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[VJAY]

Nice explain about CRR/SLR which we heard in RBI policy day by Riskyman

Let me try to explain how CRR and SLR work. CRR or cash reserve ratio is the amount of money that Banks have to keep with the RBI. This cash reserve is maintained to ensure "solvency" of the banks and at times also used to cut excess liquidity from the banking system. Higher CRR means that banks will be able to lend less.
SLR i.e statutory liquidity ratio is the percentage of banks assets in the form of gold/cash/liquidity etc that has to be kept in reserve to meet the bank's demand and time liabilities without using it for commercial purposes like investments and lending. This ratio is fixed by RBI.

Example of CRR and SLR in use. Suppose a bank has 1000 crores. If CRR is 8% and SLR 10% is then 80 crores have to be maintained in cash with the RBI. SLR @ 10% means that 100 crores (in bonds/gold/cash) has to set aside by the bank(statutorily) and so this sum total of 180 cr cannot be used for lending. Banks can only lend out the remaining 820 cr. If SLR is cut from 10% to 9% over a period then the equation will change to 8%+9% = 17% = 170 cr. The bank essentially has 10 cr extra to lend i.e 830 cr. Therefore, this is a positive development for the banks.

Decrease in SLR usually means that banks can earn interest income than just keeping the money held up. Lower SLR also means banks will lend at lower interest rates(because they have more money to deploy).

Today there was no mention of "calibrated tightening". However, the RBI outlined that if the upside risks(if any like higher oil, lower agri output) to the economy doesnt materialize then they would be more than happy to use further "policy action" ( rate cut) .

 

[VJAY]

Good post on trading in Futures ..by Riskyman

Futures and options are derivative Instruments. They are called "derivatives" because they derive their value from some underlying asset. Let me use Reliance as an example. Reliance futures is the derivative instrument here and it will derive its value from the underlying value of Reliance shares i.e share traded in the cash segment. Cash Segment rates are also called spot rates.
I will try not to talk about options as it a bit complicated and lengthy to explain.

Futures are traded in a different segment called the F&O segment. Futures are called as futures because they are contracts that are valid only until a predetermined future date. They all come with an expiry date. For ex A Reliance 27oct2018 contract means that this futures contract will expire on the 27-dec-2018. ( In our markets, settlement/expiry happens on the last thursday of every month. 27th dec is the last thursday in dec 2018)

Trading Futures is very similar to trading shares except that unlike shares where you can buy any quantity, future contracts have a pre-decided quantity which is established by the exchanges. This is called as a lot. Example, Reliance futures has a lot size of 500 i.e 500 units/shares that make one lot. You have to buy/sell in multiples of 1 lot.

Futures, as mentioned derive their value from the underlying. They are traded at a premium or discount or at par with the underlying depending on the sentiment in the market. If traders are very bullish on Reliance, then they are willing to pay a higher premium. Example Reliance spot will be trading at 1150 and futures maybe trading at 1155. This premium depends on other factors as well. In bearish markets, you can notice future contracts trading at a discount to the spot rate. Sometimes at par with the spot rate.

The advantage of trading futures is that you have to pay only a margin amount to take a position. Ex Reliance is a 500 shares per lot. If you have to trade 500 units of Reliance in the cash market then you would need 500X1150= 575,000 (lets assume 1150 is the market price). But in the futures market you would have to pay only a margin of this amount. Say 20% margin on 575,000 = 1,15,000 rs. This margin requirement is also decided by the exchange and varies from stock to stock depending on SPAN(Standard portfolio of analysis of risk) and exposure margin.

Futures and options are primarily designed to be used as a hedging instruments and not as a speculative instrument. How is it supposed to work? Lets say you are an investor who has purchased 500 Reliance shares in cash segment (delivery buying) at 1000/-. The price moves up and is trading at 1150. For some reason you fear that Reliance stock will fall and your profits will be eroded. In order to hedge your loss, you can short sell one lot of Reliance futures at 1150. Lets assume that after 30 days the stock has falls back to 1000/- taking away your entire profit of 500*150=75,000/- ( 500 shares multiplied by 150 rs profits lost). However, your sell position in futures at 1150 is now trading at 1000/- thereby giving you a profit of 500*150=75000/-. As you can see your profits in the cash position were protected by the short sold position in the futures. On expiry day you can choose to let the contract expire or square it off and enter a fresh position.
Similarly, If the stock were to go up from 1150 to 1250, then you would be gaining 500*100=50000/- from your cash position but losing the same amount on the futures position. In both cases, you would have locked your profits of 150/- per share.

