Many small-cap mutual fund investors saw 100% gains in the previous year. It's no surprise that we receive several inquiries each day from people who want to know if they can still make great returns by investing in small-cap funds. Some investors are also concerned about whether they should sell small-cap funds because the stocks have already appreciated significantly. So, what should your plan of action be? Is it possible to invest in small-cap mutual funds in a secure manner? What aspects should you consider before selecting mutual funds? Is it feasible to avoid losses in small-cap mutual funds by playing it safe? Investing in small-cap funds comes with its associated risk. However, if you do it with Zebu, one of India’s leading share market brokers, we will give you the best online trading platform and investment platform to perform a comprehensive analysis. With us, you will have access to the to trade and invest in small-cap stocks. Before you invest in small-cap mutual funds, keep the following tips in mind. Before you go any farther, you should clarify one point. If you invest in equities mutual funds, especially small-cap mutual funds, you simply cannot avoid risk and volatility. Small-cap funds, as you may know, invest in very small companies with a promising future. However, the majority of these businesses have governance flaws and fail to deliver on their promises. If these companies falter even slightly, the stock market will punish them harshly. In a short period of time, the share prices could be reduced to zero. When you invest in small-cap schemes, you are incurring this risk. What are your options for dealing with this threat? You can't completely prevent it, but you can soften the blow with a few safeguards. To begin with, you should only invest in small size funds if you have a very long investment horizon, meaning, you can hold the fund for several years. If you don't have at least seven to ten years, don't invest in small-cap plans. This will allow you to recuperate your losses over time. Two, small-cap funds should never be the mainstay of your portfolio. Small-cap schemes are notorious for going through extreme swings in prices. As a result, they will not provide you with consistent returns. So, it is better to limit your exposure to them to a fraction of your portfolio. Three, choose fund houses and managers who are well-known for their expertise in managing small-cap funds. Always keep in mind that investing in small-cap schemes is really difficult; it requires recognising potential firms, taking significant interests in them ahead of time, and patiently holding on to them in order to profit. Only a few fund managers have been able to consistently give superior performances over time. Four, make sure that the fund isn't too big. In the small-cap space, finding investment opportunities is quite challenging. It becomes exceedingly difficult when you have a vast corpus. This is why many fund houses are forced to stop their subscription programmes after a specific period of time. As a result, select a scheme with a limited corpus. Last but not least, do not begin investing in small-cap schemes when you see tremendous gains and then abandon them at the first hint of a downturn. This is a certain way to lose money. If you get concerned about your assets during a market downturn, it is apparent that you lack the essential risk appetite to participate in small-cap schemes. Invest in small-cap schemes frequently over a long period of time, regardless of market conditions, if you have the proper risk profile and a long-term investment plan. Finally, small-cap investments are only for the most daring investors. If every market slump gives you the jitters, it's best to stay away from them. As we have mentioned before, small-cap stocks come with an immense amount of risk. But for those brave hearts who back up their investments with authentic research, we at Zebu have the best trading account for you. As one of the fastest-growing share market brokers in the country, we are proud to offer the best online trading platform for our clients. To know more about them and how you can invest in small-cap funds with us, please get in touch with us now.
Feb 23, 2022
As the name implies, a calendar spread is a spread technique in which you profit from the price difference between futures contracts for the same underlying in different expiries. When compared to taking a directional view on the Nifty or individual stocks, this is considered a lower-risk and more predictable strategy. Calendar spread trades are popular among institutions and HNIs looking for low-risk tactics that allow them to earn significant rupee returns based on volume. Executing calendar spreads requires a huge amount of analysis and the lowest brokerages you can find in India. As one of the fastest-growing stock broker companies in India, we at Zebu have created the best trading platform for calendar spreads and other futures and options strategies. Let's take a look at what a Calendar Spread is and how it works. What Is A Calendar Spread? The Calendar spread is the purchase and sale of two futures contracts on the same underlying for different expiries. By buying one contract and selling the other, you can establish a calendar spread between Nifty June and Nifty July, for example. This way, your calendar spread payoffs depend on the spread increasing or contracting. For example, the Calendar spread definition states that you go long on the Calendar spread when you expect the spread to broaden and short on the Calendar spread when you expect the spread to reduce. Calendar spread process flow Remember that you can execute a Calendar spread in both options and futures. Both are popular in India, but for the sake of simplicity, we will focus on the calendar spread on Nifty futures. Calendar spreads on options will likewise follow the same logic. Calculate the fair value of the current month contract as the first step in the Calendar spread. The fair value of the mid-month or far-month contract can be calculated in the second stage. You can buy the underpriced contract and sell the overpriced contract once you notice the mispricing. Your Calendar spread is now complete. You can either buy the current month contract or sell the mid-month contract based on the relative mispricing. You can also sell the current month contract and buy the mid-month contract as an alternative. There is no restriction on this. Let's look at an example RIL June Futures are bought at Rs.2,245 and RIL July Futures are sold at Rs.2,250. Your spread is Rs.5 and you expect it to alter in your favour so that you can benefit. Assume that the RIL June futures rise to Rs.2260 and the RIL July futures rise to Rs.2,257 after a few days. When the calendar is closed, you earn Rs.15 on June futures but lose Rs.7 on July futures. In other words, you made an Rs.8 profit on the calendar spread. The spread changed from a positive of Rs.5 to a negative of Rs.