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[E] The Bollinger Bands Indicator VIIf price reaches the upper band, this means it is relatively high and the asset could be overbought. You could look to sell an overbought asset on the assumption that its price will fall towards moving average. Conversely, if price reaches the lower band, this means it is relatively low and the asset could be oversold. You could look to buy an oversold asset on the assumption that its price will rise towards the central moving average.
NSE:AXISBANKEducation
by Amit_Ghosh
[E] The Bollinger Bands Indicator - IIIIf price reaches the upper band, this means it is relatively high and the asset could be overbought. You could look to sell an overbought asset on the assumption that its price will fall towards moving average. Conversely, if price reaches the lower band, this means it is relatively low and the asset could be oversold. You could look to buy an oversold asset on the assumption that its price will rise towards the central moving average.
NSE:AXISBANKEducation
by Amit_Ghosh
Price/Earnings: amazing interpretation #2In my previous post , we started to analyze the most popular financial ratio in the world – Price / Earnings or P/E (particularly one of the options for interpreting it). I said that P/E can be defined as the amount of money that must be paid once in order to receive 1 monetary unit of diluted net income per year. For American companies, it will be in US dollars, for Indian companies it will be in rupees, etc. In this post, I would like to analyze another interpretation of this financial ratio, which will allow you to look at P/E differently. To do this, let's look at the formula for calculating P/E again: P/E = Capitalization / Diluted earnings Now let's add some refinements to the formula: P/E = Current capitalization / Diluted earnings for the last year (*) (*) In my case, by year I mean the last 12 months. Next, let's see what the Current capitalization and Diluted earnings for the last year are expressed in, for example, in an American company: - Current capitalization is in $; - Diluted earnings for the last year are in $/year. As a result, we can write the following formula: P/E = Current capitalization / Diluted earnings for the last year = $ / $ / year = N years (*) (*) According to the basic rules of math, $ will be reduced by $, and we will be left with only the number of years. It's very unusual, isn't it? It turns out that P/E can also be the number of years! Yes, indeed, we can say that P/E is the number of years that a shareholder (investor) will need to wait in order to recoup their investments at the current price from the earnings flow, provided that the level of profit does not change . Of course, the condition of an unchangeable level of profit is very unrealistic. It is rare to find a company that shows the same profit from year to year. Nevertheless, we have nothing more real than the current capitalization of the company and its latest profit. Everything else is just predictions and probable estimates. It is also important to understand that during the purchase of shares, the investor fixates one of the P/E components - the price (P). Therefore, they only need to keep an eye on the earnings (E) and calculate their own P/E without paying attention to the current capitalization. If the level of earnings increases since the purchase of shares, the investor's personal P/E will decrease, and, consequently, the number of years to wait for recoupment. Another thing is when the earnings level, on the contrary, decreases – then an investor will face an increase in their P/E level and, consequently, an increase in the payback period of their own investments. In this case, of course, you have to think about the prospects of such an investment. You can also argue that not all 100% of earnings are spent paying dividends, and therefore you can’t use the level of earnings to calculate the payback period of an investment. Yes, indeed: it is rare for a company to give all of its earnings to dividends. However, the lack of a proper dividend level is not a reason to change anything in the formula or this interpretation at all, because retained earnings are the main fundamental driver of a company's capitalization growth. And whatever the investor misses out on in terms of dividends, they can get it in the form of an increase in the value of the shares they bought. Now, let's discuss how to interpret the obtained P/E value. Intuitively, the lower it is, the better. For example, if an investor bought shares at P/E = 100, it means that they will have to wait 100 years for their investment to pay off. That seems like a risky investment, doesn't it? Of course, one can hope for future earnings growth and, consequently, for a decrease in their personal P/E value. But what if it doesn’t happen? Let me give you an example. For instance, you have bought a country house, and so now you have to get to work via country roads. You have an inexpensive off-road vehicle to do this task. It does its job well and takes you to work via a road that has nothing but potholes. Thus, you get the necessary positive effect this inexpensive thing provides. However, later you learn that they will build a high-speed highway in place of the rural road. And that is exactly what you have dreamed of! After hearing the news, you buy a Ferrari. Now, you will be able to get to work in 5 minutes instead of 30 minutes (and in such a nice car!) However, you have to leave your new sports car in the yard to wait until the road is built. A month later, the news came out that, due to the structure of the road, the highway would be built in a completely different location. A year later your off-road vehicle breaks down. Oh well, now you have to get into your Ferrari and swerve around the potholes. It is not hard to guess what is going to happen to your expensive car after a while. This way, your high expectations for the future road project turned out to be a disaster for your investment in the expensive car. It works the same way with stock investments. If you only consider the company's future earnings forecast, you run the risk of being left alone with just the forecast instead of the earnings. Thus, P/E can