|Advanced Mode||The advanced mode on Streak is for the users who want the freedom to create absolutely anything they can fathom in an extremely flexible way! Whether you want to use a complex mathematical operator or just start the strategy with parentheses or create multi-layered complex nested conditions for entry and exit – this is the mode you want to choose. As the name suggests, this mode is for experienced or advanced technical traders who want to deep-dive and test it all out.|
ADX/Average Directional Index
|The Average Directional Index helps you trade in the direction of the trend. Good entry and exit signals during a trending market can help you book those profits. The trend might be your friend, but it sure helps to know your other friends, too. Read more about the ADX.|
|Algo Trading||Algo trading means using computers programmed to execute predefined Entry & Exit Signals. It is also known as automated trading, black-box trading, or simply algorithmic trading. The signals are usually based on technical analysis. While you can build your own algorithm and deploy it to generate buy or sell signals, Manual intervention is needed for placing orders as full automation is not permitted for retail traders. At Streak, you can create your own strategies without coding.|
|Arbitrage||Arbitrage is trading that exploits the tiny differences in price between identical assets in two or more markets. The arbitrage trader buys the asset in one market and sells it in the other market at the same time in order to pocket the difference between the two prices.|
|Aroon Down||This is the line that measures the strength of the downtrend and the number of periods since a Low.|
|Aroon Oscillator||As a trader, you need to trade at a price that is either too high or too low from where it should be. And this is where the Aroon Indicator comes to the rescue.|
|Aroon Up||This is the line that measures the strength of the uptrend and the number of periods since a High.|
|Ask Price||Ask price or offer price is the price that a seller is willing to accept to sell a security.|
|Ask Size||Ask size is the number of shares that are being offered to sell at the ask price. Example: If the ask in the market is INR 20*3000, this means the seller is willing to sell 3000 shares i.e ask size at a price of INR 20 i.e. ask price.|
|Assist||The assist feature on Streak enables us to prefill the ‘standard conditions’ while you are creating a strategy or scanner. Just enter your indicator, and watch as the rest of the strategy is auto-completed.|
|At The Money||A call or put option is said to be at the money when the strike price is equal to the current price of the underlying asset (i.e. spot price = strike price). An at-the-money option has no intrinsic value but it may have time value. Example: Suppose you buy a call option of stock ABC at a strike price of INR 50 and the stock is trading at INR 50. Then the option is said to be an at-the-money option.|
|Average True Range||It’s as simple as – the higher the level of volatility, the higher the ATR, and vice versa. But note that it doesn’t indicate price direction.|
|Backtest||Backtest runs your Strategy on historical market data. The final result consists of the ‘cumulative P&L’ and ‘all the entry and exit points of the hypothetical trades. Backtesting tells you what worked in the past and what might work in the future. Also, Streak lets you run the fastest backtests in a simulated environment.|
|Backtested P&L||It is the cumulative P&L of all the hypothetical trades that took place while backtesting your strategy.|
|Basic Mode||The Basic mode lets you create strategies in a pre-defined format: first, you need to add the indicator followed by a comparator and then the indicator again. Yes, it’s a simple yet powerful arsenal to pack. You can create powerful strategies such as volume-based price action strategies, trend followers, etc.|
|Bear||A bear market is typically defined as a drop from recent highs. The most common usage of the term is to refer to the NIFTY’s performance, which is generally considered a benchmark indicator of the entire stock market. However, the term bear market can be used to refer to any stock index, or to an individual stock that is falling from recent highs.|
|Bearish Divergence||Sometimes, the price makes higher highs but the indicator disagrees with this and forms lower highs. This indicates a strengthening negative momentum. This indicates rising bearish momentum, and a break below overbought territory could be used to trigger a new sell position.|
|Bearish Momentum and Bullish Momentum||Momentum is used by investors to trade stocks in an uptrend by going long (or buying shares) and going short (or selling shares) in a downtrend. In other words, a stock can exhibit bullish momentum, meaning the price is rising, or bearish momentum where the price is steadily falling.|
|Bid Price||The bid price is the price that a buyer is willing to pay for a specific security.|
|Bid Size||Bid size is the number of shares a buyer is willing to purchase at a given price. Example: If you place an order to purchase 1000 shares of a company at INR 50 per share then the bid price is INR 50 and the bid size is 1000.|
|Bid-Ask Spread||Bid-ask spread is the difference between the immediate best ask price and the immediate best bid price of a security. It is basically the difference between the lowest price a seller is willing to accept and the highest price buyer is willing to pay for an asset. If the bid price of a stock is INR 49 and the ask price is INR 50, then the bid-ask spread is INR 1.|
Market Makers try to buy securities at the bid price and sell at the ask price thus making a profit on the bid-ask spread. Thus, the size of the bid-ask spread is proportional to the size of the market maker’s profit against the market risk that she or he’s exposed to. Many traders and analysts scrutinize patterns in bid-ask spreads to understand what price points trigger demand for both sellers and buyers.