-3, resulting in a net profit of Rs.8 on the calendar spread. This is how spread earnings are made. In most cases, the risk associated with such calendar spreads is minimal. Key factors to keep in mind It's worth noting that when you buy and sell a calendar spread, you're buying and selling futures of the same stock, but from contracts with different expirations, like in the example of Reliance Industries. What is supposed to be gained here is the difference between the prices of the two contracts. Of course, in our example, you received a bonus because the calendar switched from a positive to a negative spread, resulting in a significantly larger profit. Calendar spreads have a modest trading risk, so the earnings you make on them are also small. As a result, this is better suitable for risk-averse institutions that rely on volume to generate rupee gains. Now we'll look at the final feature of the calendar spread. What criteria do you use to determine if a contract is underpriced or overpriced? You must use the base approach or the cost of carrying approach for this. The predicted stock price is represented by the futures price. To put it another way, the spot price is simply the current value of the anticipated futures price. You may determine which contract is underpriced and which is overpriced using the cost of carrying method. Then, in accordance, you buy the underpriced contract and sell the overvalued, resulting in a calendar spread. Just a word of warning. Only by continuing to hold the position as a spread does a calendar spread remain low risk. If you're generating money on one leg, for example, it's not a good idea to record profits on that leg while holding a naked position on the other leg. When the logic of the calendar spread is broken, it becomes a speculative trading position with significant risk. As a result, only a combination approach may be used to open and close a Calendar spread. Reverse Calendar Spread When trading options on calendars, the reverse calendar spread concept is increasingly prevalent. The reverse calendar spread is when you buy a short-term option and sell a long-term option with the same strike price on the same underlying securities. You might buy a June 1500 Infosys call option and sell an August 1500 Infosys call option, for example. The majority of spreads are built as a ratio spread, which means that the investments are made in uneven quantities or ratios. When markets make a large move in either direction, a reverse calendar spread is usually the most rewarding. Because of its complex structure and larger margin requirements, it is more widely used among institutions than among individuals. When it comes to executing calendar spreads, you need access to the best trading platform from one of the most reliable stock broker companies in the country. We also complement our platform with the lowest brokerage for trading. Please get in touch with us to know more about our services and products.
Feb 22, 2022
In our journey to list the common options trading mistakes that beginner traders make, we are at the very end. In this article, we will cover the final 4 common mistakes that options traders make and how you can avoid them by trading smarter. Before we begin though, you need to understand that options can help you grow a small account into a much larger one. However, you can enjoy all of that with the lowest brokerage you can find for options trading. Zebu gives you this and more. As one of the best brokerage firms in the country, you also get the best trading accounts from us. Please get in touch with us to know more. 7. Failure to Factor Upcoming Events When you trade options, there are two things you need to keep an eye on: the earnings and dividend dates for the stock you're betting on. If a dividend is coming up and you have sold calls, there is a higher chance that your premium will rise due to positive market sentiments. As the holder of an option, you are also not entitled to the dividends of the company. Therefore, you have to cover your call option and buy the underlying stock. The smarter way to trade Be sure to factor in upcoming events. Also, unless you're ready to take a larger risk of assignment, avoid selling options contracts with upcoming dividends. Trading during earnings season usually means you'll see more volatility in the underlying stock and pay more for the option. If you want to buy an option during earnings season, you can create a spread by buying one option and selling another. Understanding implied volatility can also help you make better decisions about the current price of an option contract and its anticipated future fluctuations. Implied volatility is calculated from the price of an option and reveals what the market thinks about the stock's future volatility. While implied volatility cannot predict which way a stock will move, it can help you determine whether it will move significantly or only slightly. It's important to remember that the bigger the option premium, the greater the implied volatility. 8. Legging Into Spreads Most rookie options traders attempt to "leg into" a spread by purchasing one option first and then selling the other. They're attempting to reduce the price by a few pennies. It simply isn't worth taking the chance. This scenario has also burnt many seasoned options traders, who have learnt their lessons the hard way. The smarter way to trade If you want to trade a spread, don't "leg in." Spreads can be traded as a single deal. Don't take on unnecessary market risk. You might, for example, buy a call and then try to time the selling of another call to get a slightly higher price on the second leg. If market circumstances deteriorate, you won't be able to cover your spread, so this is a losing strategy. You can be stuck on a long call with no plan to follow. If you want to try out this trading method, don't buy a spread and wait for the market to move in your favour. You may believe that you will be able to resell it at a greater price later, but this is an unrealistic expectation. Always treat a spread as a single trade rather than try to deal with the details of timing. You have to get into the trade before the market starts going down. 9 Ignoring Index Options for Neutral Trades Individual stocks can be quite volatile. For example, if there is a major unforeseen news event in a company, it could rock the stock for a few days. On the other hand, even serious turmoil in a major company that’s part of the Nifty50 probably wouldn’t cause that index to fluctuate very much. What’s the moral of the story? Index-based options trading can protect you from the massive swings that single news items might cause in individual stocks. Consider neutral trades on big indexes, and you can minimise the uncertain impact of market news. The smarter way to trade A short spread (also called a credit spread) on an index could be a good way to make money when the market doesn't move. In comparison to other stocks, index moves are less dramatic and less prone to be influenced by the media. Short spreads are typically designed to profit even if the underlying price remains unchanged. Short call spreads are considered "neutral to bearish," whereas short put spreads are considered "neutral to bullish." Remember, spreads involve more than one option trade, and therefore incur more than one count of brokerage. As we have mentioned before, avoiding these mistakes while starting on your options trading journey can go a long way in protecting your capital. While you take care of your options trading strategy, we take care of the rest. As one of the fastest-growing brokerage firms in the country, we provide our clients with the best trading accounts as well as the lowest brokerages for options trading. To know more about our services and products, please get in touch with us now.
