Investing in an IPO can be a great way to build wealth with promising companies. However, if last year is anything to go by, IPOs can be extremely tricky to invest in. If you are purely investing in an IPO to benefit from the listing gains, we suggest that you find promising companies, apply to the IPO and sell your shares on the day that it gets listed. However, if you are a long term investor, you can hold on to your gains. In this blog, we'll talk about what an IPO is and the 10 Things to Check Before Investing in them. 1. Read the Red Herring Prospectus. A company files the Draft Red Herring Prospectus with SEBI when it wants to sell its shares to the public to raise money. This document explains how the company plans to use the money it gets from the public and what risks investors might face. So, people who want to invest in an IPO must read this document first. 2. Reasons for Raising Money: It's important to know what the company plans to do with the money it gets from the Initial Public Offering. One should find out if the company wants to pay off its debts or if it wants to raise money to grow the business, or use the money for other business purposes. This shows that the money will be used well in the business, which is a good sign for an investor. 3. Know the business model: Before investing in the Initial Public Offering, investors should know what kind of business model the company has. Once they know what kind of business the company is in, the next step is to find a new market opportunity. This is because the size of the opportunity and the company's ability to get a share of the market can make a big difference in the company's growth and shareholder returns. If investors don't understand what the company does for business, they shouldn't buy into its IPO. 4. Analyzing the background of the company's management and promoters: It's important to find out who runs the business since they are the company's backbone. Investors should look at both the people who started the company and the people who run it since both play important roles in how the company works. The company's management is a big part of what moves the business forward. One should look at the qualifications and length of time that the company's top management has been there. This gives an idea of how the company works. 5. The company's strengths and weaknesses: Before putting money into a company's IPO, you should do a SWOT analysis of the company. The DRHP can be used to figure out what the company's biggest strengths and weaknesses are. Investors should find out where the company stands in the industry it is in. People who want to invest in a business should try to learn as much as they can about the company and the strategies it uses. 6. The company's valuation: Investors should also check the company's valuation, since the offer price could be too low or too high depending on the industries it works in and its financial ratios. 7. The company's health: It's important to look at how well the company has done financially over the past few years to see if the company's sales or profits have been growing steadily. If the company's sales are going up, it might be a good idea to invest in its Initial Public Offering. Before putting money into an IPO, investors need to know how healthy the company's finances are. 8. Investment Horizon: An investor should know what their investment horizon is before putting money into an IPO. They should decide if they want to buy shares in the IPO just to trade them on the day it is listed or if they want to keep them for a longer time. The reason for this is that a trading strategy would depend on how the market is doing right now, while a long-term strategy would depend on how the company is doing in its core areas. 9. Comparable Peers: Investors should also look at who the company's competitors are. The DRHP compares the company to its peers in terms of both its finances and its value. Investors can look at how the company is valued compared to its peers to see if it is priced fairly. 10. The company's potential in the market: Investors should also look at the company's opportunities and threats in the sectors where it operates. This is important for long-term investors to determine if the investment is worth it.
Jun 07, 2022
A well-diversified equity fund, which is usually just called a "diversified equity fund," invests in companies of all sizes, no matter how big or small they are. Diversified Equity Mutual Fund: What is it? A diversified equity fund puts its money into companies of all sizes and in all industries. It spreads investments across the stock market so that investors can make the most money possible while minimising risk. Unit-linked insurance plans (ULIPs), mutual funds, and other investment firms all offer them. There are many different types and sizes of companies on the stock exchange. 1)large caps 2)mid caps, 3)small caps. How does a fund with a wide range of stocks work? A diversified equity fund also invests in companies from different sectors and industries. So, it can take part in the growth of the whole economy and isn't tied to any one sector or industry. They can choose to put their money into businesses from - Pharmaceuticals Technology Engineering Automobiles Power/Services Services for banking and finance Gas and oil Simply put, a diversified equity fund invests in companies from different sectors, industries, and sizes of the market. Diversified equity funds, which include both ULIPs and mutual funds, are created so that investors can profit from the financial growth of companies of all sizes and in all industries and sectors. The rules for investing in ULIPs and mutual funds are different, and investors are told this in product literature and on company websites. Who does it work best for? Diversified equity funds can be helpful for investors who like stocks and have long-term goals like planning for retirement or saving for a child's education or wedding. They can be used on their own or as part of a portfolio with other investments.
