Absolute Beginner Guide.

gaspy · #81 27th December 2008, 10:18 PM

Quote:

Originally Posted by haribird

Here I will guide you about the setups needed fort day trading.

First off all you need to arrange all the inventories before starting day trading. I will describe below what you need to do first. All are inconsideration that you want to be a dedicated online trader and need to have a fool proof trading system. This setup will keep you in trading as far as you want.

1. Open a Bank Account, Demat Account & Online Trading Account. You can contact a broker firm to get these accounts opened.
Brokerage firms: Sharekhan, Geojit, Religare, Reliance Money, HDFC, ICICIDirect, etc.

Funds from your bank will be transferred to the trading account. Then shares can be brought using that money. The shares you brought will be held on your demat account.
While buying a share: Bank account -> (cash) Trading Account -> (shares) Demat Account
While selling a share: Demat Account (shares) -> Trading Account (cash) -> Bank Account

The above transactions attracts certain commissions, known as brokerages. Since, above the value of shares you will be charged some small amount of money as brokerages. Also you will be charged some taxes for these transactions and for the gain.

Brokerage: For the whole buy and sell value,
STT(Security Transaction Tax): Calculated on the Weighted Average Price of the client for a particular days turnover,
Stamp Duty,
Service Tax,
etc.
This doesn't include income tax. You need to pay a particular % of income tax for all your Gains only, Also you can deduct your losses from the Gains for the calculation of income tax.

I will post a real life example of a transaction.

Share: UNITECH LTD
No of Shares brought: 200
Buy Price: 147.85
Total Amount: Rs: 29570
Brokerage: Rs: 15
Service Tax: Rs:1.86
NET COST OF BUY: Rs: 29586.86

Now you have a Trading Account ready to buy and sell shares.
For day traders the shares are brought and sold in the same day itself.
So these shares will not actually go to your demat account.

Now we can discuss about other client setups.
Consider you are a dedicated trader who trades from your home or office, you need to have the below hardwares and softwares.

1. Sufficient Trading Capital (Money).
3. A good Computer System.
4. A Power Back Up System.
5. A good Trading Terminal Software.
6. A very good Internet Connection.
7. A calm environment where other will not disturb you.

Sufficient Trading Capital
You should have sufficient fund for trading. Broker firms allow you to trade more than the money you have for non-delivery trading(day trading) or for 6 days trading with some brokers like Sharekhan. This is known as leverage, its good you can buy more for less money but, say for example if you have Rs:1000 the broker firm may allow you to trade for 4000 and for even 10000 with some brokers. But high leveraged trading is extremely dangerous and it will kill your trading capital. So try to be less leverage as possible.

See the danger of leveraged trading by an example,
One have taken the leverage of 10 times his trading capital of 1000 and brought shares worth 10000.
Brought ABC 100 share for Rs:100
After 15 minutes the share price is not moving up but going down. So he decided to sell the shares at the current price to limit the losses.
He sold at: Rs:90, means he lost Rs:10 per share.
So, Total loss = 10*100 = 1000. Now Rs: 1000 will be deducted from his trading account. Now his trading capital is 0, means he cannot trade since there is no money left.

His Capital: 1000
Brought in leverage: 10000
Lost 1000
Now his Capital: 0
Like wise if you have gained and booked profit at 110 you will gain 1000. Means you have made 1000 from 1000 from a single trade. But a single loss will kill a greater percentage of your capital and you will get pain to even recover from the loss.

I know I have detailed roughly about leverage. But consider, many traders left trading just because they traded with highly leveraged money. So my advice is to not leverage or leverage very less but never leverage more than 4 times(4000 from 1000). As a thumb rule don't loose more than 1% to 2% of your money in any single trade and not more than 10% at any time.

Computer System
These days all computers are highly powered so there is no need to discuss much but, for a dedicated online trader I recommend the following computer setups.
Processor: Dual Core min. 3.2 Ghz(1.6*2)
RAM: 1 GB or more if you are using Windows XP or higher versions.
Monitor: Preferably 2 monitors. 15inch minimum. One for Charts/Graphs and the other for orders and Index tracking.
Browsers: Internet Explorer + Opera or FireFox

Power Back Up System
You must have a power back up system over your conventional 20 minute UPS. Buy a UPS which gives atleast 1 hour back up or buy some other kind of backup system. Even if the power fails you must be able to trade for the next 1 hour atleast even if you have no power cuts in your area.

