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Fundamental-analysis

Japanese Candlesticks: Game of Body and ShadowsSo, in the last post we learned how to build a simple line chart based on the tape. Each point on the chart is defined by coordinates from the time (X scale) and price (Y scale) of a trade. But some stocks are traded at a frequency of hundreds of trades per second, at different prices. The question arises: which trade price to choose from this set? Interval charts were invented to solve this question. The most popular is the Candlestick Chart . They appeared in Japan three hundred years ago, when the Japanese exchanges were trading rice. They were invented by a trader named Homma. Apparently, being tired of drawing a lot of points on charts, he decided that it would be more convenient to show the price change over the time interval. So, what he came up with. Let's take a time frame equal to one hour and plot a 1-hour candle on the basis of the following tape: FB $110 20 lots 12/12/22 12-34-59 FB $115 25 lots 12/12/22 12-56-01 FB $100 10 lots 12/12/22 12-59-12 FB $105 30 lots 12/12/22 12-59-48 A candle consists of a body and upper and lower shadows. Like a float. The body is formed from the open and close prices of a certain time frame. In our case the hour interval is from 12-00-00 till 12-59-59. Only 4 deals were concluded in this time interval. The price of the first deal is $110, which is the opening price of the period or the so-called " open ". The price of the last deal was $105, which is the period closing price or " close ". These two prices are enough to form the body of the candle. Now let us move on to the shadows . The upper shadow is drawn at the maximum price of the interval (115$) and is called " high ". The lower shadow is drawn at the minimum price of the interval ($100) and is called " low ". The shape of our candle is ready. However, it should also have a content, namely the color. What is it for? Let's take a look at another candle. Here we can see where is the high and where is the low. But how do we know which is the open or the close? After all, the open is not always at the bottom of the candlestick body, as in the previous example, it can be at the top. To understand where is the open and where is the close, Homma has invented to paint the body of a candlestick in black, if close is lower than the open, i.e. if the price in the interval is falling (falling candle or bearish candle ). But if close is higher than open, the body of the candle remains white, it will indicate the growth of price during the interval (rising candle or bullish candle ). Sometimes a candlestick has shadows, and the close price is equal to the open price. Then it will look like a cross. This candlestick is called a doji . White and black are the classic colors for the bodies of Japanese candles. However, you can come up with your own colors. If you want the rising candles, for example, to be blue, and the falling orange - you're welcome. The main thing is to make it convenient and understandable for you. So, one candlestick allows us to understand where we had the first trade, the last trade, the price maximum and minimum in a given time frame. But it does not allow us to understand how the price changed within the interval: when the maximum or minimum was reached and what was happening within this price range. But the problem can be easily solved if we switch to a smaller time frame. If we look at the daily candlesticks (this is when the time frame of one candle is equal to one day), and we want to see what was during the day - we switch to the hourly time frame. If we want to see even more details - we switch to 15-minute candles and so on down to the seconds. But you and I will most often use daily timeframes, so as not to be distracted by the fluctuations that occur during the day. To be continued :)
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NSE:TATAMOTORSEducation
by Be_Capy
2
The birth of the chart. The evolution of the tapeLast time we studied how the exchange price is formed, and we found out that it is important to learn how to read charts correctly in order to analyze price changes correctly. Let's see how a chart is made and what it can tell us. Everyone who went to school probably remembers: to draw a function, we need the X and Y axes. In stock charts, the X-axis is responsible for the time scale, and the Y-axis is responsible for the price scale. As we already know, a chart is built on the basis of data from a tape. At the previous post , we have produced the following tape: FB $110 20 lots FB $115 5 lots FB $100 10 lots Actually, in addition to ticker, price and volume the tape also fixes time of trade. Let's add this parameter to our tape: FB $110 20 lots 12/08/22 12-34-59 FB $115 5 lots 12/08/22 12-56-01 FB $100 10 lots 12/08/22 12-59-02 That's it. Now this data is enough to put points on the chart. We draw three points, connect them with straight lines and get a chart. At one time, this was enough, because trades on the exchange were not frequent. But now some popular stocks, such as Apple or Google, have hundreds of trades per second with different prices. If the minimum division on the X scale is one second, what price point should we put if there were many trades at different prices in one second? Or let's place all the points at once? We will discuss that in the next post. And now, as a postscript, I want to show you some pictures describing how the tape was born and evolved. Here is a picture of a stock player, looking through a tape with quotations, which is given by a special telegraph machine. Each telegraph machine is connected by wires which, like a spider's web, entangle New York City. 1930's broker's office with several telegraph machines and a quotation board. An employee of the exchange looking through a tape of quotes. It won't be long before all this is replaced by the first computers. We'll continue today's theme soon.