Jun 06, 2022
Experts say that reading a company's quarterly earnings is an art that must be honed over time with careful and deliberate work. A company's quarterly earnings report is like an internal compass that shows how it is doing now and how it will do in the future. It also helps figure out how much the company is worth. Still, many regular investors still don't understand how a company's quarterly earnings work. How to read a company's quarterly results? What can you tell about the company from these results? Why do companies even bother to report their quarterly results? Security and Exchange Board of India (SEBI) rules say that every listed company must make its quarterly reports public. This is to protect the interests of investors. As an investor in a company, the quarterly results will help you figure out how the company is doing now and how it will do in the future. You can also tell from the quarterly result if you should invest in the company for the long term. The quarterly results of a big company could have a direct effect on the market for short-term investors or intraday traders. When a big company announces its quarterly results, the markets go up or down depending on the effect. How can you read results for a quarter? If you are a beginner you can focus on three main parameters of the report. These are the sales growth, debt to equity ratio and promoter holding. WIth an increasing sales growth and a high promoter holding, you can know that the company is doing well. Debt to equity ratio tells you whether the company has incurred more debt compared to the previous quarter. Gross sales Gross sales is the total amount of money a business makes in a certain amount of time. Gross sales that keep going up over time are a sign of growing demand and a healthy business. Net sales Gross sales minus discounts, returns, and allowances equal a company's net sales. When putting together the top-line revenues and the statement of income, net sales are often taken into account. This is a better measure of the health of a business than gross sales. Expenses and income Operating income is the amount of profit made by a business after operating costs like wages, depreciation, and the cost of goods sold are taken out. It shows how much money the company is making. On the other hand, other-than-business income is income from sources other than the business. It includes, among other things, dividends and rental income. A steady drop in operating income could mean that the company is losing market share or that fewer people want to buy its goods or services. Things to think about when writing quarterly reports Interest cost To run a business, the interest cost is the money paid for a loan amount. So, if the cost of interest goes up, it means that the company has more debt. What else should you look for in a quarterly earnings report? Investors should also look at things like net interest margins and non-performing assets when it comes to banks. Experts say that investors should also look at how much cash the company has on hand and how many shares have been pledged. Not every company may be declaring their pledged shares every three months. Investors should also look at the asset-liability statement, which shows half of the financial year when they look at the results for the next quarter. Why should investors pay attention to news about earnings? Earnings reports are often one of the most important things that move stocks. When big stocks report earnings, they can shake the market. When the earnings reports come out, the stock market could be at a record high or a record low. When a company's sales go up but it doesn't meet the analysts' expectations, people will sell their shares quickly. So, the report's estimates are also just as important as the report itself. Before analysing the quarterly reports, make sure to compare them with the previous year’s audited report as well. This will help you with understanding the projections for the upcoming quarter as well.
Jun 05, 2022
We all know that investing in stocks can be good because, if done right, it can give you a huge return. We buy our stocks from the companies listed only on the stock market. However, there are companies that are not listed on the market whose shares you can buy. These are called unlisted stocks. Many of us don't know that there are many benefits to investing in shares that aren't on the stock market. 1. Diversification of risk Unlisted shares have different risks than listed shares and can be a good addition to a portfolio of listed shares. They can be a good way to spread out your investments. Unlisted shares have the same or a better chance of making money than listed ones. There's a chance that these stocks will go public at some point in the future. When they do, there's a good chance that they'll go up a lot. But whether you buy listed or unlisted shares, it's important to look at the valuation metrics along with the price and buy stocks that are undervalued but have a good chance of growing earnings. 2. Undervaluation: Since most unlisted shares can't be sold quickly, they can only be bought by people who are willing to keep their money invested for a long time. Since there is less interest in these investments and fewer people want to join this community, the valuations are usually lower. There are many chances to invest in a stock that is undervalued. To find these opportunities, you need to be smart and know what to look for. For a beginner, it may be best to hire a professional who can give them the help they need. 3. Lower volatility Because the shares aren't easily sold, there are a lot fewer worries about their volatility. The standard deviation, which is a technical way of talking about how volatile something is, is much lower than listed shares. But if the wrong investment is made, the amount of money lost can be very high. Demand and supply for these stocks are not tracked every day, so the price would not change every day. When compared to listed shares, this investment will be less stressful in terms of money because the prices are fairly stable. How much should you spend on unlisted stocks? One should only buy unlisted shares if they are a good fit with the rest of their portfolio. Going overboard can make things a lot more dangerous. It is important to figure out your risk-appetite and how risky the investment is. Then, you can choose an investment that fits your risk profile. The risk of losing a lot of money in unlisted stocks is very high, so it's important to only buy as much as fits your risk tolerance. We suggest that if you are a beginner investor you should keep away from unlisted stocks but if you are an experienced investor, that you still take the help of a financial advisor before investing in unlisted stocks.