Trading Terminal Software
As a day trader you should have a trading terminal rather than brokers webpage trading. For this you can signup for brokers providing software terminals to trade. Below are some brokers who provides softwares.

Sharekhan: Provides Software(with technical analysis tools).
ICICIDirect: Donot provides software (So, not suitable for day traders).
Religare: Provides Software.

[Optional]
If you can buy technical analysis softwares (like MetaStock, Amibroker, etc) will be a good idea. Also you need to buy good real time data feeds inorder to see charts and prices in MetaStock, Amibroker,etc. Softwares provided by brokers doesn't need additional data feeds. The advantage of these Technical Analysis softwares over broker's trading terminal softwares are the higher ability to do technical analysis.

Internet Connection
A proper internet connection is a must for every trader. A 250Kbps internet connection will smooth out your trading. Also take a backup connection from a different company inorder to continue trading when the other connection fails of any reason.
Backup Connection is not expensive if you take a usb data card wireless connection or mobile edge internet connection. All these are available for as low as 400 per month or even less. You may also activate the backup connection from your mobile service provider and can use your mobile as modem to access internet through GPRS or EDGE. All mobile service providers have this facility for less than 250 per month. This will save you from a sudden internet blackout.

I wrote these all in a jiffy manner, so please correct if I have missed something or did anything wrong. Will update and add more advanced topics regarding day trading soon. But I need your feedback, questions, complaints, etc to keep me in track.

Thank you,
Hari.

You forget an important point : how much time do you want to spend for trading!!

bijovyppil · #82 27th December 2008, 11:32 PM

Quote:

Originally Posted by gsalvadi

Every company has a clause "Registered Office", where the companies registered office is located. This is identified as primary address for the company. For every company, it is a must to print the address of registered office in every communication, say letter heads, quotes for business etc., irrespective of the branches it has.

nice man.... go on...

irfan91 · #83 4th January 2009, 07:22 PM

Quote:

Originally Posted by gsalvadi

Every company has a clause "Registered Office", where the companies registered office is located. This is identified as primary address for the company. For every company, it is a must to print the address of registered office in every communication, say letter heads, quotes for business etc., irrespective of the branches it has.

If the company wants to open a new branch, the board must pass a resolution saying so, and must be filed with Govt. (ROC). At any point of time, if the company wishes to change the address of registered office, it can not just shift the office like a other forms of business.

It must give a a notification in newspaper, the ROC would wait for a period, say 2 months, to see if there would be any objection, complaint arises.

Just imagine how could the law keep hold when it comes for closing a company. Such a thing would go under standard procedures. Say the company could have liabilities, could have received advance payments in business etc.,

The object of Companies Act is to make it transparent to the eye of a share holder or a customer, that how the company operates.

Now, our friends, A, B and C have been doing the business successfully for some years. Now the the business has grown. There are other directors have been appointed as the company has expanded its operation and so needs specialized skills for management.

On its success path our company has now got say some 10 directors for 10 distinct departments. Remember the point that the directors could be mere employees. When our imaginary company wants to motivate the employees it allots shares to them under "Employees Stock Option", the section of law that allows allotment of shares among employees. Again I suggest let us not digg into the details as this series could turn more like a course on companies law

What if our company wants to expand its business activity?

Let us not name A, B and C as we earlier did. Because, now there are many directors. We know whether they hold shares or not, collection of such directors which called Board of Directors is suppose to take any decision by majority opinion. So from this point we call them as "Board" (Board of Directors).

And again, we don't know whether A is the managing director yet and, we may not surprise at this point if A, B or C is not even at the Board.

And now, we can understand the fact that the Board of Directors has the supreme power in the organization. If there are many directors who are also share holders of the company (in public limited companies it is expected), there is always a chance for politics of power.

Ok. Let us come to the point.

If our company wants to expand its business activity, the Board must come out with a resolution for such an expansion.

Now let us consider two aspects of a business expansion.

1. Diversified business activity (entering into new fields of commerce)
2. Need of Huge Capital

Let us discuss these in next post, probably tomorrow if not today

Ok. Now what happened to remaining shares that left after allocating shares to A B and C?

What is the difference between Pvt. Ltd. and Public Ltd. companies?

How the share holders get profit of the company appropriate to the number of share they hold?

How and why a company comes out with an IPO?

Let us discuss little by little. I writing this in the midst of burning the midnight oils.

Gsalvadi what happen abaout the given topics I think u have forget to describe so please go though with these topics...

gsalvadi · #84 5th January 2009, 08:02 AM

@irfan,
Sorry for being late. I was down with temperature. And, Good Now

Diversification of Business is the activity where the company enters a business field that it has not been earlier.