NSE:HDFCBANKEducation
by Be_Capy
Market order or the hunger games of stock tradingThe previous parts of the post can be found at the links: Part 1 - How is the share price formed on the stock exchange? We do it Part 2 - Bid/Offer: The Yin and Yang of Stock Prices So, let's continue. So why don't we ever see some orders in the order book? Because such orders don't have a price, which means they can't be arranged in a book where all orders are sorted by price. This type of order is used by buyers or sellers who don't want to wait for a counter offer with a suitable price. "But how can you buy or sell something without specifying a price?" - you ask. It turns out it's possible. When you put out an order without specifying a price, the order simply "eats up" the number of lots you need at the prices currently on the books. Such an order is called a " market order ". We can say that the most "hungry" investors who want to satisfy their "hunger" right now use the market order. Remember yourself: when you really want, for example, a cake, you won't stand at the counter and wait for the seller to set the price you want, you'll just buy the cake at the price that's valid at the moment. So, let's imagine that someone sent the following order to the exchange: " to sell FB stocks in the volume of 20 lots". Such an order will not appear in the book, but it will "eat" all bids within 20 lots, starting with the most expensive ones. In our example, there were a total of 15 lots left in the book, so the following concluded trades will be printed in the tape: FB $115 5 lots FB $100 10 lots What will happen to the remaining market order of 5 lots (20-15) that couldn't be filled? The exchange will cancel the order for this remainder, as there are no counter offers in the book. So, let's review what we learned in the current series of posts: - For each company, the exchange maintains its own order book for buying and selling stocks; - A buy order is called a "bid"; - A sell order is called an "offer"; - The order must contain the ticker (abbreviated name of the stock), the direction of the transaction (buy or sell), the price per share and the volume in lots; - The lot size is set by the exchange. It may be equal to 1 share, 100 shares or some other quantity; - All orders in the book are called "limit orders"; - There is a special type of orders, which are called "market orders". They have the following parameters: ticker, trade direction, volume in lots, and have no "price" parameter. - The intersection of buy and sell orders by price creates a trade; - The volume and price of a trade depends on how much volume was "eaten" in the counter offer and at what price; - The trade is recorded in the tape. Each company has its own tape. By the way, our book became empty because all limit orders were filled and no new ones came in. As a result, we have a tape of three trades. The trades are recorded in the tape according to when they were made: FB 110$ 20 lots FB 115$ 5 lots FB $100 10 lots So, when you see a flashing stock price somewhere, like in the broker's app, know that it's the last trade in the tape as of the current second. Or if you hear that Tesla stock has reached $2,000 a share, that means that there's a $2,000-a-share deal imprinted in the Tesla tape. To show how the stock price has changed over time, a chart is made based on the prices of the trades and when they were made. At its core, a chart is a demonstration of how the stock tape has changed over time. Knowing how to read a price chart is a basic skill that you will use as you invest. I will tell you how to read charts at our next meeting.
NSE:NIFTYEducation
by Be_Capy
2
Bid/Offer: The Yin and Yang of Stock PricesRead the first part of this post at the link: How is the share price formed on the stock exchange? We do it So at what price and what volume will the deal eventually be made? To understand this, let's go back to the "price" parameter of the order. When a buyer placed an order "to buy 25 lots at $115 a share", the exchange takes it as "to buy 25 lots at a price not more than $115 a share". That is the purchase price can be less than the price stated in the order, but not more. And when the seller earlier submitted an order "to sell 20 lots at $110 a share", the exchange takes it as "to sell 20 lots at a price not less than $110 a share". That is, it is possible to sell at a price higher than that specified in the order, but not less. Once again: buyers always put orders "buy at no more than such-and-such a price", and sellers always put orders "sell at no less than such-and-such a price". So, we return to the situation with the crossing of prices. When the exchange detects a crossover, it begins to execute the order that has caused this crossover. In our case, it is an order for 25 lots at $115 per share. This order kind of "eats up" all sell orders that are on the way to the price of $115 (that is, everything cheaper than $115), until it reaches 25 lots. Which orders were "eaten up" in our case? One single order to sell is 20 lots at $110 per share. What was "eaten" is recorded as a buy and sell trade in what's called a tape. It's similar to the way a cash register punches a check with a price. The record looks like this: FB $110 20 lots However, we have a remainder after the trade is 5 lots, the remainder of those 25 at a price of $115. Since at this price (or lower) nothing can be "eaten", the order remains in the left page of the book until a suitable offer. Let's see how the FB order book looks now, after the deal is done: Let me note again that all orders in the book are sorted in descending order from top to bottom. The concept of "book" is very useful for understanding how the exchange price is formed. In the past, when there were no electronic trading systems, there were so-called floor brokers, who used to collect and record prices and volumes of orders in a real book. Nowadays you may encounter alternative terms like Depth of Market (DOM), Level II, but they are all identical to the notion of an "order book". The orders to buy that we see in the order book are called "bids", and the orders to sell are called "offers". So, in our order book there are two bids and no offers. All bids and offers are called "limit orders" because they have a price limit. But there's also a type of order that we will never see in the book. Why? I'll tell you in the next post.