Jun 04, 2022
VaR and SPAN margins are related to every position you take in the stock market, especially if you trade in FnOs. But what exactly are they and how can you calculate them? Here’s everything you need to know. VaR is a way to measure the risk of a loss. Value-at-risk, or VaR, is a way to measure the downside risk or potential loss of a portfolio or investment over a certain amount of time. It helps analyse and estimate how much the minimum loss can be with a certain amount of confidence. Essentially, it is a number that tells you how risky a portfolio is. For example, VaR can tell us that an investor can expect to lose at least 2% of the total value of their portfolio on 1 out of every 15 days. So, it helps figure out how much money could be lost, how likely it is to lose that much money, and how long it could take. Statistical simulations can be used in a number of ways to figure out VaR. The risk management department of a company keeps a close eye on this parameter and tries to make sure that extremely risky trades are not taken. Margin SPAN On the equity markets, traders also need to have a certain amount of money set aside as "margin money" to help cover trade losses. But it is hard to guess how much of a margin is needed to cover all the losses if the market shows the worst-case scenario. As a result, the SPAN, which stands for Standardised Portfolio Analysis of Risk, is a standard way for traders to figure out how much margin money they need. When figuring out margin amounts for every single position, the SPAN system uses complicated algorithms and machine learning techniques. Each margin amount is equal to the most a single account can reasonably lose in a single trading day. It was made by the CME in 1988, and more than 50 exchanges around the world use SPAN as their official way to figure out how much margin they need. This margin is different for each security because each one comes with a different level of risk. For example, the SPAN margin for a single stock will be higher than that for an Index because single stocks are more risky and volatile. Risk management Every trader who is successful knows how important it is to manage risk, which is even more important than making money. With the help of VaR and SPAN calculations, a trader can keep a large number of contracts in their portfolio and stay away from serious margin calls. More brokers and financial institutions are now focusing on better ways to handle risks. Many of them require that, in addition to SPAN margin, which is collected when trades are started, an additional margin called Exposure margin to be collected to protect against liabilities caused by wild swings, rogue trades, or reactions to extreme stress in the market.
Jun 03, 2022
As a regular investor, here's how you can start Algo trading. As top brokers in share market , Zebu, allows you to use algo trading for free, along with offering the lowest brokerage for intraday trading options and proving users with the best trading accounts 1. Learn about the market Before you do any kind of trading, you need to learn about the market. Before you start Algo trading, you should learn as much as you can about the instrument or market you can trade in. This will help you come up with a hypothesis that you can use to guide your trades. 2. Know how to code If you don't know how to code, you can learn a language like Python and make an algorithm that works for you, or you can pay a professional to do it for you. 3. Backtesting You must test your algorithm before putting it into use. Back-testing is a way to make sure that your strategy will work in the future. You can also use software from a third party to check if your algorithms work. You can change your code based on whether or not they work. 4. Decide on the Best Platform As crucial as your coding is, you must also choose the correct broker and platform. Choose a broker that supports your algorithm and gives you a variety of tools to help you improve your trading strategy. For example, at Zebu we offer a free algo-trading provision that traders can use to execute their trades. If you would like to know more, please get in touch with us. 5. Go Live When you're happy with your algorithm, take it live. Monitor its market and real-world performance. Your algorithm might not always work. You might then have to start over or make changes to fit your needs. 6. Keep Evolving Even if your first strategy doesn't work, you don't have to give up on algorithmic trading. Keep trying out different codes to see what works best. If you don't have the time or skills to make your own algorithm, you can buy Algo software that will do the job for you. Do your research, try out the strategies with past data, and choose the one that works best for you. Conclusion Traditional investors can boost their trading approach by trying Algo trading. You can take advantage of short-lived trading chances that you would have missed otherwise. Algo trading can help you become a good trader who is quick, efficient, and successful. Is algo trading costing you a bomb? Zebu, As top brokers in share market allows you to use algo trading for free, along with offering the lowest brokerage for intraday trading options and proving users with the best trading accounts.