|Black Box Trading||A black-box trading or algorithmic trading or automated trading is a computerized trading system that utilizes pre-programmed logic to generate buy and sell orders. The black box system is named as such since the user need not see or need not know the mathematical calculations or the logic used in the trading strategy while placing an order.|
|Blue Chip Stocks||The term “blue-chip stocks” connotes a certain type of investment: well-established, reliable companies with advantageous positions in their markets. Often, the predictability and success of these businesses allow such firms to reward shareholders with regular dividends. Investors in this subset of equity tend to eschew the higher-risk, growth-oriented parts of Wall Street for what tend to be large-cap stocks with below-average volatility. Blue-chip equities generally tend to advance and decline less than the overall market. Here’s a look at U.S. News’ list of the 10 best blue-chip stocks to buy for 2021 and how they’re holding up so far this year. After accounting for dividends, only one has declined so far.|
|Bollinger Bands||The Bollinger Bands is an important indicator that’s formed using the SMA (Simple Moving Average). answer one very basic question: Are prices high or low on a relative basis or has the price deviated too much from the mean price? It works around the law of mean reversal. This means that if a price moves away from the mean price, it tends to return to the original mean price. Hence, this gives the investors better clarity to determine when a stock is:|
Overbought – the closer the prices move along the upper band, the more overbought the market
Oversold – the closer the prices move to the lower band, the more oversold the market.
|Bonds||Bond is fixed-income security, using which a company or a government, known as bond issuer, raises debt from the investors, known as bondholders. Based on the bond indenture (contract), the issuer is obligated to pay a specified amount of money as interest on the debt taken, to the holders, at specified future dates mentioned in the indenture.|
There are different types of bonds such as bonds that do not pay interest (Zero Coupon bonds), bonds that can be redeemed prior to the specified maturity date (Callable bonds), bonds that can be exchanged for the shares of a company (Convertible Bonds), etc. Most of the corporate or government bonds are publicly traded on exchanges, while others are traded over-the-counter (OTC).
Bonds are used by companies, municipalities, states, sovereign governments and other entities to raise money for various activities such as fulfilling operating needs, completing specific projects, infrastructure spending, etc. They may issue bonds directly to investors instead of obtaining loans from various banks to raise the capital needed. When an investor purchases a bond, they are actually loaning that amount of money to the bond issuer and in return, collect timely interest payments. When the bond matures, the issuer repays the principal to the investor along with any remaining cash flows.
The basic terminology that is used in bonds is: Face Value/Par Value, Coupon Rate, Maturity Date, Issue Price.
|Bracket Order||Bracket order is designed where the investor can limit their loss and lock in a profit by “bracketing” an order with two opposite-side orders.|
Buy Bracket Order: A Buy order is bracketed by a sell limit order generally above the buy order price and a sell stop order is generally below the buy order price. This allows investors to lock profit by an upside movement and limit downside loss.
Example: If you place a buy order for a stock currently trading at INR 50, along with a sell limit order at INR 55 and a sell stop order at INR 45. If the price moves up to INR 55 or down to INR 45, the position will be sold. The trader will either meet a specified gain of INR 5 with the sell limit order or suffer a loss of INR 5 with the stop-loss order.