serve as a measure of your risk. The higher the P/E value at the time you buy a stock, the more risk you take. But what is the acceptable level of P/E ? Oddly enough, I think the answer to this question depends on your age. When you are just beginning your journey, life gives you an absolutely priceless resource, known as time. You can try, take risks, make mistakes, and then try again. That's what children do as they explore the world around them. Or when young people try out different jobs to find exactly what they like. You can use your time in the stock market in the same manner - by looking at companies with a P/E that suits your age. The younger you are, the higher P/E level you can afford when selecting companies. Conversely, in my opinion, the older you are, the lower P/E level you can afford. To put it simply, you just don’t have as much time to wait for a return on your investment. So, my point is, the stock market perception of a 20-year-old investor should differ from the perception of a 50-year-old investor. If the former can afford to invest with a high payback period, it may be too risky for the latter. Now let's try to translate this reasoning into a specific algorithm. First, let's see how many companies we are able to find in different P/E ranges. As an example, let's take the companies that are traded on the NYSE (April 2023). As you can see from the table, the larger the P/E range, the more companies we can consider. The investor's task comes down to figuring out what P/E range is relevant to them in their current age. To do this, we need data on life expectancy in different countries. As an example, let's take the World Bank Group's 2020 data for several countries: Japan, India, China, Russia, Germany, Spain, the United States, and Brazil. To understand which range of P/E values to choose, you need to subtract your current age from your life expectancy: Life Expectancy - Your Current Age I recommend focusing on the country where you expect to live most of your life. Thus, for a 25-year-old male from the United States, the difference would be: 74,50 - 25 = 49,50 Which corresponds with a P/E range of 0 to 50. For a 60-year-old woman from Japan, the difference would be: 87,74 - 60 = 27,74 Which corresponds with a P/E range of 0 to 30. For a 70-year-old man from Russia, the difference would be: 66,49 - 70 = -3,51 In the case of a negative difference, the P/E range of 0 to 10 should be used. It doesn’t matter which country's stocks you invest in if you expect to live most of your life in Japan, Russia, or the United States. P/E indicates time, and time flows the same for any company and for you. So, this algorithm will allow you to easily calculate your acceptable range of P/E values. However, I want to caution you against making investment decisions based on this ratio alone. A low P/E value does not guarantee that you are free of risks . For example, sometimes the P/E level can drop significantly due to a decline in P (capitalization) because of extraordinary events, whose impact can only be seen in a future income statement (where we would learn the actual value of E - earnings). Nevertheless, the P/E value is a good indicator of the payback period of your investment, which answers the question: when should you consider buying a company's stock ? When the P/E value is in an acceptable range of values for you. But the P/E level doesn’t tell you what company to consider and what price to take. I will tell you about this in the next posts. See you soon!
Editors' picks
NSE:HDFCBANKEducation
by Be_Capy
8
What are Bollinger Bands and How to Use themBollinger Bands are a widely used technical analysis tool traders rely on to gauge market volatility and identify potential entry and exit points. Developed by John Bollinger in the 1980s, they provide a simple yet effective method to analyze price trends and determine potential movements. In this post, we'll cover the fundamental concepts of Bollinger Bands, including how they work and how you can use them to your advantage . This post will also lay the groundwork for future posts about more advanced topics on Bollinger Bands. Please remember this is an educational post to help all of our members better understand concepts used in trading or investing. This in no way promotes a particular style of trading! What are Bollinger Bands? Bollinger Bands are composed of three lines that are plotted on a price chart. The first line is a simple moving average (also known as the basis line), and the other two lines are standard deviation lines, one located above the SMA and the other below it. When plotted, the SMA appears at the centre of the chart, flanked by the upper and lower bands. The width of the bands is determined by market volatility; the bands will expand as volatility increases and contract as volatility decreases Components of Bollinger Bands Basis line: The basis line is the middle line in the Bollinger Bands and represents the simple moving average (SMA) of the closing prices of an asset over a defined period. Upper Band: The upper band is calculated by adding a specified number of standard deviations to the SMA. Typically, traders use two standard deviations from the SMA, making it the most common setting used. However, these settings are not universal and vary as per the trading style. Lower Band: The lower band is calculated by subtracting the same number of standard deviations from the SMA. This results in a channel of three lines, with the upper and lower bands fluctuating around the SMA, reflecting volatility. Usage: 👉 Overbought and Oversold Conditions Bollinger Bands can help in the identification of overbought and oversold conditions. Generally, when the price of an asset touches or exceeds the upper band, it may suggest that the asset is overbought, and a pullback or reversal could be on the horizon. In contrast, when the price touches or falls below the lower band, it may indicate that the asset is oversold and could be due for a bounce or reversal. However, it's worth noting that in strong trends, the price may remain at the upper or lower band for an extended period. This occurrence is not a signal for a pullback or reversal, and traders should consider other factors to confirm the actual trend. Exhibit: Strong Uptrend Exhibit: Strong Downtrend 👉 Volatility Indicator Bollinger Bands serve as a measure of volatility. As the bands widen, it indicates that the volatility is increasing, which means that price swings are likely to be more significant. Conversely, when the bands become narrower, it suggests that the volatility is decreasing, which could result in smaller price fluctuations. 