Jun 02, 2022
There are many opportunities on the stock market. Yes, there is nothing better than believing in a stock and seeing it go up in value by a lot. But since the stock market has grown into a big, complicated beast, there are other ways to make money consistently, like catching a short-term trend or reversal pattern or using options structures to profit from short-term moves. Are you in the search best stock trading platform? Then, your search ends here. We make online stock trading easy with our best trading platform. If you tried to use these strategies manually in a market that keeps getting bigger and bigger, you probably gave up because it was too hard. But if you use technology and automation to help you trade, you'll see that you can make trading less stressful and easy. In a nutshell, that's what Algorithmic Trading has to offer. As Indian markets become more developed, it will change the stock market in a big way. Even though Algorithmic Trading has been around for a while in India, it is still in its early stages. Algos make up 70–80% of the global market volume and have many different structures, rules, and participants. In India, however, algos only make up 50–60% of the market volume and are simpler and less understood. Around 2010, algorithmic trading began in India, but at first, only Institutions and brokers used it. But now, thanks to the growth of digital discount brokers and API solutions, anyone in the retail market can make algorithms, and the possibilities are endless! Algorithmic trading is becoming more popular, and people are learning more about it and getting better at it. But even so, there is a lot of room for growth for Algos in India if you look at how they are used in other markets. Algorithmic trading is different in many ways. Not only does it give the trader the chance to make money, but it also makes trading more systematic by removing the effects of human emotions and mistakes. It also makes the market run better and have more money in it. The main reasons why algorithmic trading is better than manual trading are that it is faster, more accurate, and saves money. Algorithms can find patterns and trades in a fraction of a second, which is faster than humans can see. When a machine follows instructions that have already been set, accuracy and precision are good. Also, the algo keeps an eye on your orders all the time without you having to do anything, which cuts down on trading time and costs and saves you a lot of time. Most people are interested in algorithms that are used for systematic trading. Trend watchers, hedge funds, and pair traders find that it is much more efficient to programme their trading rules into software and then let the software trade on its own. But apart from that, Execution and Arbitrage are two large areas of trading where algorithms are used. Mutual funds, pension funds, and insurance companies use algorithms to split up their orders when they don't want their single, large-volume trades to affect stock prices. And there is arbitrage, which is buying and selling instruments that are highly related to each other to make consistent small profits from the spread and make the market work better. Then comes high-frequency trading, which means they trade every millisecond, or medium frequency, which means they trade every few minutes or even days. Trend following, also called momentum trading, and mean reversion, also called range-bound trading, are two other important types of algos. Smart Beta is a way to invest in market inefficiencies based on rules. It is becoming more popular in India. High-frequency traders use arbitrage and market-making, which is a way to trade on both sides of the range. Rules and the Way Forward: Along with the growth of markets, India is also changing its rules for Algorithmic Trading. SEBI has recently put out a consultation paper to make automated trading rules stronger and better for the end customer. Algos have had their fair share of problems, like the Colocation scam or the way some algo traders take advantage of people. But as the industry becomes more well-known, the inefficiencies would be fixed, and algorithms would change the markets by making them more efficient, fair, and data-driven. If you are looking for the best stock trading platforms? Then, we are here to help you. We make online stock trading easy with our best trading platform.
