Is It Safe to trade With Loan Money??

Indian stock market is one of the grooming trading platforms for worldwide investors .Investing in Indian stock market is a big chance for traders to earn money. But due to lack of knowledge many of them go for wrong strategy due to which many traders trying to invest the loan money in the market then they should think over twice. Many investors started trading with loan money, Is it safe?? The answer is NO. So be careful don’t let your money waste. Now we will go to discuss some points why not to trade with loan money.

First let us have look what is loan money?? People usually take loan from bank when they have urgent requirement of money with the deal of being repay the amount within in certain period of time and also pay the interest of the loan they have taken. There is also various types of loans available such as home loan, personnel loan, education loan. Rate of interest may vary depend on the loan taken.

What happens if you trade with loan money??

As it is unpredictable to examine the stock market as it moves up and down, we are not sure about the scenario what will happen to next day. There are many investors who do day trading suppose you invest loan money in day trading and get a profit return and on next day if market clashes then think over your loan money?? You will loose everything so how will you repay your loan money.

Lastly it can be said that be careful while investing, consult with an research analyst in spite of bearing any loss.

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Stock Buying Tips

Stock market a big platform for investors in terms of profit return. But it should be very necessary to have right knowledge about which shares one should buy or sell while trading. Although there are certain   strategies to follow which guide regarding the proper choice of stocks which have the potential to return you big profit. We are going to describe those factors are as follow.

1.Sales Revenue - It is the amount of money that a company earns during a financial year Revenue can be calculated by multiplying price of goods and services at which it is sold to the number of units or amount of unit sold.

2.Earnings - Net income of a company that shows the figure of a company whether it is losing money or gaining. It is one of the factors which show company potential and financial strength in the market. So it is clear that an investor likes to invest in a company which has strong financial earning.

3.Debt - The amount of money that a company owns in different ways. So it should be better to invest in a company which has relatively low or no debt level.

4.Liquidity - Liquidity shows the cash holding position of a company. Company which expands its area and volume of business and assures high profit gain for investors is considering being a good investing stock.

5.Valuation - It’s the worth of a company which can be determined by the P/E ratio

Last but not least while investing one should have to do research about a company profile with the  annually report publish time to time.

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A Mapping of India’s Trade

India’s economy is growing day by day as compared to GDP over the past few years. Since 1991, the International trade strengthens the country’s economy due to the liberalization. Due to which the ratio of international trade to GDP has rises continuously with certain factors.

We are going to classify these factors into three categories

1.The Demand of India’s Export of Goods and Services

2.The Supply of India’s Export of Goods and Services

3.The Demands for India’s Imports

1.Factors that affect Demands for Export- India’s trading factor depend upon the intensities of India trade relation with other countries such as North America, the Middle union, Middle East, Asia and south Asia. Although US market adversely affect the demands for products.

2.Factor Affecting the Supply of Exports- It has been observed that India’s is unable to fulfill the supply scheduled due to following reasons are as follow.

a.Infrastructure Bottleneck - This is one of the critical factors in fulfilling the supply order. Due to power shortage, delay in transportation and less efficient techniques proves to be failure in demand supply.

b.Domestic Demand Growth - The huge growth of domestic demands lessen the exporting products.

c.Inflow of Export-Orientated Foreign Direct Investment -  MNE’S play a great role in the manufacturing of exports from East and South –East Asian countries as they provide  good investment platform from US and Japanese MNE’S.

3.Factor Affecting the Demand for Imports- Due to the overall growth of the economy, trade liberalization and growth changing factors, increases the surplus demand for import. The performances of Indian industry generated a tremendous optimism and sustain an existing competitive platform for future time.

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Derivative Market

A derivative market are based upon another underlying market which includes stock market, stock indices and currency market .A financial market which is a derivative market or financial instrument just like future contracts or option that can be derived from other forms of assets.