👉 Bollinger Band Squeeze A squeeze occurs when the bands contract and move closer together, indicating decreased market volatility. This phenomenon is often a precursor to a significant price movement or breakout, as periods of low volatility often precede periods of high volatility in the market. 👉 Trend Confirmation Bollinger Bands can also be used to confirm the direction of a trend. During an uptrend, prices often stay within the upper half of the Bollinger Bands, while in a downtrend, prices tend to remain in the lower half of the bands. In addition, when prices repeatedly bounce off the basis line or keep getting rejected from it, it could indicate the continuation of a trend. Exhibit: Trend continuation in a Bullish trend Exhibit: Trend continuation in a Bearish trend Thanks for reading! Hope this was helpful. As we mentioned before, this isn't trading advice, but rather information about a tool that many traders use. See you all next week. 🙂 – Team TradingView Be sure to follow us on Twitter , Instagram , and Telegram for more valuable content! 💘
Editors' picks
NSE:NIFTYEducation
by TradingView
26
The most common mistakes traders make and how to avoid themWhen it comes to investing, trading can be a highly lucrative and exciting way to potentially earn profits. However, it's not without its challenges. One of the biggest challenges for traders is avoiding common mistakes that can lead to significant financial losses. In this article, we'll discuss the most common mistakes traders make and provide actionable tips on how to avoid them. 1. Lack of Research and Preparation: One of the most crucial aspects of successful trading is research and preparation. Unfortunately, many traders overlook this crucial step in their haste to start trading. Without proper research and preparation, traders may miss critical market trends or overlook important factors that can impact their trades. To avoid this mistake, it's essential to do thorough research and preparation before placing any trades. This includes conducting fundamental and technical analysis of the market, evaluating economic data, and developing a trading strategy based on your research. By doing so, traders can better understand market conditions and make informed decisions about their trades. 2. Emotions and Impulsivity: Another common mistake traders make is allowing their emotions to impact their trading decisions. When traders become emotionally attached to their trades, they may make impulsive decisions based on fear, greed, or other emotions. These decisions can lead to poor trading results, including significant financial losses. To avoid the pitfalls of emotions and impulsivity in trading, it's essential to remain objective and rational when making trading decisions. Traders should stick to their trading plan and avoid deviating from it based on emotions. Additionally, traders can use tools like stop-loss orders to automatically close positions if the market moves against them. 3. Overtrading: Overtrading is a common mistake that many traders make, and it can have devastating consequences. Overtrading occurs when traders place too many trades in a short period, usually due to a desire to make up for previous losses or to chase profits. This can lead to significant financial losses and may result in traders ignoring their trading strategy. To avoid overtrading, traders must be disciplined and patient in their trading approach. They should stick to their trading plan and avoid making impulsive trades based on emotions. Additionally, traders should set realistic trading goals and avoid chasing unrealistic profits. 4. Lack of Risk Management: Risk management is a critical component of successful trading, yet many traders overlook this aspect. Traders who do not implement an effective risk management strategy are more likely to experience significant losses in the event of adverse market movements. To avoid the pitfalls of poor risk management, traders should assess their risk tolerance and develop a risk management strategy that aligns with their risk tolerance. This may include implementing stop-loss orders, using position sizing techniques, and diversifying their portfolio. 5. Focusing on Short-Term Profits: Traders who focus solely on short-term profits often make the mistake of ignoring long-term market trends and opportunities. This can lead to missed opportunities for profitable trades and may result in traders making impulsive decisions based on short-term market movements. To avoid this mistake, traders should adopt a long-term perspective in their trading approach. They should focus on market trends and opportunities that align with their long-term trading goals and avoid being swayed by short-term market movements. 6. Not Having a Trading Plan: Traders who do not have a trading plan are more likely to make impulsive trading decisions and may overlook critical market trends and opportunities. A trading plan outlines a trader's approach to the market and includes details on their trading strategy, risk management, and trading goals. To avoid this mistake, traders should develop a comprehensive trading plan that aligns with their trading goals and risk tolerance. They should review and update their trading plan regularly to reflect changes in the market or their trading objectives. Conclusion: In conclusion, avoiding common trading mistakes is essential to successful trading. By doing proper research and preparation, managing emotions and impulsivity, implementing an effective risk management strategy, focusing on long-term profits, and developing a comprehensive trading plan, traders can make informed decisions that lead to profitable trades. Trading is a complex and challenging endeavor, but with discipline, patience, and a commitment to continuous learning and improvement, traders can achieve success in the markets.