Jun 01, 2022
Algorithmic Trading is something that investors use in many different ways. Here are some of the most common. As an online share broker, we understand the need for an efficient online trading platformand we offer our customers just that. Also, get in touch with us for the lowest brokerage options. Rebalancing: Index funds constantly change their holdings to match the current market price of the asset they track. So, they give algo traders chances to take advantage of the trades that are expected and make money from the difference of 20–80 basis points. Most of these trades happen when an index fund rebalances are done through algorithmic trading. Trend Following: This is the type of algorithmic trading that algo traders do most often. In this process, they use moving averages, price changes, channel breakouts, etc. to make a set of instructions for the algorithmic trading software. Arbitrage: It is when you buy a stock at a low price in one market and sell it at a high price in another market at the same time. You make money from the price difference. Investors use data to find stocks that are trading at different prices and then use algorithmic trading to place buy and sell orders in both markets. Mathematical Model: Investors trade on the stock and derivative of the same underlying asset by using mathematical models that have been tested and shown to work. Since this can be a complicated set of trades, they use algorithmic trading to find these assets and place orders across different asset classes based on price changes. Mean Reversion: This strategy tries to take advantage of an asset's temporary highs and lows. If given enough time, the asset price will always go back to its average value (average price). VWAP: Investors use algo trading to set a price range for an asset and make sure it automatically buys or sells when the price goes in or out of that range. Investors seek to execute orders as close as feasible to the VWAP. With algorithmic trading, investors can break up large orders into smaller pieces that change over time and make sure their closing price goals are met. Please keep in mind that these are just a few of the strategies that you can use with algo trading. Apart from this, you can also trade breakouts, chart patterns and price actions as well. As we mentioned earlier as an online share broker, we understand the need for an efficient online trading platform and we offer our customers just that. Also, get in touch with us for the lowest brokerage options.
May 31, 2022
An algorithm is the core of every computer programme and how it works. With the rise of new technologies, the effectiveness of almost every sector is based on this piece of logical coding. Algorithms use user data, patterns from the past, and a set of instructions that have already been decided on to reach their goals. In the financial world, the need to lower transaction costs is driving more people to want to use algorithms in everything from customer service to trading stocks. When you trade with algorithms you need to have a powerful technology to support you and we understand that. As one of the top brokers in share market, we offer the best trading accounts and the lowest brokerage for intraday trading. Algo-trading is the technology that changes the most quickly. It has amazing and smart features that make trading faster and better for market participants. Financial institutions like banks, brokerage firms, and investment funds use complex algorithms to open and close positions at lightning speed. This setup lets these institutions take advantage of small differences in real-time market conditions, which is harder to do manually. Algo-trading constantly watches markets and places orders when conditions match a set of parameters, such as volume, price, resistance, support, or any other factor that the trader or market participant is comfortable with. One of the benefits of algorithmic trading is that it can easily and quickly find a trend by using the data that is already available. If they can't analyse a large amount of data quickly, it's hard for market participants to act quickly. Market participants can also use more than one strategy at the same time and decide what the net result of the strategy will be. Let's look at an example to see what I mean: if a market participant has used 10 different strategies on one stock, the system will suggest other ways to trade that stock. If 7-8 of these 10 strategies give buy signals, the trader will buy the stock. Most of the strategies are giving buy signals, so it makes sense to think that the strategy will be good. Algo trading uses technology and computers to make trade decisions, which can be hard for traders who don't know much about the financial markets to do on their own. Trading automation is a great way to try out different strategies and automate boring tasks to get results faster. Also, the use of algorithms in financial services is likely to create growth opportunities in the near future that will be very profitable. There is no doubt that algorithmic trading will be used more often, especially now that platforms exist to make complex technologies easier for everyone to understand. When trading with algorithms you need to have a powerful technology to support you and we understand that. As one of the top brokers in share market, we offer the best trading accounts and the lowest brokerage for intraday trading.