NSE:RELIANCEEducation
by Be_Capy
How is the share price formed on the stock exchange? We do itYou already know that the stock exchange is a one-stop place to buy or sell stocks, whether you are a novice investor or a seasoned professional. But even if you don't trade stocks, you will still "come" to the stock exchange to find out stock prices. Let's find out how the exchange price of a stock is formed. Regardless of what country the stock exchange is in, the rules for determining the price are similar for everyone. Let us understand how it works, as always, with the help of our imagination. Imagine a large rack of books. Each book has a name on the cover: Apple, Facebook, Amazon, etc. Let's take one of the books, let's say Facebook, and open it. We will see only two pages, and they are both blank. On the left page we will record buyers' orders to buy shares, and on the right page we will record sellers' orders, respectively, to sell shares. So, every day the exchange, when it opens trading, essentially opens such a "book" and records every bid it receives. What should be written in the order? First of all, there must be an abbreviated name of the stock, or, in professional slang, the "ticker," to understand which book to get off the shelf. For example, Facebook shares have a ticker consisting of two letters FB, while Apple shares have four letters - AAPL. Second, the order must indicate the direction of the transaction, i.e. "buy" or "sell". This is how the exchange understands whether to record the incoming information on the left or on the right page of the book. Third, the order must indicate the price per share, so that the exchange can sort the orders in descending order of price from top to bottom. Fourth, the order must specify the volume in lots, that is, how many lots of shares we want to buy or sell. To clarify: Shares on the exchange are not traded by the piece, but by the lot. The lot size is set by the exchange. One lot may be equal to one share, or a hundred, a thousand, or even ten thousand shares (depending on the specific share). This is really handy because the price of one share can be equal to, for example, the price of your computer (then 1 lot may be equal to 1 share), and sometimes 1 share may be worth as much as a box of matches (then 1 lot may be equal to a thousand shares). Why "may be"? The specific rules for determining the lot size depend on the laws of the country and the exchange itself. For example, on the New York Stock Exchange (NYSE), the usual size of 1 lot is equal to 100 shares. So, let's return to our example. Suppose we want to buy shares of FB at a price of $100 per share in the amount of 10 lots. Then the exchange will record the following on the left side of the FB book: 100$ 10 Then there is a seller who wants to sell FB stock at $110 per share in an amount of 20 lots. Then this is what the exchange will record in the right side of the book: 110$ 20 Then there is a buyer who wants to buy FB stocks at $115 per share in an amount of 25 lots. The entry on the left side of the FB book will look like this: 115$ 25 And now comes the interesting part. Did you notice that the $115 price in the last buy order is higher than the single sell order of $110? That means the buyer is willing to make a deal at a price even higher than what the seller is offering. So at what price and what volume will the deal end up being made? Please wait for the next post.
NSE:TATASTEELEducation
by Be_Capy
Picking rules - the Lynch methodBack in 1977, the still famous investment company Fidelity Investments entrusted the management of a small fund of $18 million to this very man. The next 13 years were impressive for the Magellan fund and its manager - the famous Peter Lynch. The fund's assets grew to $14 billion, more than doubling the average annual growth of the S&P500 stock index. When he stopped actively managing assets, Peter shared his approach with the rest of us. Some of his thoughts inspired me to create my approach and may be useful to you as well. 1. The private investor has an objective advantage over institutional investors (e.g., funds) because he is more agile. He is not burdened by the need to coordinate his actions with the management of the company, and his purchase requests are easily satisfied by the market. Agreed, it's easier to buy for $1,000 than it is to buy for $1 billion. Thus, the private investor can catch prices that the big "players" will have a hard time getting. 2. Don't spend everything you have under your belt on stock investments. The trades will not be able to close "in the plus" just by your own volition. So first provide yourself with a financial safety cushion, a stable job and a place to live, and then start investing. 3. Admit to yourself: are you a patient person who is capable of making independent decisions, diving deep into analysis and soberly reacting to plus and minus changes? If not, practice, but on small volumes. 4. Never buy a company's stock if you can't explain what it does and can't talk about its financial performance. The stock market is no place for gambling. There are slot machines, etc., for that. 5. The company works for profit and grows because of it. So keep an eye on everything that affects profits. Evaluate the company not in monetary units, but in the number of profits. 6. Watch where the company invests its profits. If it's mostly capital investments that will probably make a profit someday, in the distant future - think about it. After all, the beautiful future as conceived may not come. If, on the other hand, the company is allocating its profits to buying its own stock, it means that management thinks the current stock price is attractive enough. 7. The success of the stock may be unrelated to the company's financial success. Beware of such investments. 8. A company's financial success may not be reflected in its stock price for a long time. However, the longer the period in question, the more direct the relationship. So if you select companies based on an analysis of financial performance, be prepared to make a long-term investment. To this day, these thoughts help me look at assets consciously and not give in to spontaneous decisions. What do you think of this approach?
