pivot Point.

S stands for Support.
R stands for Resistance.
But don’t get too caught up in thinking “S1 has to be support” or “R1 has to be resistance.” We’ll
explain why later.
In the following lessons, you will learn how to calculate pivot points, the different types of pivot
points and most importantly, how you can add pivot points to your trading toolbox
GAP THEORY - Meaning and how it works in share market GAP THEORY - Meaning and
how it will work in SHARE MARKET
Have you ever wondered what causes gaps in price charts and what they mean? Well, you've
come to the right place. Just in case, a gaps an area on a price chart in which there were no
trades. Normally this occurs between the close of the market on one day and the next day's open.
Lot's of things can cause this, such as an earnings report coming out after the stock market has
closed for the day. If the earnings were significantly higher than expected, many investors might
place buy orders for the next day. This could result in the price opening higher than the previous
day's close. If the trading that day continues to trade above that point, a gap will exist in the price
chart. Gaps can offer evidence that something important has happened to the fundamentals or the
psychology of the crowd that accompanies this market movement. Before we get into the
different types of gaps, here is a chart showing a gap so you will know what we are talking
about.
Gaps appear more frequently on daily charts, where every day is an opportunity to create an
opening gap. Gaps on weekly or monthly charts are fairly rare: the gap would have to occur
between Friday's close and Monday's open for weekly charts and between the last day of the
month's close and the first day of the next month's for the monthly charts. Gaps can be
subdivided into four basic categories: Common, Breakaway, Runaway, and Exhaustion.
Common Gaps
Sometimes referred to as a trading gap or an area gap, the common gap is usually uneventful. In
fact, they can be caused by a stock going ex-dividend when the trading volume is low. These
gaps are common (get it?) and usually get filled fairly quickly. "Getting filled" means that the
price action at a later time (few days to a few weeks) usually retraces at the least to the last day
before the gap. This is also known as closing the gap. Here is a chart of two common gaps that
have been filled. Notice that after the gap the prices have come down to at least the beginning of
the gap? That is called closing or filling the gap.
A common gap usually appears in a trading range or congestion area, and reinforces the apparent
lack of interest in the stock at that time. Many times this is further exacerbated by low trading
volume. Being aware of these types of gaps is good, but doubtful that they will produce a trading
opportunities.
Breakaway Gaps
Breakaway gaps are the exciting ones. They occur when the price action is breaking out of their
trading range or congestion area. To understand gaps, one has to understand the nature of
congestion areas in the market. A congestion area is just a price range in which the market has
traded for some period of time, usually a few weeks or so. The area near the top of the
congestion area is usually resistance when approached from below. Likewise, the area near the
bottom of the congestion area is support when approached from above. To break out of these
areas requires market enthusiasm and, either, many more buyers than sellers for upside breakouts
or more sellers than buyers for downside breakouts.
Volume will (should) pick up significantly, for not only the increased enthusiasm, but many are
holding positions on the wrong side of the breakout and need to cover or sell them. It is better if
the volume does not happen until the gap occurs. This means that the new changein market
direction has a chance of continuing. The point of breakout now becomes the new support (if an
upside breakout) or resistance (if a downside breakout). Don't fall into the trap of thinking this
type of gap, if associated with good volume, will be filled soon. It might take a long time. Go
with the fact that a new trend in the direction of the stock has taken place, and trade accordingly.
Notice in the chart below how prices spent over 2 months without going lower than about 41.
When they did, it was with increased volume and a downward breakaway gap.
A good confirmation for trading gaps is if they are associated with classic chart patterns. For
example, if an ascending triangle suddenly has a breakout gap to the upside, this can be a much
better trade than a breakaway gap without a good chart pattern associated with it. The chart
below shows the normally bullish ascending triangle (flat top and rising, lower trend line) with a
breakaway gap to the upside, as you would expect with an ascending triangle.
Runaway Gaps
Runaway gaps are also called measuring gaps, and are best described as gaps that are caused by
increased interest in the stock. For runaway gaps to the upside, it usually represents traders who
did not get in during the initial move of the up trend and while waiting for a retracement in price,
decided it was not going to happen. Increased buying interest happens all of a sudden, and the
price gaps above the previous day's close. This type of runaway gap represents an almost panic
state in traders. Also, a good uptrend can have run away gaps caused by significant news events
that cause new interest in the stock. In the chart below, note the significant increase in volume
during and after the runaway gap.
Runaway gaps can also happen in downtrends. This usually represents increased liquidation of
that stock by traders and buyers who are standing on the sidelines. These can become very
serious as those who are holding onto the stock will eventually panic and sell — but sell to
whom? The price has to continue to drop and gap down to find buyers. Not a good situation.