May 30, 2022
Algorithms are everywhere. From our smartphones to laptops to anything with technology, algorithms power the functionality of billions of entities. With the rise of more advanced technologies, this piece of logical code is now used in almost every field. Algorithms use user data, patterns from the past, and a set of instructions that have already been decided on to reach their goals. Mutual Fund companies, for example, use an algorithm to take the set amount out of your bank account every month for a SIP Algorithms are used in the virtual transaction system to make sure that trading is clear, that users have a good experience, and that there aren't any hiccups or delays. But depositories and stockbrokers aren't the only ones who use algorithms. Traders use algorithms to avoid mistakes made by retail traders and increase their chances of making money. Algorithmic Trading or Algo Trading is the name for this process. Before we get into what is Algo trading it is important that you understand that it requires a powerful tool. As a share broker company, we understand the requirements of an avid trader and offer a seamless . online trading platform with the lowest brokerage options. How does algorithmic trading work? Algorithmic trading is a way to trade quickly on the financial market by using trading instructions that have already been programmed. Traders and investors use trading software, which they tell what to do based on time, volume, and price. When the market triggers the set instructions, the investor's orders are carried out by the trading software. In general, Mutual Funds, Hedge Funds, Insurance Companies, Banks, etc. use algorithmic trading to make a large number of high-volume trades that would be impossible for humans to do. Algorithmic trading lets investors make more deals in less time without human emotions and mistakes. Take a look at the following example to better understand what algo trading is. The following set of instructions can be given by an investor for algorithmic trading to take place: Instruction 1: Buy 200 shares of XYZ company if the price goes above its 15 minute high. Now, if the price of a share goes above the 15 minute high, the algorithmic trading system will automatically place an order for 200 shares of XYZ company. But the algorithmic trading software won't do anything with the order unless the conditions are met. Instruction 2: Sell 200 shares of XYZ company if its 20-day moving average falls below the 200-day moving average on the 5-minute time frame. In this case, the algorithmic trading software will sell 200 shares of XYZ company if its 20-day moving average falls below its 200-day moving average.. If it doesn't, the order will not be executed. For algorithmic trading to work, each set of instructions must be carried out only once. For example, in Instruction 1, the algorithmic trading software will place a buy order if the price stays above the 15-minute high for even a few seconds. After those few seconds, the price might drop back below the entry point and develop a loss. But the order would have already been placed as soon as the conditions are met. Algo trading has come a long way in India and is all set to reach greater heights. You can simplify your trading system or add as many data points to it as you want but it is crucial to understand its working and monitor it closely. As we mentioned earlier Algo trading requires a powerful tool. As a share broker company, we understand the requirements of an avid trader and offer a seamless online trading platform with the lowest brokerage options.
May 29, 2022
Day trading is a way to trade stocks that is both risky and profitable. Day trading, which is also called intraday trading, is when you buy and sell stocks during the same trading session. Here are some basic intraday trading tips you can use if you want to use this strategy to make money on the stock market. Before we get into the rules, the basic rule of trading is to use the right tools — as a share trading company we understand this better than anyone and are here to offer our customers the best Indian trading platform along with the lowest brokerage options. 1. Choose the best stocks When you start day trading, the first and most important thing you should do is choose the right stock to buy. Not all stocks are good choices for trading during the day. Since you would be buying and selling them during the same trading session, you would need to choose stocks with a lot of liquidity, which will make buying and selling them easier. Large-cap stocks and mid-cap stocks are usually the best choices for day trading because they have a lot of buyers and sellers. 2. Set prices to enter and exit the market Once you've decided on the stock you want to trade, the next step is to set entry and exit prices. Going into a trade without any goals is a sure way to lose money. Set a price at which you want to buy the stock and stick to it, even if it means you might not be able to buy it. Set a goal for when you want to sell the stock, even if it means you might miss out on any gains the stock might make in the future. 3. Don't forget to set stop loss After buying the stock, the first thing you should do is set a stop loss. This will keep you from losing a lot of money if the stock moves in a way you didn't expect. Let's say you buy a stock for Rs. 100 with the hope that it will go up. But as a safety net, you set a stop loss at Rs. 97. Now, if the stock goes against your expectations and drops to Rs. 97, the stop loss will be triggered, and your stock will be sold at a loss of Rs. 3. You will also be protected if the price goes down even more. 4. Always follow the trend This is one of the best tips you can use when trading during the day. If the market is going up, it's a good idea to buy stocks. And if it is bad, it is best to sell stocks. Contrarian views on the market are never a good idea because they can backfire. For example, many people short-sell stocks when the market is bullish because they expect the price to go down. These kinds of changes don't happen very often. Conclusion Even though intraday trading is riskier than regular trading, when done right, it can be one of the most profitable ways to make money consistently. So, if you want to do day trading, you must have both a trading account and a Demat account. Get in touch with us right away to start trading stocks. As a share trading company, we understand this better than anyone and are here to offer our customers the best Indian trading platform along with the lowest brokerage options. Want to try out our tools? Get in touch with us.