Sell Bracket Order: A sell order is bracketed by a buy stop order at a higher price and a buy limit order at a lower price.
|Breakout||When an asset’s price moves with a specific tendency, it alerts traders to a new possible trading opportunity once it breaks that tendency. For example, assume a stock has traded between INR 11 and INR 10 for the last 20 days, then moves above INR 11. This change in tendency alerts traders that the sideways movement has possibly ended and that a possible move to INR 12 (or higher) has begun. Breakouts occur from many different patterns, including ranges, triangles, head and shoulders, and flag patterns. A breakout doesn’t mean the price will continue in the anticipated direction, and it often doesn’t. This is called a false breakout and presents a trading opportunity in the opposite direction of the breakout. Breakouts can be small or large. When you’re looking for small consolidations or short periods where the price moves sideways, breakouts during a trend can provide excellent profit potential.|
|Broker||A broker is a regulated entity that acts as an intermediary between buyers and sellers for both retail and institutional investors. Brokers charge a fee or commission for executing orders submitted by an investor. Brokers are important in any market because they bring buyers and sellers together thus creating liquidity and making the market more efficient.|
|Brokerage Toggle||While looking at backtest results, you’ll find a toggle button for Brokerage. When turned on, it shows the results after deducting the calculated brokerage amount. You need to check this out as Brokerage is an invisible factor, and sometimes it amounts to such huge numbers that it might even lead a profitable strategy to a loss.|
|BSE/Bombay Stock Exchange||BSE, which was earlier known as Bombay Stock Exchange, is the oldest stock exchange in Asia and figures in the top 10 stock exchanges globally in terms of market capitalization. Founded in 1875, BSE has played a pivotal role in developing the capital market space in India. Today, it lists almost 6,000 companies, and with a trade speed of 6 microseconds, it is credited as the fastest exchange in the world. To put things in perspective, that’s less than the time it’ll take you to say “whoa!” Moreover, Sensex (BSE’s equity index), is one of the most widely tracked indexes in the country.|
|Bull||Broadly speaking, a bull market is a sustained period — usually months or years — when prices rise. The term is most commonly used in reference to the stock market, but other asset classes can have bull markets as well, such as real estate, commodities, or foreign currencies.|
|Bullish Divergence||Sometimes, the price makes lower lows but the RSI disagrees with this and forms higher lows. This indicates a strengthening positive momentum. This indicates rising bullish momentum, and a break above oversold territory could be used to trigger a new buy position.|
|Buy Order||Buy order is an instruction given by an investor to a broker to buy a security. Buy orders can be of different types. If an investor instructs the broker to buy immediately at the best available price i.e. at the market price then, it is called a market buy order. If an investor specifies the price they are willing to pay for a security then, it is called a limit buy order.|
|Call Option||A call option is an option contract that gives the buyer of the contract the right, but not the obligation, to purchase the underlying security at the strike price on or before (depending on option type) the expiration date. The seller, or writer, of the call option, has an obligation to sell the underlying should the buyer of the contract chooses to exercise his/her right to purchase the underlying.|
|Cancel Order||Cancel Order is an instruction given by a trader to his broker or the exchange to not carry out an order which has already been placed before it is executed on the exchange. Cancel order is important in case of limit orders when the price is expected to move outside the current buy-sell range or when the market price later is expected to be more advantageous than the limit price for which the order was placed.|
Example: Suppose a trader places a limit order to buy 100 shares of a company at INR 100 per share, which is currently trading at INR 102. Due to a recent negative earning surprise, the price of the stock begins to fall. As an analyst, you expect the stock price to go below INR 100. As a result, buying at the market price later might be more advantageous than buying at the limit price. Hence you place a cancel order at the exchange through your broker to stop the purchase of shares at INR 100.
|Candlestick Chart||This centuries-old charting style was developed in the rice markets of Japan. The style’s name refers to the way each time period is represented by a rectangle with lines coming out of the top and the bottom. This shape resembles a candlestick with a wick. The Japanese market watchers who used this style referred to the wick-like lines as “shadows.”|
On the chart, each candlestick indicates the open, high, low, and close price for the time frame the trader has chosen. For example, if the trader sets the time frame to five minutes, a new candlestick will be created every five minutes. For an intraday chart like this one, the open and close prices are those for the beginning and end of the five-minute period, not the trading session.