Feb 21, 2022
In the previous article, we saw 3 of the most common mistakes beginner options traders can make and the smarter ways to overcome them. This article is a continuation of the list and we will cover 3 more common mistakes that can be avoided by trading smartly. But do people make mistakes only with strategies? No, it is important to choose the right technologies as well. As one of the top brokers in the share market, we at Zebu offer trading accounts with lowest brokerage, and an online trading platform to help you focus only on executing your strategies efficiently. 4. Not Trying Out New Strategies Out-of-the-money options and in-the-money options are two types of options that many traders say they won't buy or sell. These rules don't make sense until you're in a trade that's going against you. We've all been there. A lot of people break their own rules when they face this situation. You can find several options trading strategies that can be integrated into your own system. The most important point here is that buying a call option is so much different than buying a stock or its futures. But it can be a lucrative career if you are starting out with a smaller capital. The smarter way to trade Be willing to learn new ways to trade options. Remember that options aren't the same thing as stocks. This means that their prices don't move the same or even have the same properties as the stock they're linked to. Time decay always needs to be taken into account when you make plans. Find a new trade that makes sense to you. Options can be a great way to get a lot of leverage on a small amount of money, but they can also quickly lose value if you dig yourself in too far. Be willing to lose a small amount of money if it gives you the chance to avoid a disaster in the long run. 5. Trading illiquid options Liquidity is all about how quickly a trader can buy or sell something without creating a big change in the price. A liquid market is one with ready, active buyers and sellers at all times. Here's another way to look at it: liquidity is the chance that the next trade will be done at the same price as the last one. It's simple: Stock markets are more liquid than option markets because they have more people buying and selling them. Stock traders only trade one stock, but options traders may be able to choose from dozens of options contracts. If you want to trade stocks, you'll only be able to buy one type of TCS stock. Options traders, on the other hand, can choose from 3 different expiration dates and a wide range of strike prices to trade. With these many options, the options market will probably not be as liquid as the stock market. Stock or options traders don't have to worry about having enough of a stock like TCS because it's usually a lot bigger than that. There is more of a problem with small stocks. If the stock is illiquid, the options of the same stock will likely be even more inactive. This is usually going to make the spread between the bid and ask price for the options look a little too big. For example, if the bid-ask spread is Rs 0.20 (bid = Rs 1.80, ask = Rs 2.00), and if you buy the Rs 2.00 contract, that’s a full 10 percent of the price paid to establish the position. It's never a good idea to start your trade with a 10% loss right away, just by choosing an option with a wide bid-ask spread. The smarter way to trade It costs more to do business when you trade options that aren't easy to sell. A simple rule you can follow is to make sure that the associated open interest for the strike price is at least equal to 40 times the number of contracts you want to trade. For example, if you want to trade a 10-lot, you should have at least 400 open orders. Open interest represents the number of outstanding options contracts of a strike price and expiration date that have been bought or sold to open a position. Any opening transactions increase open interest, while closing transactions decrease it. You can trade options that are easy to buy and sell. This will save you money and stress. Plenty of liquid opportunities exist. 6. Waiting Too Long to Buy Back Short Options There is only one piece of advice for those who do not buy back short options and it is as straightforward as it gets: Be willing to buy back short options early. There are a lot of times when traders will wait too long to buy back the options they've sold. There are a million reasons why. For example: You don’t want to pay the commission. You’re betting the contract will expire worthlessly. You’re hoping to make just a little more profit out of the trade. The smarter way to trade Know when to buy back your short options. If your short option becomes OTM and you can buy it back to take the risk off the table profitably, do it. A Rs 100 premium option might go down to Rs 2 at expiry. You wouldn’t sell a Rs 2 option to begin with, because it just wouldn’t be worth it. Similarly, you shouldn’t think it’s worth it to squeeze the last few paisas out of this trade. Here’s a good rule of thumb: If you can keep 80 per cent or more of your initial gain from the sale of the option, you should consider buying it back. As one of the top brokers in the share market, we at Zebu offer trading accounts with lowest brokerage, and an online trading platform to execute your strategies. To know more, please get in touch with us now.
Feb 18, 2022
When you trade options, you can make money even if stocks go up, down, or stay the same. With options trading, you can cut losses and protect gains for only a small amount of money. Great, right? Here's the deal: When you trade options, you can lose more money than you invest in a short amount of time. This isn't the same as when you buy a stock. You can only lose what you paid for the stock in that case. With options, depending on the type of trade, it's possible to lose all of your money. That's why it's so important to be careful. Even if you're an expert trader, you can still make a mistake and lose money. When it comes to online stock trading and growing your trading account, another important aspect for you to consider is the share market brokers you trust. At Zebu, we offer the best trading platform that is packed with features that will help you make better trading decisions. To help you avoid making costly mistakes, we're going over the top 10 mistakes that new option traders make. 1. Buying OTM call options Buying out-of-the-money (OTM) call options is the biggest mistake you can make when trading options. OTM call options seem like a good place to start for new options traders because they are cheap. This may feel safe to you because it's the same thing you do as an equity trader: buy low and try to sell high. There are many ways to make money in options trading, but they are one of the most difficult. In this case, you might lose more money than you make if you only use this method. The smarter way to trade Think about selling an OTM call option on a stock that you already own as your first move. In the business world, this strategy is called a "covered call." The risk doesn't come when you sell an option when you have a stock position that covers the option. In addition, if you're willing to sell your stock if the price goes up, it could make you money. This strategy can help you get a sense of how OTM options contract prices change as the expiration date nears and the stock price changes. It's also possible to lose a lot of money by owning the stock, but that risk can be big. Even though selling the call option doesn't put your money at risk, it does limit your chances of making money, which is called "opportunity risk." You could have to sell the stock if the market rises and your call is taken. 2. Not Knowing How Leverage Works Most people who start trading don't think about how much risk they're taking when they use the leverage factor in option contracts. They like to buy short-term calls. As a result of this happening so often, it's worth asking: Is buying calls outright a risky or safe strategy? 3. The smarter way to trade A general rule for new option traders: If you usually trade 100 share lots, stick with one option at first and start with that. If you usually trade 300 shares at a time, then maybe three contracts would be a good change of pace. This is a good amount to start out with. If you don't do well with these sizes, you'll probably not do well with bigger size trades, too. This is a general rule. 4. Not having an exit plan You may have heard it before: When you trade options, like stocks, it's important to keep your emotions in check. The point isn't to be able to overcome all of your fears in a superhuman way. Having an exit plan even when things are going your way is part of this. Take the time to figure out where you want to leave and when you want to leave. If you start to worry about leaving some money on the table by getting out too early, don't worry. Remember this counterargument: What if you made more money consistently, cut down on your losses, and slept better at night? 5. The smarter way to trade Make sure you know how you'll leave a trade. Whether you are buying or selling options, having an exit plan can help you set up better trading habits and keep your fears in check. Determine how you want to get out of the situation on the upside and how much you can handle on the other side. In the event that you reach your upside goals, you should clear your position and take your money. Don't be too greedy. If you hit your stop-loss on the downside, you should clear your position again and start a new one. Don’t stay in a losing trade hoping that the prices may rise again. A lot of times, it'll be hard not to go against this way of thinking. Don't. Too many traders make a plan and then, as soon as they make a trade, ditch their plan and follow their feelings instead. Online stock trading requires you to stick to your plan and use the right market brokers to grow your trading account. At Zebu, we offer the best trading platform that is packed with features that will help you make better trading decisions. If you would like to know more, please get in touch with us now.