NSE:NIFTYEducation
by AfnanTAjuddin
what is The symmetrical triangle patternThe symmetrical triangle pattern is a technical analysis chart pattern that forms when the price of an asset is moving within a range, with the highs and lows converging towards each other. it is characterized by two trend lines that converge toward each other, forming a triangle. It is confirmed when the price breaks out of the triangle, either above the upper trend line (bullish) or below the lower trend line (bearish). Traders often look for a price target that is equal to the height of the triangle at its widest point, projected in the direction of the breakout. The symmetrical triangle pattern can be a reliable indicator of future price movement, but it should be used in conjunction with other technical analysis tools and market indicators. one can support the work by simply following BACTIFY and sharing the same with their friends all the best and happy trading
NSE:BPCLEducation
by pratik2358
Understanding Modern Portfolio Theory1. Introduction Modern Portfolio Theory (MPT) is a framework for constructing portfolios that aim to maximize expected returns while minimizing risk. It was introduced by Harry Markowitz in 1952. The theory is based on the idea that investors should not focus solely on individual securities but rather on the overall portfolio of investments. MPT provides a way to measure portfolio risk and return and provides tools to optimize investments.
TVC:GOLDEducation
by rishurishab66
Large time frame analysis significanceWho should use this? Larger time frames are used by swing traders and long-term investors who are interested in the overall trend and direction of the market. Advantages? Broader Perspective: They help traders and investors to see the overall trend and direction of the market over a longer period, which can be useful for identifying larger price patterns and longer trend Reduced Noise: This can help traders to filter out market volatility and noise that may be present in shorter timeframes, and focus on more significant price movements and trends that are relevant to their trading or investment strategy. Higher Reliability: Longer timeframe candlesticks represent a larger sample of price data and are less prone to false signals or market noise. This can result in more reliable and accurate technical analysis, which can be beneficial for making informed trading decisions. Less Frequent Trading: A more relaxed trading approach or having limited time for actively monitoring the markets. Note: it's important to carefully consider your trading or investment strategy, goals, and risk tolerance when choosing a timeframe to use in your analysis. It should suit your personality and characteristics. You should keep a track of global indices and fundamentals before estimating the next move.
NSE:NIFTY1!Education
by OK_Rane
dual top pattern explained in simple form The dual top pattern is a popular technical analysis pattern that can signal a potential trend reversal. This pattern is formed when the price of an asset reaches a resistance level twice and fails to break above it. The two peaks of the pattern look like two mountain tops that are approximately equal in height, with a dip or valley in between them. The neckline of the pattern is drawn by connecting the lows between the two peaks. A breakdown below the neckline is considered a sell signal, as it suggests that the price is likely to continue to decline. The dual top pattern is an important tool for traders because it can help to identify potential trend reversals. However, it's important to confirm the pattern with other indicators and analysis before making trading decisions. For example, traders might look for other technical signals such as a bearish divergence or a break below a key support level to confirm the dual top pattern. Additionally, traders may use fundamental analysis to gain insight into the underlying factors that are driving the price movement of the asset. Overall, the dual top pattern is a powerful tool for traders to identify potential trend reversals, but it's important to approach it with caution and to use other analysis techniques to confirm the signal before making trading decisions. In the below example, a newbie too would be able to learn and practice trend reversal using double top pattern Dual top pattern = potential trend reversal. Look for two mountain tops with a valley in between. The resistance level was reached twice but was not broken Draw the neckline by connecting lows between the peaks. A breakdown below the neckline = sell signal. Remember, the dual top pattern can be a powerful tool for traders to identify potential trend reversals, but it's important to confirm with other indicators and analysis before making trading decisions.