May 28, 2022
Some investors are wary of the stock market and investing in stocks in general because these markets tend to be unstable. Investors say they'd rather be safe than sorry, so they put their hard-earned money into relatively safe investments like government-issued bonds and fixed deposits. People who say the stock market is extremely volatile aren't completely wrong, because it can be. But it's important to remember that investors and traders who know what they're doing can get a good idea of how volatile the market is and limit any possible loss. While you analyse how the market is going to act, it is important you have the best tools in hand. At Zebu, we aim to offer our users the best trading accounts and the lowest brokerage for intraday trading to make their online stock trading journey easy. Correction in the stock market If you are a big investor and most of your money is in stocks or if you want to start trading and investing in the stock market, you need to know about stock market corrections. A "correction" in the stock market is when prices fall by at least 10% from their previous highs. Just the fact that prices are falling gives it a bad reputation. Even though this might make you feel nervous, it doesn't always mean something bad. Most investors think that this is a normal part of trading on the stock market. In light of this, there are a few things you should know about corrections in the stock market. 1. Types of corrections The markets can only go up or down. But when the market goes down, it can go down in different ways. For example, a "pullback" is a change of about 5% in market prices. A correction, on the other hand, is a little bit bigger, with a drop of 10–20% from previous highs. Then you have what is called a "bear market," which means that prices have dropped more than 20% from their previous highs. This could go on for a longer time than a pullback or a correction. When you buy shares online, the good news is that bear markets don't last as long as bull markets. 2. Inevitable Corrections Corrections are the only way to reach a balance that makes sense for markets to stay in a healthy state. If markets go through the roof, it means that other parts of a country's finances, like inflation, are in trouble. Because of corrections, investors can buy stocks at fair prices. 3. Greater uncertainty During a correction, volatility, as measured by the VIX (volatility index), is thought to reach greater heights. This is because investors' feelings change all the time, and a wide range of feelings affects market prices. 4. Expectations Corrections in the stock market can't be predicted, but they happen as often as the sun rises and sets. Also, a crash in the stock market doesn't have a clear cause. Some stock market investors make predictions based on what happened in the past, but this isn't a sure thing. 5. A chance to make a long-term investment Long-term investors like it when the stock market drops because they can buy stocks at lower prices (called "discounts") and they don't mind keeping them for a long time. When the stock market as a whole falls, the prices of individual shares tend to fall as well. This is great for people who invest for the long term. 6. Temporary Corrections are temporary. Most people agree that they may only last a little more than a year at the most. This is important to investors because months of hard work can go to waste in a single day, but if you look at the big picture, the highs of the stock market are higher than the lows of corrections. 7. Dividends When you buy shares online, you should know that in the past, growth stocks have helped the stock market as a whole reach new heights. But stocks that pay out income or dividends can be a safer investment. These come from stable companies and give you dividends you can count on. They start making money after a few years. If you buy "dividend stocks," you might still get returns that won't change if the market goes down. No Reason to Worry A few changes here and there don't matter much in the long run. In general, the market is always going up. Stock Market Trading and Investment You shouldn't worry about a correction when you open a Demat account. Many investors do this, and it keeps them from having a healthy view of investing and diversifying their portfolios. You can learn and make money at Zebu, and we can help you make smart investments. At Zebu, we aim to offer our users the best trading accounts and the lowest brokerage for intraday trading to make their online stock trading journey easy. Check our website for more info
May 27, 2022