Feb 17, 2022
When you are new to trading and are Googling what it takes to be a successful trader, you’ll quickly become familiar with terms like "plan your trade; trade your plan" and "minimise your losses." And the amount of information available can soon overwhelm you. So, here is a simple, 10-step Gyan about what you should do in the first year of trading. Each of the guidelines below is vital, but their combined impact is powerful. Remembering these can considerably boost your chances of market success. But before we get into the article, make sure to always choose an online trading platform that offers either lowest brokerage or zero brokerage intraday trading. Never trade without a plan. A trading plan details a trader's entrance, exit, and money management criteria for each buy. With today's technology, it is easy to test a trading strategy before risking actual money. Backtesting allows you to test your trade concept using past data to see if it works. Once a plan is devised and backtested well, it can be employed in real trading. Your job is to simply keep to the strategy. Trading outside the trading plan, even if profitable, is considered a bad strategy. Trading As A Business Trading should be treated as a full-time or part-time business, not a pastime or profession. As a hobby, there is no genuine commitment to learning. A job without a regular income might be frustrating. Trading is a business with costs, losses, taxes, stress, and risk. As a trader, you are a tiny business owner who must research and plan to optimise your profits. Embrace Technology Trading is a cutthroat sport. It's safe to presume that the most successful traders use all available technology. Traders can use charting software to view and analyse markets in limitless ways. Using a good and trusted online trading platform with the lowest brokerage or zero brokerage for intraday trading is another important strategy. Backtesting an idea with historical data saves money. We can track trading from anywhere with our smartphones. A high-speed internet connection, for example, can considerably improve trading performance. Technology and keeping up with new products may be exciting and lucrative in trade. Preserve your trading capital. Saving money for a trading account requires time and effort. It's considerably harder when you have to do it again. Notably, safeguarding your trading capital does not imply never losing a trade. Every trader loses. Protecting capital means not taking needless risks and protecting your trading enterprise. Become a Student Of The Market Consider your career in trading as lifelong learning. Traders must keep learning every day. Remember that learning about markets and their nuances is a lifetime endeavour. Studying hard helps traders grasp economic information and help them develop an edge over the others. The ability to focus and observe allows traders to refine their skills. Politics, news, economics, and even the weather affect the markets. The market is fluid. Traders are better prepared for the future if they understand the past and current markets. Don’t Trade More Than You Can Afford to Lose First, be sure that all of the funds in your trading account are genuinely expendable. If it isn't, you should save. Money in a trading account should not be used to pay for college or the mortgage. It is dangerous to use the money for trading that is earmarked for critical expenses. Money loss is bad enough. It's even worse if it's capital that should never have been risked. Develop a Fact-Based Methodology Developing a strong trading strategy takes time. It's easy to fall for the online trading scams that promise trading strategies "so easy it's like printing money." Facts, not emotions or hope, should guide the creation of a trading strategy. In general, traders who are not in a hurry to learn can sort through the internet's vast amount of data more easily. Suppose you wanted to change careers, but you needed to spend a year or two in college to be qualified to apply for a job in the new field. Learning to trade takes at least the same amount of effort and research. Use a Stop Loss As a trader, you set your own stop loss. The stop loss might be in rupees or percentages, but it restricts the trader's risk. Using a stop-loss reduces tension when trading since we know we will only lose a certain amount. Even if a trade is profitable, not having a stop loss is undesirable. The trading plan's guidelines allow for lost trades to be exited with a stop loss. The aim is to profit from every trade, but that is unrealistic. Using a precautionary stop-loss reduces losses. Know When to Sell Inefficient trading plans and ineffective traders are the worst combinations for a trading career. If you feel like your trading strategy is not responding well over a period of time, then take the time out to re-assess and develop your strategy again. An unsuccessful trading plan is an issue that has to be solved. It is not the end of a trading career. An ineffective trader is one who sets a trading plan but is unable to follow it. External stress, bad habits, and inactivity all contribute to this issue. Traders who are not in top trading condition may consider resting. After resolving any issues, the trader can resume operations. Remain Focused on Trading Trade with a big picture in mind. It's normal to lose trades; it's part of trading. A winning deal is only one step towards a successful business. And the cumulative profits matter. A trader's performance improves once they accept wins and losses as part of the business. That is not to imply we cannot be happy about a successful deal, but we must also be aware of the possibility of a loss. Setting realistic goals is important for a trading career. Your company should make a reasonable profit in a reasonable time. Expecting to be a multi-millionaire by Tuesday is a recipe for disaster. Conclusion Understanding the value of each trading rule and how they interact can help a trader build a profitable trading firm. Traders who follow these criteria with discipline and patience might boost their chances of success in a highly competitive market.