How to trade them? Just click on the futures tab in your broker platform, Select the scrip, Select the expiry, choose if you want to buy or sell, enter price and submit. Basically no different than cash segment except basic changes as mentioned above.

Trading in futures is very risky and can also be very rewarding. Taking the case of Reliance futures again.. Assume you buy a future at 1150. If price moves to 1155 then you make a profit of 5*500=2500/-( 5 rs move multiplied by lot size). Same way the loss will be 2500/- if price falls to 1145/-.

If you ask me, I would suggest you practice first in the cash segment with small qty till you learn to figure out the trend. Once you start making money consistently, you can always switch to futures. Profits/losses can be big in Futures trading. It’s a double edged sword which if used the wrong way will kill you very quickly. If it doesn’t kill you, I promise you can lose your chaddi, baniyan, lungi, bra and kaccha very very quickly. So be careful.

 

[VJAY]

Post by Riskyman about methods...........

I do not have any special trading system or method. I use same S/R, price action that everyone else uses. There is no magic. Everything I know today, I have learnt from this forum itself and by talking to wonderful and helpful people here. This forum has a ton of wealth mostly hidden under various types of rubbish. When you have time try to read as much.

The only pointer I can share is..... Irrespective of the methods used, a trader can succeed with the right psychology. Doing what suits one's need and being aware of our state of mind is more important than following the herd. Trading is mostly a game of decisions. And all decisions come from the mind. Executing trades is only 5% of the game. Positions sizes, short/long and all technical aspects contribute only a small percentage to you success. Without the right decision making ability, a trader is only as good as an expensive car without a driver. Sadly, I notice too many traders emphasizing only on technicalities and not on internal/psychological development. Therefore, train your psychology and trading will become easy.

There is no standard psychology that one can apply to all. Each one of us is different from the rest. Therefore, reading psychology books also wont help. The only thing that helps is to look and dig deep inside of yourself to know who you are. It may be difficult initially but it will come with time.
Once you do that and as the the babas and the saints say "you become one with yourself" You will have better clarity of mind. With better clarity you may make better decisions. With the progress of time, you develop instincts.. you don't have to think at all. It just happens intuitively without any thought. The japanese call this state as "Mushin" i.e "mind without the mind". A mind without anger, fear, greed, ego.

 

[VJAY]

Good lines of poem shared by Loss_lover.....perfectly suits to traders ....must keep this in mind always to be calm in trades

Trust no Future, howe'er pleasant!
Let the dead Past bury its dead!
Act -- act in the living Present!
Heart within, and God o'erhead!

A Psalm Of Life" by H. W. Longfellow.

 

[vivek.civil17]

TS 06/12/18 - 2 shorts , 1st Short is agg entry in 1 min which is neutral . 2nd short as per our Re-entry rule .

 

[raju.vzm]

TS 06/12/18 - 2 shorts , 1st Short is agg entry in 1 min which is neutral . 2nd short as per our Re-entry rule .
View attachment 31429

Vivek, my 2nd trade is different than yours. I waited until mpl forms below that vph and then shorted at bd of that mpl. Is it wrong entry?

Coming to re entry rules, on 5th Dec you didn't reentered at bd of previous mpl (you entered at bd of previous vpl) where as on 6th Dec your reentry is at bd of previous mpl. May I know the reason for that.



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[vivek.civil17]

Vivek, my 2nd trade is different than yours. I waited until mpl forms below that vph and then shorted at bd of that mpl. Is it wrong entry?

Coming to re entry rules, on 5th Dec you didn't reentered at bd of previous mpl (you entered at bd of previous vpl) where as on 6th Dec your reentry is at bd of previous mpl. May I know the reason for that.



Sent from my RealMe1 using Tapatalk

Marking in the chart will help to understand clear .

 

[vivek.civil17]

Vivek, my 2nd trade is different than yours. I waited until mpl forms below that vph and then shorted at bd of that mpl. Is it wrong entry?

Coming to re entry rules, on 5th Dec you didn't reentered at bd of previous mpl (you entered at bd of previous vpl) where as on 6th Dec your reentry is at bd of previous mpl. May I know the reason for that.



Sent from my RealMe1 using Tapatalk

I think u r asking about re-entry without lower MPH . ??

 

[raju.vzm]

Marking in the chart will help to understand clear .

My short entry

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[vivek.civil17]

My short entry

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hi @Raju . it is coming under our Re-entry rule .