stock fundas, please!

#1
Friends, I am just posing some questions that have been dangling for me for quite some time. I request you to enlighten me with any knowledge you may have on these.

1. What is your preferred exchange for carrying out your stock transactions (NSE vs. BSE) and WHY? Does it may any difference for the online traders? Can it be a trading strategy to buy stocks at one exchange and sell them at the other? Does it ever contribute to additional margins, by taking advantage of the differences in the stock prices at both these exchanges?

2. What guarantee do the BSE-30 or NSE-50 listed shares give you "in addition", when comapared to the ones that do not appear in any of these lists? Anyone can see that "over an year gains" are more in the category of the shares that do not appear in the BSE-30 or NSE-50 lists.

3. Do you really care for the "different" types of Index (BSE - group A, B1, B2 etc), and various other types in Nifty? I realize that each of them are based on different kind of groupings, but DO YOU ever make use of that grouping, is my question.

4. BSE trading seems to mandate (or offer) something like "% protection" for the trading orders you place. Why is it so, and can anyone throw some light on this?

5. We all depend on various sites (icicidirect, geogit, indiabulls, sharekhan, 5paisa etc) for analyzing the real time stock data and historical data, and to present in some kinds of charts for easy understanding of the trends. Assuming you have got the necessary systems (computers and software) to do that job by yourself, where and how to get that RAW data?

6. How do we know if a compay is a MID-CAP company, or a JUNIOR-CAP company? I know that they are classified based on the "total market capital", but what are those numbers?

Any URLs that can clarify me in these questions will also be greatly appreciated.

Thank You All In Advance!
 

Traderji

Super Moderator
#3
bhangima said:
Friends, I am just posing some questions that have been dangling for me for quite some time. I request you to enlighten me with any knowledge you may have on these.

1. What is your preferred exchange for carrying out your stock transactions (NSE vs. BSE) and WHY? Does it may any difference for the online traders?
My preferred exchange in the NSE. Since NSE has higher volumes the transaction costs (other than commissions) associated with trading these shares is lower.

Transaction costs can be divided into three components:

Transactions Costs = bid-ask spread + broker commissions + market impact

Bid-Ask Spread
The difference between the bid and the ask for a security at a given time, where the ask is the highest price anyone wants to pay for the security at a given time, and the bid is the lowest price anyone wants to sell the security for at a given time.

The simplest way to convince yourself that this spread is a cost is to consider the following scenario: you buy a stock, then turn around and sell it immediately. Since these transactions are simultaneous, the actual price of the stock is presumed constant, but you still lose the spread on the transaction. Thus the spread is part of the transaction costs.

Broker Commissions
Whenever you buy or sell stocks, you pay a commission to your broker. This is also true for institutional investors, they have to have a commission too, although it is much less than what an individual pays.

Market Impact
When an investor buys a "large" quantity of shares, she has to pay a price higher than the market price at the time of the purchase. Thus, the investor is said to "move the market," or her trade has an impact on the market prices.

Obviously "large" is a relative term. For a stock on the NSE exchange that does not trade very often, an order to buy a few thousand shares is "large," while for a stock like RIL, an order to buy a million shares is large.

Due to the adverse effect of market impact, large institutional investors tend to spread their orders over a few days or even weeks.
 
#4
Thank you for that Traderji. I am hoping that my other questions will also answered.

BTW, another question: There seem to be some brokerage that online brokers charge on the name of "speculation brokerage" (as opposed to "brokerage for delivery"). Could someone explain what it is?
 
#6
Another question, friends:

Could someone please elaborate on how to specify "stoploss" numbers associated with the stocks that are purchased? I have not seen any such mechanism with the online brokering interfaces. Is it something that we have to keep tracking manually?
 

Traderji

Super Moderator
#7
bhangima said:
Thank you for that Traderji. I am hoping that my other questions will also answered.

BTW, another question: There seem to be some brokerage that online brokers charge on the name of "speculation brokerage" (as opposed to "brokerage for delivery"). Could someone explain what it is?
Speculation brokerage probably means that you take long buy/ short sell positions in stocks with the intention of squaring off the position within the same day settlement cycle. As there is no delivery involved the brokerage charged is much less than compared to a delivery trade (brokerage for delivery) which is generally done with the intention of taking delivery of shares or monies.
 

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