Feb 16, 2022
Full-time traders who treat their work as a business are the ones who succeed. But the trading business can get very lonely very quickly. This might psychologically hinder your productivity but there are a few steps you can take to drastically improve your trading productivity. Here are a few of them. But Before we get started on your journey to increase your trading productivity, we believe that you deserve one of the best trading accounts from one of the top brokers in share market.With Zebu, you get access to an extensive online trading platformwith which you can create the right trading system. The first step is to create alerts. Set price notifications based on what you're looking for. Alerts allow you to be informed about price changes or other changes at a specific time of day without having to sit in front of your computer all day long. To make the most of the rest of the day, you can take a break from the computer and take in the latest market news. An investor's ability to react quickly to market changes is helped by the timely distribution of alerts. Alerts have the potential to significantly boost output. Create a system for your job and keep to it. A person's productivity is directly related to the amount of time spent working. As you trade the market, come up with a plan for yourself. You'll be more motivated to work on improving your trading performance if you establish a system. Keeping to a routine you've established for yourself is the cherry on top. Instead of waiting for the market to shift in your favour, traders who focus on ethics and stick to a process are more likely to become more profitable in the long run. Examine your area of expertise Re-examine recent trades in your trading journal. It will assist you in refining your approach. You can get a sense of how successful your trades have been by going over your previous transactions and determining whether or not they were profitable. Is it better to hang on to the traded stock for a longer period of time or not? Will you make money or lose money? And there are many more questions you can answer by going over your previous trades. The present market trends might also be better understood by looking back at your trades. It's essential to review your work to determine where you're doing well and where you need to improve, as well as where you should focus your efforts in the future. Every great trader keeps a journal of their accomplishments. Fresh air is good for you. Taking a breath of fresh air might help you relax and improve your physical and emotional health. You'll feel better about yourself, your lungs will be clearer, your immune system will be stronger, and you'll have a calmer mindset, which is especially important for trading. Trading on the stock market puts traders under constant stress, therefore it's critical that they take a break and get some fresh air to de-stress. Taking a break has been shown to enhance output. Take some time to unwind and do something you enjoy. Make an effort to engage in activities other than trading, such as listening to music, binge-watching your favourite television show, or even taking a walk by the ocean alone. Pre-market, market-time, and post-market analysis can take up to eight hours of a trader's day, which can sometimes get boring. With such a demanding schedule, mental equilibrium is essential. It is important to take a break from work in order to maintain a healthy work-life balance. When traders relax, their energy system is rejuvenated and they are able to start fresh with their trading strategies, which increases their productivity. As one of the top brokers in share market, we believe that you deserve one of the best trading accounts that we have to offer, where you get access to an extensive online trading platform with which you can create the right trading system. Get in touch with us to know more.
Feb 15, 2022
International corporate heavyweights have set up shop in India because of the country's size, the scope for innovation, and the soundness of its financial sector. From a highly regulated environment to a more liberalised one, India's robust and stable financial sector has gradually evolved. It has been ranked as the third most attractive investment location in the world by UNCTAD's World Investment Prospects Survey. Due to the country's liberal rules, the Indian market offers enormous potential for profit. Furthermore, currency trading in India is becoming the go-to place for traders from around the world to transact day and night, thanks to this dynamic environment. In India, the foreign exchange market, also known as the currency trading market, serves as a marketplace for the exchange of foreign currencies. Market information in a nutshell The NSE, BSE, MCX-SX, and United Stock Exchange all offer trading platforms for currency futures. With Zebu’s lowest brokerage fees, and our credibility as one of India’s best share market brokers, we guarantee that you will have access to the best trading accounts in the country. The currency market is open from 9:00 a.m. to 5:00 p.m. on weekdays. For currency trading, there is no cash or equity form, like we use in the Indian stock market. To begin trading, you will need a broker, but you will not require a DEMAT account in order to do so. In the foreign exchange market, we can only deal in the futures and options segments. Forex trading in India has shown an upward trend with the introduction of futures derivatives. Individuals and investors were previously only able to trade with banks and major corporations before this change. Both banks and enterprises were given greater freedom to store and trade foreign currencies as a result of India's currency liberalisation. Derivative products were necessary as trading laws were loosened to facilitate the integration of global and local economies. What is the rationale for using derivatives to manage risk? As with other financial instruments, the value of a currency fluctuates widely in response to changes in the broader economy and politics. Inflation, foreign commerce, and interest rates are all critical, but the most critical is political stability. Governments can influence the value of their currencies by intervening in the foreign exchange market through the actions of their central banks. They either flood the market with their own currency to reduce the price or buy to raise the price in order to make a statement. The currency trading market in India can also become unstable due to large orders by large firms. Foreign exchange supply is increased when a country's exports rise. Additionally, market participants' expectations of national economic performance and their faith in the economy of their respective countries also play a role. Currency trading in India could be severely disrupted as a result of these operations. For a long time, any one entity can't control India's currency trading market because of its enormous size and volume. Because of their enhanced transparency, liquidity, counter-party assurance, and accessibility, exchange-traded currency futures are an ideal hedging instrument. Due to its size, volume, and frequency of trade, currency trading in India is a substantial contributor to the national economy. As businesses of all sizes make up the majority of the economy, everything that helps them grows the national economy. Currency trading can be a rewarding endeavour if you keep abreast of global market developments. You can explore these options and more with Zebu. Our lowest brokerage fees allow you to purchase the index fund of your choice effortlessly, making yours one of the best trading accounts for currency trading.