NSE:HDFCLIFEEducation
by pratik2358
1
Guide to Portfolio Rebalancing for Mutual Fund Investments1. Introduction Portfolio rebalancing is an essential process for optimizing mutual fund investments that investors should notice more. It involves periodically reviewing and adjusting the allocation of assets in a portfolio to maintain a consistent level of risk and return. This article will delve into the technical details of portfolio rebalancing, highlighting its importance, benefits, and best practices.
TVC:GOLDEducation
by rishurishab66
Learn Bullish technical analysis pattern called DOUBLE BOTTOM The double bottom pattern is a bullish reversal pattern that occurs after a downtrend. It consists of two consecutive troughs of roughly equal price, with a peak in between. The pattern is confirmed when the price breaks above the peak with higher-than-average trading volume. Traders use the pattern to project a target price for the breakout. Traders may enter long positions in anticipation of the breakout. The pattern should be used with other indicators and analysis to confirm its validity.
NSE:NAVINFLUOREducation
by pratik2358
Harmonic trading learning & experience.Harmonic more accurate work in consideration stock like Reliance, Nestle,Bosch, hul . this stock move slowly and fundamental strong so if you play using harmonic swing trade So you have benifit. Here you get low risk reward . But if you have patience and harmonic experience definitely yearly generate good % profit And plz avoid option trading in this stocks . In consolidation stock or sideways stock+ fundamental strong. Harmonic accuracy around 65/70%.
NSE:BOSCHLTDEducation
by biokon70
1
Taxation of Mutual Funds A Complete Guide for Investors in India1. Introduction Mutual funds have become increasingly popular among retail investors as one of India’s most popular investment options due to their convenience and diversification benefits. However, many investors need to consider the tax implications of their mutual fund investments, which can significantly impact their overall returns. This article aims to provide a technical overview of the tax implications of mutual funds in India, including how to calculate capital gains tax and dividend distribution tax, file taxes on mutual fund investments, and adjust mutual fund investments based on tax implications.
TVC:GOLDEducation
by rishurishab66
CLASSIC RSI SWING TRADE EXAMPLE: 15 MINUTE INTRADAY CHARTRSI is a versatile momentum indicator that tracks price trends as well as sideways consolidations, and gives trend change signals at or about the right times. Here a standard 14 period RSI is used to identify trend change from Stage-1 consolidation (accumulation) to Stage-2 rally (Markup) on the 15-minute NIFTY 50 chart. RSI bear-zone resistance is red horizontal lines, and the bull-zone support is the green horizontal lines - both on the RSI indicator. NOtes on the chart explains the trade structure in more detail.
NSE:NIFTYEducation
by RajuDatla
lets understand support and resistance in detail support and resistance they play a truly crucial role in trading If you want to trade like a pro, there's something you should know: Support and resistance, they're the stars of the show! this can be understood from the below:- Support is like a floor, it holds prices up high, Resistance is a ceiling, prices can't seem to fly. When prices hit support, they tend to bounce back, And when they reach resistance, they often lose track. These levels are key, they're a trader's best friend, They help you to enter, exit, and defend. So pay attention to support and resistance, my friend, They'll help you make profits and trade till the end! volume confirmation along with breakouts are beautiful
NSE:ANURASEducation
by pratik2358
[N] False Breakdown Case for Support and ResistanceNote - One of the best forms of Price Action is to not try to predict at all. Instead of that, ACT on the price. So, this chart tells at "where" to act in "what direction. Unless it triggers, like, let's say the candle doesn't break the level which says "Buy if it breaks", You should not buy at all. ======= I use shorthands for my trades. "Positional" - means You can carry these positions and I do not see sharp volatility ahead. (I tally upcoming events and many small kinds of stuff to my own tiny capacity.) "Intraday" -means You must close this position at any cost by the end of the day. "Theta" , "Bounce" , "3BB" or "Entropy" - My own systems. ======= I won't personally follow any rules. If I "think" (It is never gut feel. It is always some reason.) the trade is wrong, I may take reverse trade. I may carry forward an intraday position. What is meant here - You shouldn't follow me because I may miss updating. You should follow the system I share. ======= Like - Always follow a stop loss. In the case of Intraday trades, it is mostly the "Day's High". In the case of Positional trades, it is mostly the previous swings. I do not use Stop Loss most of the time. But I manage my risk with options as I do most of the trades using derivatives. =======
NSE:AUROPHARMAEducation
by Amit_Ghosh