The term measuring gap is also used for runaway gaps. This is an interpretation that is hard to
find examples for, but it is a way of helping one decide how much longer a trend will last. The
theory is that the measuring gap will occur in the middle, or half way, through the move.
Sometimes, the futures market will have runaway gaps that are caused by trading limits imposed
by the exchanges. Getting caught on the wrong side of the trend when you have these limit
moves in futures can be horrifying. The good news is that you can also be on the right side of
them. These are not common occurrences in the futures market despite all the wrong information
being touted by those who do not understand it, and are only repeating something they read from
an uninformed reporter.
Exhaustion Gaps
Exhaustion gaps are those that happen near the end of a good up- or downtrend. They are many
times the first signal of the end of that move. They are identified by high volume and large price
difference between the previous day's close and the new opening price. They can easily be
mistaken for runaway gaps if one does not notice the exceptionally high volume.
It is almost a state of panic if the gap appears during a long down move and pessimism has set
in. Selling all positions to liquidate holdings in the market is not uncommon. Exhaustion gaps are
quickly filled as prices reverse their trend. Likewise, if they happen during a bull move, some
bullish euphoria overcomes trades, and buyers cannot get enough of that stock. The prices gap up
with huge volume; then, there is great profit taking and the demand for the stock totally dries up.
Prices drop, and a significant change in trend occurs. Exhaustion gaps are probably the easiest. to
trade and profit from. In the chart, notice that there was one more day of trading to the upside
before the stock plunged. The high volume was the giveaway that this was going to be, either, an
exhaustion gap or a run away gap. Because of the size of the gap and the near doubling of
volume, an exhaustion gap was in the making here.
Chapter 9
Sentimental Analysis
Earlier, we said that price should theoretically accurately reflect all available market information.
Unfortunately for us traders, it isn't that simple. The markets do not simply reflect all the
information out there because traders will all just act the same way. Of course, that isn't how
things work.
Each trader has his own opinion or explanation of why the market is acting the way they do. The
market is just like Face book - it's a complex network made up of individuals who want to spam
our news feeds.
Kidding aside, the market basically represents what all traders - you, Pip crawler, Celine from
the donut shop - feel about the market. Each trader's thoughts and opinions, which are expressed
through whatever position they take, helps form the overall sentiment of the market.
The problem is that as traders, no matter how strongly you feel about a certain trade, you can't
move the markets in your favor (unless you're one of the GSs - George Soros or Goldman
Sachs!). Even if you truly believe that the dollar is going to go up, but everyone else is bearish
on it, there's nothing much you can do about it.
As a trader, you have to take all this into consideration. It's up to you to gauge how the market is
feeling, whether it is bullish or bearish. Ultimately, it's also up to you to find out how you want to
incorporate market sentiment into your trading strategy. If you choose to simply ignore market
sentiment, that's your choice. But hey, we're telling you now, it's your loss!
Being able to gauge market sentiment can be an important tool in your toolbox. Later on in
school, we'll teach you how to analyze market sentiment and use it to your advantage like Jedi
mind tricks.
Chapter 10
Money Management
Money management is all about managing risks, and it is the defining factor that separates
winners and losers in forex trading. Novice traders think of how much they can make profit in
the market, experienced traders think of how much they can lose to the market. The first goal of
money management must be to ensure long-term survival in the market, because if you don’t
survive to trade another day , you can forget about profits altogether. Money management is
about fully optimizing your trading capital. It allows you to be proactive in managing risks and
to cope with trading losses. Success comes to those who have set down rules for money
management, and have the discipline to follow them through their trading.
Golden Rules
1. Identify where you are going to get out before you get into your trade
2. Use a protective stop and have it in the market whenever your in a trade
3. Use 1:2 risk reward ratio so you can be profitable if you win half of your trades
4. Never risk more than 5% of your account balance at any one time
5. Obey all rules at all time
If you have a 50% win to losses you will be profitable if you stick to 1:2 risk reward ratio.
Example: Tossing coin and seeing the result
Trading in any investment market is exceedingly difficult, but success first comes with education
and practice
Forex spot market does not have an exchange but the forex futures market has and exchange
The world’s big banks are the main market players and they form the exclusive club where most
trading activities take place. This club is known as the interbank market.
Fear and Greed
These are the two dominant emotions that affect not just the state of our mind, but also the
currency market. In fact fluctuations of these two emotions are the main drivers of the currency
market.
Types of Fear
1. Fear of missing out
2. Fear of losses
3. Fear of making wrong decisions(Trading is based on probability, not certainty)
Remember that there will be times of losses and time of profits, which is why it is so
important to enter only trades that have a high probability of success.
Congratulations! You Made It!

