Can anyone please explain me how to study charts of BSE & NSE?

I know the basic concepts of trading in equity. But I need to learn more and get into derivatie & F&O trading. for which i need to know proper method of studying charts. If anyone can explain it would be great.
thanx dude i know charts are just one of the many ways…..I just want to know that “one” way ….as even I am in the study part yet

3 Replies to “Can anyone please explain me how to study charts of BSE & NSE?”

  1. There are several investing web sites and blogs which go into detail on the various strategies.
    The charts themselves present only one dimesion – historical information – which won’t take you very far.
    You will actually have to do a wide-ranging study and engage in some trading to get to grips with this. I am still in the study part!

  2. Well the charts doesnt teach u just gives u an indication of whats happening with market or a particular scrip in a given point of time…
    and i did not understand which chart were u referring to ..coz there are many kinds of charts associated with stock markets, equity n stuff and most of them are simple…if it is a intraday show u the market movement from the opening to closing(after market) and in the market time i mean during trading it shows u where its going..if the market or a stock is up meaning more buying happening in the market usually the curve will be raising and in many charts Up is represented in Blue colour …when when the prices are coming means that there is selling happening and the market is coming is usually represented in red colour…
    ull have to see the axis….on one axis it will be the time..and on the other axis it will be the moment of the scrip or the market…
    there will be many charts..i just gave u an example….
    if u wanna know about give u a brief about them in a simple way :

    Derivatives are financial instruments whose value is derived from the value of something else. They generally take the form of contracts under which the parties agree to payments between them based upon the value of an underlying asset or other data at a particular point in time. The main types of derivatives are futures, forwards, options, and swaps.

    The main use of derivatives is to reduce risk for one party while offering the potential for a high return (at increased risk) to another. The diverse range of potential underlying assets and payoff alternatives leads to a huge range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), bonds, interest rates, exchange rates, or indexes (such as a stock market index, consumer price index (CPI) — see inflation derivatives — or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the payoffs.
    One use of derivatives is as a tool to transfer risk by taking the opposite position in the futures market against the underlying commodity. For example, a farmer can sell futures contracts on a crop to a speculator before the harvest. By taking a position in the futures market, the farmer hopes to minimize his price risk.
    Speculators may trade with other speculators as well as with hedgers. In most financial derivatives markets, the value of speculative trading is far higher than the value of true hedge trading. As well as outright speculation, derivatives traders may also look for arbitrage opportunities between different derivatives on identical or closely related underlying securities.
    Forward Contract is A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. Although the delivery is made in the future, the price is determined on the initial trade date.

    Most forward contracts don’t have standards and aren’t traded on exchanges. A farmer would use a forward contract to “lock-in” a price for his grain for the upcoming fall harvest.

    futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price.

    A futures contract gives the holder the obligation to buy or sell, which differs from an options contract, which gives the holder the right, but not the obligation. In other words, the owner of an options contract may exercise the contract. Both parties of a “futures contract” must fulfill the contract on the settlement date. The seller delivers the commodity to the buyer, or, if it is a cash-settled future, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. To exit the commitment prior to the settlement date, the holder of a futures position has to offset their position by either selling a long position or buying back a short position, effectively closing out the futures position and its contract obligations.

    Futures contracts, or simply futures, are exchange traded derivatives. The exchange’s clearinghouse acts as counterparty on all contracts, sets margin requirements, etc.
    To minimize credit risk to the exchange, traders must post margin or a performance bond, typically 5%-15% of the contract’s value.

    Margin requirements are waived or reduced in some cases for hedgers who have physical ownership of the covered commodity or spread traders who have offsetting contracts balancing the position.

    Initial margin is paid by both buyer and seller. It represents the loss on that contract, as determined by historical price changes, that is not likely to be exceeded on a usual day’s trading.

    A futures account is marked to market daily. If the margin drops below the margin maintenance requirement established by the exchange listing the futures, a margin call will be issued to bring the account back up to the required level.

    Margin-equity ratio is a term used by speculators, representing the amount of their trading capital that is being held as margin at any particular time. The low margin requirements of futures results in substantial leverage of the investment. However, the exchanges require a minimum amount that varies depending on the contract and the trader. The broker may set the requirement higher, but may not set it lower. A trader, of course, can set it above that, if he doesn’t want to be subject to margin calls.

    Return on margin (ROM) is often used to judge performance because it represents the gain or loss compared to the exchange’s perceived risk as reflected in required margin. ROM may be calculated (realized return) / (initial margin). The Annualized ROM is equal to (ROM+1)(year/trade_duration)-1. For example if a trader earns 10% on margin in two months, that would be about 77% annualized.
    Options are financial instruments that convey the right, but not the obligation, to engage in a future transaction on some underlying security. For example, buying a call option provides the right to buy a specified quantity of a security at a set strike price at some time on or before expiration, while buying a put option provides the right to sell. Upon the option holder’s choice to exercise the option, the party who sold, or wrote, the option must fulfill the terms of the contract.

    The theoretical value of an option can be determined by a variety of techniques. These models, which are developed by quantitative analysts, can also predict how the value of the option will change in the face of changing conditions. Hence, the risks associated with trading and owning options can be understood and managed with some degree of precision.

    Exchange-traded options form an important class of options which have standardized contract features and trade on public exchanges, facilitating trading among independent parties. Over-the-counter options are traded between private parties, often well-capitalized institutions, that have negotiated separate trading and clearing arrangements with each other. Another important class of options, particularly in the U.S., are employee stock options, which are awarded by a company to their employees as a form of incentive compensation.

    Other types of options exist in many financial contracts, for example real estate options are often used to assemble large parcels of land, and prepayment options are usually included in mortgage loans. However, many of the valuation and risk management principles apply across all financial options.
    Every financial option is a contract between the two counterparties with the terms of the option specified in a term sheet. Option contracts may be quite complicated; however, at minimum, they usually contain the following specifications:

    * whether the option holder has the right to buy (a call option) or the right to sell (a put option)
    * the quantity and class of the underlying asset(s) (e.g. 100 shares of XYZ Co. B stock)
    * the strike price, also known as the exercise price, which is the price at which the underlying transaction will occur upon exercise
    * the expiration date, or expiry, which is the last date the option can be exercised
    * the settlement terms, for instance whether the writer must deliver the actual asset on exercise, or may simply tender the equivalent cash amount
    * the terms by which the option is quoted in the market, usually a multiplier such as 100, to convert the quoted price into actual premium amount
    Hope this information helps…..
    Good luck
    Happy Investing….!!!!!

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