Feb 14, 2022
The Basic Rules Of Position Sizing Most successful traders, whether they trade the forex, index, equity, or commodities markets, vouch for the relevance of position sizing in their performance. And why shouldn't they? Without proper position sizing strategies, you could be putting a large portion of your trading capital in danger. Finally, the higher the risk you incur in each trade, the more likely it is that your trading account will be closed. While it is true that the trade might sometimes provide the much-desired large win, most skilled traders will tell you that it is advisable to limit your position size rather than raise your risk needlessly. Before you secure your trades with position sizing rules, ensure that you use the best broker for trading with the lowest brokerage on offer. Zebu empowers your online stock trading journey with a state-of-the-art trading platform as well. Let's take a look at what position sizing is and why it's so important, as well as the best position sizing tactics you'll need to learn in order to enhance your trading. What exactly is position sizing? Setting the correct transaction size to buy or sell a certain instrument, or determining the Rupees amount that a trader will use to start a new trade, is the most basic definition of position sizing. It may appear easy, but it can be rather complex. Before you enter a trade, you should understand how much risk you are incurring and how it will affect your trading account. Furthermore, traders must regularly review their positions to ensure that everything is under control. Keep in mind that markets move swiftly! Furthermore, traders must keep margin requirements and margin stop out levels in mind. What is the significance of position sizing? As you can expect, opening positions with arbitrary position sizes or based on gut instinct will result in disaster. Position sizing is concerned with avoiding excessive losses. If you have a good risk management strategy and stick to it, you are unlikely to lose a large amount of your cash on a single trade. It will also provide you with an opportunity to retain your focus on your account as a whole and all your open positions. It is especially common for short-term traders who must react rapidly to new developments to lose oversight and forget how much risk they already have running before opening fresh positions. This is why it is so important: a successful trader is also a good risk manager. However, position sizing is about more than just avoiding excessive losses. It also provides you with the opportunity to improve your performance. A risk-averse trader who is only ready to risk a small fraction of his capital must realise that he will never generate significant returns. As you can see, position sizing is all about striking the appropriate balance - allowing yourself to maximise profits while avoiding excessive losses. Proper position sizing along with profit-taking tactics can assist traders in developing the optimal strategy for entering and leaving all trades. How do you calculate the size of your position? Let's have a look at a handful of popular position sizing approaches you can use to improve your trading and make better use of position size. Position sizing strategies that work well 1. Fixed rupee value The simplest method to include position sizing into your trading strategy is to use a fixed Rupees amount. This may be especially useful for those who are new to trading or have a little quantity of capital. All you have to do is set aside a certain amount of money for each trade you make. For example, if you have Rs 10,000 in trading capital, you could want to set aside Rs 1,000 for each trade. That is, instead of investing the entire cash into one deal, you can divide it into ten. This instantly reduces the amount of risk you take with each trade. It will also aid in the preservation of your capital if the first few deals you make turn out to be losses. 2. Fixed percentage The most often utilised position sizing approach by traders is a fixed percentage risk each trade. On each trade, you put a small portion of your total cash at risk. Depending on the financial asset you're trading — for example, equity, metals, oil, or indices – most successful traders would agree that a 1 – 2 percent per trade risk is a decent starting point. If you employ the set % risk per trade strategy with a Rs 10,000 trading capital, you should only risk Rs 100 – Rs 200 per trade. The beautiful thing about this method is that it forces you to focus on the percentage risk rather than the monetary value. Then, as your capital rises from Rs 10,000 to Rs 20,000, your 1% risk every trade rises from Rs 100 to Rs 200. Similarly, if your capital falls, you still risk 1%, but it will be a smaller Rupees amount. If you don't, you'll quickly discover that the large risks you incur in each trade will quickly deplete your trading cash. 3. Use of leverage While leverage is one of the primary draws for traders to the equity, index, and commodities markets, we all know that leverage can be a double-edged sword. It has the ability to amplify both successes and defeats. Many trading platforms give leverage ranging from 3:1, 5:1, 10:1, or even 20:1. However, when it comes to leverage, keep in mind that you do not have to employ the utmost level of leverage. Just because it's on sale doesn't mean you have to take advantage of it. It is preferable to utilise less leverage to ensure that you are limiting your risk exposure. If you use too much leverage, you increase your chances of experiencing a capital loss or a margin call if a trade goes against you. 4. Kelly's Criterion Let's have a look at the Kelly Criterion formula: W − [(1-W)/R] = Kelly % It computes the percentage of your account you should put at risk (K per cent). It is equal to your trading strategy's historical win % minus the inverse of the strategy win ratio divided by your profit/loss ratio. The proportion you receive from that equation represents the stance you should take. For example, if you get 0.05, you should risk 5% of your capital per trade. These are 4 of the very basic position sizing rules and points to keep in mind while trading. In a world where trading is one of the riskiest businesses to be in, following the rules of position sizing can drastically improve your risk management. As we mentioned before, we at Zebu offer the lowest brokeragefor trading and, as a result, have emerged at as one of the best brokers for trading. Take your online stock trading to the next level with us - please get in touch with us to know more.