Underlying assets in derivatives

a. Precious metals like gold and silver
b. Foreign exchange rate of currency
c. Bonds of various types including long and short term negotiable debt
d. Over the counter(OTC) money market products such as loan or deposits

 Classification of derivatives

a. Forward Contract - A forward contract or “specific delivery contract” occurs between buyer and seller where long position holder (buyer) agrees to buy an underlying asset in future with a certain price. Forward contracts are traded over-the-counter and are not allowed to deal with exchange. As this contracts are bilateral contract. Forward contracts are very popular in foreign exchange market.

b. Future Contracts - An agreement between two parties of buying and selling of an asset with a specific quantity, time and place. These contracts allow trading in exchanges which defines certain standardized norms for future contracts.

c. Option Contracts - Option contracts are those contracts which give the right but not the authority to buy and sell the asset before its specified time or date. Option can be traded in various instruments commodities, financial asset, stock index petroleum products, metals etc

d. Swap Contracts - An agreement over a predefined interval of time between two parties to exchange assets. These are generally customized transactions and are helpful in problem of price fluctuation forex market.

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Risks Involved In Stock Market

Investment in the stock market involves risks. The possibility of facing a loss for an investor affects the financial market performance. Market risk also called “Systematic risk “.The risk which declines the market profitable situation in to a disaster one. Market risk occurs due to recessions, political turmoil, changes in interest rates and terrorist attacks.

                           

                                               
Risk may be of two types 

1. Systematic Risk - Systematic risk occur due to external factors of an organization. This risk is uncontrollable.

2. Unsystematic Risk - Unsystematic risk occur due to internal factors of an organization. This risk is micro in nature.

Top risks involved in stock market

1. Economic Risk - These are also know as external risk .This may occur due to fluctuation in market such as changes in demand for the product, price fluctuation, changes in income.

2. Market Risk - Market risk also be called as un-diversifying risk. This risk occurs when there is fluctuations occur in trading price of any particular shares & securities.

3. Liquidity Risk - Liquidity risk is a type of risk where investment is quickly converted in to cash without bearing any loss. These risks occur when the sales and purchase of securities get affected by business cycles.

4. Financial or credit Risk - This risk occur due to change in changes in the capital structure of an organization. There are various types of financial risk such as exchange rate risk, credit event risk, sovereign risk and settlement risk.

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10 terms related to stock market

       

       Important terms used in trading:

1.       Index - Index is most commonly used benchmark for traders.

2.       Initial public offering (IPO) - The first offering of a stock by a company to the traders.IPO is used in order to make more profit.

3.       Dividend - It’s a portion of company earning which is distributed to a class of its shareholder, decided by board of directories.

4.       Hedge - To reduce the risk in price movements for an asset hedge is used. It hold an position for an stock and sold it for future contracts.

5.       Yield - Yield is the measure of return on an investment this is calculated by  annual dividend amount to the price paid for the stock

6.       Margin - To purchase an investment in share market, a person borrow money from brokers. The difference between the loan amount and securities price is termed as margin.

7.       Day trading  - In general terms  day trading is the purchasing and selling of different financial things like future, option, stocks and currencies with the aim of gaining a profit.

8.       Bear market - A long term decline market, the country’s economy recession time is termed as bear market.

9.       Bull market - A financial market where the price rising is expected to rise. This word is often term as bull market.

10.   Over the counter market (OTC) – A decentralized market where there is no geographical limitation, trading is done through computers and telephone.

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General Introduction of Trading in Commodities

Trading can be define as  purchasing or selling of exchange commodities between two parties.Generally it’s a buying and selling of goods and services in order to make quick profit in less time or in other words trading can be a businesss. Participation involve  in trading market may  range from small investor to big investor, involves some participation such as retail investor, institutional investor such as mutal funds, banks, Insurance company etc.Trading can be done in various  exchange commodites such as stock market, equity market, bullion market .

Exchanges in share market can be done by physical location which is termed as open outcry. In this process traders bids verbally and offers simultaneously, example of such an exhange is New York stock Exchange. Another type of exchange is virtual type in which trading is done  electronically with the help of an network connection example of such exchange is Nasdaq.

Most of the traders trade by auction market in which an buyers bid for a stock and a sellers ask for a stock at specific price.Trading in share market may varies with some profit and lose.In fact stock market shows the country’s strength and economic growth. In this way financial system promotes once country’s increase prosperty.

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