SP:SPXEducation
by Be_Capy
2
I dream of entering the stock market. The question is: What for?Read the previous part of the post here . Having received only denials, the owner of the workshop decides the following: it would be great if shares were sold and bought not in the offices of banks, but in one single place - the stock exchange. Then those who want to vote would be able to buy as many shares as they need votes. Those who want a discount will wait until the price on the stock exchange falls to an acceptable level for them. And those who bought one share would be able to sell it at any time at the exchange price. The owner likes this idea and decides to list his shares on the stock exchange. Another term to remember is listing. Listing is the service of the stock exchange to allow the shares to be traded on the stock exchange. Now the shares can be bought or sold in one place, simply by connecting to the stock exchange trading through brokerage companies. The banks, which have brokerage licenses, also liked it. The main thing is that now they do not have to convince clients to buy shares for dubious rights, you can just say that the price at the exchange is constantly changing, and if you buy shares at $ 1000 now (in the bank office), then a month later at the exchange you can sell them already at a higher price. This created a real stir around the company's shares, and they were bought up from banks at the IPO price - that is, at the original price of $1,000 per share. A significant advantage for any investor is the ability to buy or sell shares quickly and easily. That is exactly the kind of opportunity stock exchanges provide. If there were no stock exchange, the owners of shares would have to look for buyers on their own. But now they have the opportunity to connect to the exchange and make a deal at any time. As soon as the stock exchange started trading, the share price of the workshop came to life. This attracted new investors who tried to buy cheaper shares and sell at a higher price. Such investors include you and me. So what we know so far: - A company needs stock to sell a share of its business and get real money. - Shares can only be issued by a public company. - Shares give its owner rights: to vote, to receive agreed dividends, and to receive a share from a bankrupt company. - The initial sale of shares to the public is called an IPO (initial public offering). - During an IPO, shares are sold not on the stock exchange, but through brokers or banks. - The first day of stock trading on the stock exchange is the completion of the IPO process. - In order for the shares to be traded on the stock exchange, the company has to go through the listing procedure. - It is only possible to buy shares on the stock exchange through a licensed broker. - The exchange price is constantly changing during trading. The workshop story may give the impression that we small investors are only being used to get money from us in exchange for unnecessary rights. However, it is important to understand that we are more interested in the opportunity to profit from the growth of the shares than in gaining formal rights. It is this desire that unites all shareholders of a company, whether you have one share or a million. A joint-stock company can be compared to a hotel with many identical rooms. One share is one room. If the hotel is doing great and making a profit, investors will want to buy more rooms, and sellers will want to sell more rooms at a higher price. If the hotel performs poorly and makes a loss, then room owners will get rid of them (i.e. sell even at an unprofitable price to get money and find another hotel that is more attractive for investment). The strategy I will share will be to find, figuratively, great hotels (in fact, joint stock companies) during a room sale (i.e., a period of declining stock). We'll figure out how stock prices are formed on the stock market soon. See you next time!
NSE:BANKNIFTYEducation
by Be_Capy
2
Short Term Trade Idea Buy(NTPC) Utilities Power Generation Largecap With a market cap of ₹1,65,140 cr, stock is ranked 33 Current price is less than the intrinsic value Stock has been generating better return on equity than bank FD Stock offers good dividend returns Good time to consider, as stock is not in overbought zone Stock not in ASM/GSM lists and not a lot of promoter holding is pledged Disclaimer : I am not a SEBI Registered Research Analyst so before your Investment Please Consult you Financial adviser.
NSE:NTPCLong
by imran12020
Short Term Trade Idea Buy (DRREDDY) Health Care Pharmaceuticals Largecap With a market cap of ₹73,055 cr, stock is ranked 73 Stock has been generating better return on equity than bank FD Stock doesn't offer attractive dividend returns Good time to consider, as stock is not in overbought zone Stock not in ASM/GSM lists and not a lot of promoter holding is pledged Disclaimer : I am not a SEBI Registered Research Analyst so before your Investment Please Consult you Financial adviser.
NSE:DRREDDYLong
by imran12020