Feb 11, 2022
Every trader would love to trade a well-funded trading account - with a minimum balance of INR 10,00,000 - but only a small percentage of us are able to do so. Most traders, especially those who are starting their trading careers, start with a small account. Trading with a limited account requires tight risk management and money management due to the lack of a cushion for mistakes or unexpected losses. For example, if a trading account only covers its minimum margin by Rs 20,000 and suffers a Rs 30,000 loss, the account will become untradeable until more funds are deposited. When it comes to online stock trading with a smaller capital, you need the best trading platform to back up your trading decisions. As one of the best share market brokers, we have created an online platform that is fully loaded with indicators, scanners and other tools to make trading easy. Here are some pointers for people with a modest trading account. The Constraints of a Small Account Trading with a small account is far more difficult than trading with a large account. Large accounts are protected against mistakes, unexpected losing streaks, and even bad traders, but small accounts do not have this protection. Even if you can afford losing streaks, trading with a small account has psychological concerns that make it difficult to trade well. For example, if a trader knows that they can only afford one loss in their trades, their account can be untradeable (due to a lack of needed margin), and the pressure to make a profitable trade is great. There are also differences in what a small-account trader is legally permitted to do. Large accounts can trade every available market, however, small accounts may only be allowed to trade specific markets in specific ways. Large accounts permit more flexible trading, such as several contracts and short positions, whereas small accounts may be restricted to long positions that can be covered with cash. Here's our advice With all of the difficulties, it might appear that trading a small account profitably is impossible. However, this is not the case, and many traders, including experienced traders, trade small accounts profitably. Using Leverage in Trading Trading with leverage gives traders the opportunity to make upto 4X in profits for the trades they are right about. When day trading individual stocks, for example, you can normally trade up to four times the amount of funds in your account. Trading the same underlying stock in the options requires only about 15% of the trade's value in cash. Trade with Caution Traders with well-funded accounts can afford to take high-risk bets, such as those with substantial stop losses in relation to their targets. Small-account traders must be extra cautious, ensuring that their risk-to-reward and win-to-loss ratios are calculated and used effectively. Follow the 1 per cent risk rule Trading with the 1% risk rule gives a small account the same cushion (against mistakes and unexpected losses) as a large account. Because it is a very successful risk management approach, many expert traders adhere to the 1% risk rule regardless of the size of their trading accounts. In conclusion Some traders are sure that trading accounts with insufficient capital cannot be profitable. This assertion is false. Small trading accounts may be more difficult to trade successfully, but if done right, there is no reason why they cannot be profitable. Small account traders can make a solid livelihood from trading, but they must manage the stress that is often associated with undercapitalization. The biggest focus should be on risk management and its strategies, especially the 1 per cent risk rule. With these considerations in mind, you may be able to grow your capital considerably. Profitable trading is one approach to grow a modest account, but if you're conservative and follow the 1 per cent risk limit, the growth may be slower than you'd want. You could pursue higher risk/higher return transactions, but this exposes you to the chance of losing your entire account. Many traders with a small account may discover that they require additional sources of income, such as a day job, in order to substantially increase capital. When it comes to online stock trading and growing your trading account, another important aspect for you to consider is the shar market brokers you trust. At Zebu, we offer the best trading platform that is packed with features that you will help you make better trading decisions. If you would like to know more, please get in touch with us now.
Feb 10, 2022
How To Backtest Your Strategy Manually There are numerous applications and trading platforms available now that allow you to backtest your strategy. However, you may not always have these tools available, or you may want to see the complexities of your strategy in action. The good thing is that you can independently backtest your strategy. All you need is your trading strategy and historical data to accomplish this. Even if you do it manually, backtesting a plan is not difficult. However, employing a programme or a platform makes things much easier. What exactly is backtesting? Backtesting is the foundation of developing trading techniques and edges. During a backtest, a new approach is tested against historical data to determine its effectiveness. This has a lot of advantages, such as being able to watch the plan in action and evaluating whether or not any of the parameters need to be changed in order for it to function. If a trader's backtesting provides positive outcomes, he or she may have faith in the approach. If a backtest does not produce acceptable results, adjustments will most likely be required. You might also find out that the strategy you devised isn't worth pursuing. While backtesting is a terrific idea, it must be done with extreme caution. As we'll see later, it's entirely feasible that a method that performed admirably in the backtest may fail miserably on real-time data. There are, however, solutions to this difficulty. How to Backtest Your Strategy Manually Backtesting is typically performed by those who are familiar with coding. Those who are unable to code must rely on a backtesting platform. If you decide to manually test your approach, you can simply choose any chart that provides access to the indicators required for your plan. TradingView and MT4/MT5 now offer the finest free options. Let's look at how to manually backtest your plan now. Or, you can use your trading platform's in-build charts as well. For example, Zebu comes with an impeccable trading platform that you can use to manually backtest your strategy. You can view charts in multiple time frames and use a host of indicators and screeners to backtest your strategy. 1. Develop the Strategy Before you can backtest a strategy, you need to develop one in the first place. It is critical that you do not test half-heartedly since this would be a waste of your time. Create a trading plan based on your understanding of the market. When you're done, take a good, long look at it and try to examine each individual parameter. If something does not appear to be correct, make the necessary changes before proceeding to backtest. Your entry/exit signals, conditions, timeframe, and risk per trade are all important considerations. After you've finished developing your plan, you may begin backtesting it. 2. Choose your charts Choose the market in which you want to backtest your data. Once you've found the market, open the chart you're using and choose a timeframe from the past. Traders typically backtest their method for at least a few years. While some traders believe that scrolling back to the beginning of the chart is necessary, this is not the case. You should be alright as long as you can backtest your technique over a prolonged period of time. A sample size of around ten years gives enough history to build a reasonable sample size. Then, using the tools on your chart, pull up all of the indicators you'll need for your trades. Ascertain that your chart is properly configured with all of the trading tools that will be required during the backtest. You are now ready to begin your backtest. When you choose a share broker for backtesting and trading, ensure that you choose the best online trading platform like Zebu. Our charts, along with the wide range of indicators we have can help you formulate the most complex as well as easy trading strategies and backtest them manually. In addition to this, we also support your trading with the lowest brokerage for intraday trading. 