|CCI/Commodity Channel Index||The CCI is a momentum-based oscillator that helps to determine when a stock is overbought or oversold, spotting new trends and spotting weakness in trends when the indicator diverges with the price.|
|Chandelier Exit||The Chandelier Exit places a trailing stop (stop-loss) under the highest high the stock reached since you entered the trade. The distance between the highest high and the stop level is defined as multiple times the ATR. For example, we can subtract three times the value of the ATR from the highest high since we entered the trade.|
|Choppy/Sideways/Ranging Market||In a choppy market, there is no clear direction, and the price just “chops around” or “chops up and down” and trades within a very narrow range. Prices remain within a tight range for any period. They don’t make higher highs or a breakout above the previous highest price. If they did, that would indicate a bull market. They don’t make lower lows or drop below the previous level of support. If they did, that suggests a correction.|
|Closing Price||Closing price is the final price of a security at the end of the trading day. The closing price doesn’t necessarily mean the end of all trading on the security for the day. It simply means the floor of the exchange is closed. After-hours markets remain open for settlement purposes and other custodian activities.|
It represents the best and up-to-date valuation of a security till the time the trading of the security resumes. However, for stocks that get heavily traded at the close, the LTP may or may not be a true indicator of close, because a few moments pass before the orders are processed in all these heavily traded stocks and their last traded price, during the closing period, is determined. Depending on the exchange or quote service, these trades may be posted anywhere from 30 seconds to 30 minutes after the closing bell. Trading also takes place during the ‘after-trading hours’ which ultimately decides the price of the security at the end of the day.
The closing price of a security is compared to its opening price to determine the value addition or value reduction in the security over a trading day. Even the closing prices of two or more trading days are compared to get a fair idea of the market sentiments of the given security.
|Commodity||When you buy an ear of corn or a bag of wheat flour at a supermarket, you probably don’t pay much attention to where they were grown or milled. That’s because both corn and flour are commodities.|
Commodity goods are raw materials. They’re interchangeable and can be bought and sold in bulk. Often these raw materials are the building blocks of manufactured products.
Types of commodities:
Investors break down commodities into two categories: hard and soft. Hard commodities require mining or drilling to find. Soft commodities are grown or ranched. There are four main types of commodities.
1. Agricultural products: Soft commodities. They include crops like coffee, corn, wheat, soybeans, cotton, and lumber.
2. Livestock and meat: Soft commodities. They include live cattle, beef, pork bellies, and milk.
3. Energy products: Hard commodities. They include crude oil, natural gas unleaded gasoline, propane, ethanol, and coal.
4. Metals: Hard commodities. They include precious metals, like gold and silver, and industrial metals, like copper, aluminum, and palladium.
Commodities trading is the buying and selling of these raw materials. Sometimes it involves the physical trading of goods. But more often it happens through futures contracts, where you agree to buy or sell a commodity for a certain price at a specified date.
With futures contracts, commodities traders bet on how the commodity’s price will move. When you think the price will go up, you’d buy futures, or go long. When you think the price will drop, you’d sell futures, or go short. While futures contracts can be used to speculate about price changes, often they’re used by producers or major industrial consumers as a hedge against price increases or decreases, as we’ll discuss shortly.
|Coupon||Coupon is the annual interest paid on the face value of a bond. Coupons are generally described in terms of coupon rate which is fixed over a period of time. The coupon rate is calculated by taking the sum of all coupons paid per year and dividing it by the bond’s face value. Coupon rates depend on the probability of default of the underlying fixed-income security. Securities with low credit risk have low coupon rates, while those with higher coupon rates provide higher yields to compensate for the lack of creditworthiness of the company. Example: Let’s assume a bond with a face value of INR 1000 is purchased with a coupon rate of 5%. This means that 5% of the INR 1000, i.e. an INR 50 coupon will be paid to the bondholder annually by the issuer of the bond.|
|Coupon Rate||Coupon rate is the rate of interest paid on the face value of the bond for a fixed interval of time. Typically intervals are annual or semi-annual. For example, if the coupon rate is 5% on the face value of INR 1000, the issuer of the bonds pays INR 50 in interest on each bond annually. Coupon rates are generally quoted annually. If the time interval in the above example was semi-annual, INR 25 interest payment is made by the bond issuer, twice a year, to the bondholder.|
|Currency Futures||Currency Future is a futures contract between two counterparties who agree to exchange one currency for another in the future at a particular price which is decided on the purchase date of the contract. These futures contracts are binding, as both the parties have obligations to execute the trade on the specified pre-decided date.|
Currency Futures are mainly used to hedge against foreign exchange risk, as the investor can lock the exchange price above, against the exchange rate fluctuations in the future. Further, they are used to speculate so as to gain profit from the rise and fall in the exchange rates.