A company can always register amendments regarding its objective. Just understand a company can alter it's secondary objective, not the primary objective. Say if a company has been started to carry on IT related business, then it can not enter into finance business. It can do some alterations that is needed to carry on IT business.

Say Infosys Technologies Ltd. can not do finance or banking business.
In these cases, the company promotes another company.

So, what is the relation that exists between the company and newly promoted company (usually called "sister concern")?

Company is the promoter and could be the major share holder in newly promoted company. Here it is worth to note that a partnership firm can not become a "partner" in other firms. Wheres the a company can hold shares of other company.

If our company needs to launch so many business in this way, we call it a "group of companies". The managing Director of the company, say A in our case may need to have the control over all the companies that lies in the group. In this case, he becomes Chairman (Chairperson) of every company in the group.

Need for huge capital
The essence of capital :

Capital, is what a company is capable of. Though it is important to have a good product, or business idea, capital comes important to meet the objectives of the company in real world.

A person can innovate a new product by research. The product could the a greatest innovation that could change lives of people. It is not only enough to have such an innovation. A business is an entity (assume that a company

)
where actualization of serving customers for profits really happens

gsalvadi · #85 5th January 2009, 08:03 AM

Authorized Capital is the maximum amount of capital the company is allowed to hold. Authorized capital is the maximum number of shares that company can issue to pump funds.
There is a close relation between the face value of the share (when first issued) to the authorized capital of the company.

Authorized capital is defined in a class of MOA. Authorized capital need be the capital the company may need in future for business operations. It is just the capital the company can have at any point of time. Likewise at any point of time, a company may give amendments to authorized capital class of MOA by registering same with ROC. (I hope I can use "MOA" and "ROC". Kindly check previous posts to know what they mean)

If a company has 100 lakhs as authorized capital, till it could issue shares only for 50 lakhs.
Remaining shares could be issued by the company at any point of time later. At no point the capital could not exceed 100 lakhs unless there is an amenIn dment registered.

In this case 100 lakhs is authorized capital and 50 lakhs is issued captial

Dividend

Dividend is the portion of profit every share deserves. If a company makes a profit, then the profit would be distributed among shares issued. Each share get its portion of profit, "dividend"

Types of shares

Ordinary Shares : These is most risky shares as they do not have any special privileges or restrictions. If a company is winding up, these are the shares which are suppose to be settled at last.

Preference Shares These shares have special privileges like getting dividends well before ordinary shares and restrictions like there will be restrictions on dividend if the company makes great profits.

Redeemable Shares These shares are of the type the company could buy back from share holder at any time fixed by the company.

These basic types are enough.

So, the company generate funds for its business by means of shares, the shares are issued to people.

gsalvadi · #86 7th January 2009, 08:29 PM

Public Limited Companies

Public Limited companies could be easily understood by comparing it to private limited companies.

Public Limited companies need minimum of 7 members against 2 is enough for Pvt. Ltd.

Public Ltd (generally "Ltd." implicitly mean "Public Limited") must be registered with a minimum amount of authorized capital that is greater than a Pvt. Ltd. company. (Say Rs5 Lakh)

Members of Pvt. Ltd. companies can not exchange their shares among them. In Public Limited companies members / share holders could exchange the ownership of shares.

A Public Limited company must have a "Company Secretory" who is qualified, registered, to deal with the issues that arises on business, by the guide lines provided by law.

Public Limited companies can invite public (people) to invest in their companies. By this means Public Ltd. companies could generate funds for their business operations. This process is know as IPO in general.

sanjugalande · #87 8th January 2009, 10:32 PM

how to use/add two monitors on single pc
plzz give info

gsalvadi · #88 9th January 2009, 08:20 PM

Quote:

Originally Posted by sanjugalande

how to use/add two monitors on single pc
plzz give info

What OS you use? What is the purpose for two monitors?

I will try to help it out

sanjugalande · #89 14th January 2009, 09:25 AM

Quote:

Originally Posted by gsalvadi

What OS you use? What is the purpose for two monitors?

I will try to help it out

i am using Win XP service pack 2 ver .2
two screen : one for foroum reading/orkut etc gtalk, YIM and another only for mkt graph watching and trading
as said by thread owner

shaml · #90 26th January 2009, 11:17 PM

I fail to understand how do you use two monitors with different screens. As i know you can have to monitors with same screen shots. But how will you get two different screens like charts in one and trading window in another.. Please explain.

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