3. Perform Manual Backtesting on Your Strategy You might have already figured out what to do next! Backtest your method by moving the chart ahead bar by bar. This entails recording trades anytime your trading method suggests it. Recording your trades is actually pretty simple, and it can be done using either a physical journal or software like Microsoft Excel. It is not difficult to keep track of your trades, but it can be time-consuming. When a trade signal is generated, all you need to do is record the entry point, stop-loss, date and time, and any other information that may be relevant to the trade. Many traders like to mention other nuggets that their trading method is informing them, such as the risk to reward ratio, and so on. When you're ready to exit the trade, make a note of your return as well as the exit point. After that, you simply repeat the procedure. Backtesting, as you may have guessed, can be tedious and time-consuming. Remember that backtesting a decade of data will most likely take at least a few hours. As a result, when you sit down to backtest a technique, make sure you have the time. The Drawbacks of Manual Backtesting The issue with manual backtesting is that you can make mistakes when tracking the data. In addition, when backtesting your technique, there is a psychological component involved. Because you can see the data ahead of you, you may not wind up executing the trades that your method suggests. People usually try to excuse this by saying, "I wouldn't have made that trade in real life." Simply do not do this! If a trade fulfills your criteria, make a note of it! If you are able to authentically and honestly note down your trades while backtesting manually, then you do not have to sprint for expensive programs and data plans to backtest. Your journal or excel sheet would suffice. As we have mentioned before, when you choose to start with manual backtesting, you need an online trading platform that accommodates every complexity of your trading system. As a leading share broker, we at Zeu have created an online trading platform that comes with a host of indicators to help you formulate and backtest a strategy. In addition to this, we also support your trading efforts by giving the lowest brokerage for intraday trading.
Feb 09, 2022
One of the decisions that new traders must make is whether to be a discretionary or a system trader. Discretionary trading is trading that is based on a decision. Based on current market conditions, the trader determines which deals to execute. System trading, on the other hand, is based on rules. The trading system determines which deals to execute; current market conditions are irrelevant. Discretionary and system trading can both be profitable. That is, the decision should be made based on the trader's personality. Some traders may immediately determine which kind of trading is best for them; others may need to try both sorts before deciding. Whether you are a system trader or a discretionary trader, we provide you with the best trading accounts to choose from. As one of the top brokers in share market, we provide one of the lowest brokerage fees to help you make as many trades as you would like for the day. The Benefits and Drawbacks of Discretionary Trading The trader picks the transactions to make based on the information available at the moment in discretionary trading. A discretionary trader can (and should) nonetheless stick to a trading plan with well-defined trading guidelines. They will use their discretion in accepting the trade and managing it. A discretionary trader, for example, may study their charts and discover that all of their requirements for a long trade have been met. Nonetheless, they may decline to make the trade since the volatility for the day is too low, and so the price is unlikely to reach the profit target for the trade. The benefit of discretionary trading is that it is responsive to market situations. You may have an excellent trading system, but if you are aware that it performs poorly in particular market conditions, you can avoid those trades. Alternatively, if you see your strategy performs well in other conditions, you might increase your position size somewhat during such times to optimise gains. The disadvantage of a discretionary method is that many traders are prone to second-guessing themselves. They may be inept at determining when to trade and when not to trade; consequently, a more methodical approach would be preferable. Discretionary systems are vulnerable to trader psychology; being overly greedy or scared can quickly erode the profitability of a discretionary trading system. System Trading Benefits and Drawbacks The choice to make a trade in system trading is totally dependent on the trading system. System trading choices are final. They do not allow the dealer to decline a trade at his or her discretion. If the criteria are met, the trade is executed. A system trader may study their charts and discover that their trading system's requirements for a short trade have been met. They will complete the transaction without any further deliberation. This is true even if their "gut" tells them it isn't a good trade. System trading techniques can frequently be automated since the rules are so well defined that a program can carry them out on the trader's behalf. Once a program has been built to determine when the requirements of a trading system have been completed, the program can make the trade without the trader's involvement. This involves entry, management, and exit. The system trading approach has the advantage of being immune to the trader's psychological whims. The system accepts all trades regardless of how the trader feels. The disadvantage is that systematic trading is not very adaptable. Trades are always accepted as long as the terms are met, even in less advantageous conditions. More rules can be introduced to the system to help overcome this problem, however, this often results in the loss of some winning trades. Discovering Your Personal Style Discretionary trading and system trading both aim to make money, but in slightly different ways. The two systems may even make many of the identical trades. Each will most likely be better suited to different types of traders. Discretionary trading is ideal for traders who desire complete control over their trading decisions, including entry, stop loss, and exit. Discretionary traders frequently feel uneasy about handing over total management of their trading to software. Discretionary trading is also for folks who just want to adjust their transactions to current market conditions. System trading, on the other hand, is ideal for traders that value speed, precision, and accuracy in their trading. System traders have no reservations about using a computer program to make trading choices for them. They may cherish the sense of diminished responsibility that this provides. Can You Use Both Methods? It is feasible to be a discretionary trader who employs system trading. However, it is not viable to be a system trader who also employs discretionary trading. A discretionary trader, for example, may use a trading system for their entries and take every deal that the system identifies. They can then manage and exit their deals at their leisure. A system trader does not have this option because they must adhere to their trading method exactly. If a system trader makes a decision without following the rules of their strategy, then he/she becomes a discretionary trader. All of your trades, whether you are a discretionary trader or a system trader, need to be complemented by the lowest brokerage and the best trading accounts you can find. As one of the top brokers in share market, we at Zebu offer low brokerage trading accounts and a high-end trading platform to execute your strategies. To know more, please get in touch with us now.
Feb 08, 2022