Are you scared now?
Good!
We just did that to make sure you understand that even though you've got to have fun in
everything you do, Currency trading is serious business and you have to approach it that way.
With all that said , anyone with the passion and commitment to learn this business has the chance
to get their piece of the pie and then some.
Yes, you can make it, but before beginning your Currency trading adventure, here are a few
lessons we've learned that we'd like to share to help you get started on the right path.
You, The Successful Trader
These things are what you do to ensure your long- term success
You plan every trade on paper – before entering it
Set clear goals: Yearly, Monthly , Weekly
You journal every trade
You master the basics, and practice key skills to build competence
You stick with what you know
You keep a journal, to build on success and learn from mistakes
You monitor yourself, and develop yourself
You study and learn continually – with focus on full comprehension
You manage your money and your risk –constantly
You keep your pride and ego in check – they won’t make your money.
You keep a clear head and listen to, but don’t get caught up in, your feelings and emotions
You keep your awareness high – especially regarding time. You’re here for the long haul.
You keep respect for the markets, for yourself, your money.
You thing every trade all the way through, including all possibilities, and put decision guides and
actions to take in for all of them.
You review your trades, your journal and your goals and milestones on a scheduled basis. Take
action to build on success and block mistakes.
You do your trading in an organized place and keep your policies, this success –reminder sheet,
that mistakes traders make in full view during the planning of every trade.
You run your trading the same as you would a business. It is your business.
“TREND IS YOUR FRIEND UNTIL THE END” RULE IS LIKE BEING ABLE
TO RIDE ON A TREND IS LIKE MAKING FULL USE OF THE WIND
DIRECTIONS TO STEER YOUR SHIP TOWARDS YOUR DESTINATION

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Awareness of Investments in Financial Markets

Definition of Stock Exchange

Meaning of stock market

STOCK EXCHANGES IN INDIA

BSE (SENSEX 30)

• Started on 01 January, 1986

• Consists of the 30 largest and most actively traded stocks

MCX (Multi Commodity Exchange)

Commodities traded on the exchanges

Gold, Silver, Platinum

Copper, Nickel, Lead, Zinc, Aluminum, Tin

Energy: Crude oil, Natural gas

NCDEX (National Commodities &Derivatives Exchange)

National Commodity & Derivatives Exchange Limited (NCDEX) is an online

NCDEX is regulated by Forward Markets Commission (FMC) in respect of futures trading in

What is The Currency Market?

What is traded in the Currency Market?

Money, as simple as that!

 TheUS dollar (USD)

 The Euro (EUR)

 The British Pound (GBP)

 The Swiss Franc (CHF)

 The Canadian dollar (CAD)

 The Australian dollar (AUD)

 The Japanese Yen (JPY)

Benefits of Trading Currency

CURRENCY MARKET HOURS – INDIAN TIME ZONE

Currency Market center Opens time Close time

Sydney, Australia Australia /Sydney 3.30 AM 11.30 AM

Frankfurt, Germany Europe/ Berlin 11.30 AM 7.30 PM

London, Great Britain Europe/ London 12.30 PM 8.30 PM

Tokyo, Japan Asia/Tokyo 4.30 AM 12.30 PM

Why should one invest?

When to start Investing?

The three golden rules for all investors are:

What are various Short-term financial options available for investment?

What are various Long-term financial options available for investment?

What is a ‘Debt Instrument’?

What is a Mutual Fund?

Factors affecting the capital market

Inflation and interest rates

FII and DII activities

What is the rate of inflation?

What is the rate of return?

Instruments of Fiscal Policy

Monetary tools with central bank:

unincorporated firm one needs to consider an equivalent criterion. Ownership share

Factors affecting the Global market

Definition of 'Interest Rate'

The amount charged, expressed as a percentage of principal, by a lender to a borrower for

Using the compound interest formula:

Compound Interest = P (principal) x [ ( 1 + I(interest rate) N (months) ) - 1 ]

Definition of 'Foreign Institutional Investor - FII'

which it is currently investing. Institutional investors include hedge funds, insurance

'Foreign Institutional Investor - FII'

Definition of 'Fiscal Policy'

Government spending policies that influence macroeconomic conditions. Through fiscal

Definition of 'Monetary Policy'

inflation targets that are meant to maintain a steady inflation of 2% to 3%.

IMPORTANT ECONOMIC INDICATORS

Trade Balance KOF Leading Indicators

Gross Domestic Product

Tankan Large Manufactures Index