Example: An Indian company has a German client and for its service, it will receive EUR 100,000 after two months. Suppose, during these two months the Rupee appreciates, in such a case the Indian company will receive fewer Rupees per EUR which can affect its earnings. Therefore, it can enter into a Currency Futures contract in which it can specify the time and the price at which it will exercise the contract so that the uncertainty of the exchange rate can be dealt with.
|Currency Options||Currency options contract gives the buyer the right but not the obligation, to buy or sell the currency at a specified exchange rate on or before the expiration of the contract. Currency options market is the largest and the most liquid compared to any other options market. Currency options are generally traded over-the-counter (OTC). Traders can choose a particular price and expiration date till which the contract will be valid and then they receive a quote stating the premium to be paid to acquire that option. Currency options are best for multi-national organizations that seek protection against exchange rate fluctuations. Consider an example, suppose a trader purchases an option to buy two lots of EUR/USD at 1.30 in one month. If the price of EUR/USD is below 1.30, the option expires worthless, and the buyer loses only the premium. On the other hand, if EUR/USD rises above 1.30, then the buyer can exercise the option and gain two lots for only 1.30 instead of the increased price in the market.|
|Day Order||A day order is an order to buy or sell a security that expires if it hasn’t been executed by the end of the trading day. A day order is canceled if the limit or stop order price is not met during the trading session.|
|Day Trading/Intraday||Intraday trading, also known as “day trading”, refers to opening a buy or a sell position and squaring it off on the same day. It involves speculating on the prices of securities based on quantitative, technical, or fundamental indicators. For Example: If you bought 100 stocks of XYZ company during the opening of the market, then you would be selling the 100 XYZ stocks before the market closes for that particular trading day.|
|Defensive Stocks||A defensive stock is a stock that provides consistent dividends and stable earnings regardless of the state of the overall stock market. There is a constant demand for their products, so defensive stocks tend to be more stable during the various phases of the business cycle.|
|DEMA/Double Exponential Moving Average||This is nothing but the EMA (Exponential Moving Average) of an EMA and its sole purpose is to reduce lag.|
|Demat Account||A Demat account serves as a storehouse of information for all of the securities transactions you make in India. When you buy and sell exchange-traded funds (ETFs), stocks, bonds, and mutual funds, the change in ownership is recorded in your Demat account.|
The Securities and Exchange Board of India (SEBI) requires everyone who wants to trade Indian securities to have a Demat account. That means Demat accounts are absolutely mandatory, and a person without a Demat account is not allowed to conduct securities trading in India under any circumstances.
|Deploy||‘Deploying a strategy‘ means implementing the strategy in real-time in the stock market. Streak gives you an option to select which stocks you want to deploy, the quantity total number of strategy cycles before confirming the deployment.|
You’ll notice that there are 2 fundamental modes to Deploy:
1. Take Live
2. Paper Trade
|Discover||Quickview of our list of pre-built strategies or scanners. You can jump to any category and know the performance with a minimalist backtest result.|
|Divergence||Divergence is when the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, or is moving contrary to other data. Divergence warns that the current price trend may be weakening, and in some cases may lead to the price changing direction.|
|Dividend||Dividend is the distribution of a company’s earnings/profits to its shareholders depending on the type (preferred stock, common stock) and the number of shares held by them. Dividends can be paid in the form of cash, stocks, or other forms. The amount and timing of dividends are decided by the board of directors of the company with the approval of the shareholders. However, it is not obligatory for a company to pay dividends.|
Usually, companies that are in the early stage of ventures, do not pay dividends as they prefer to reinvest most of their profits to facilitate higher growth and expansion. On the other hand, companies in their mature stage pay regular dividends to their shareholders.
Dividends are a signal that the company is stable enough to share excess profits and has a good future prospect. Further, there are certain investors who prefer the companies which pay regular dividends. While on the other hand, dividends by a company reduce its retained earnings and limit its growth capacity.
|Dividend Yield||Dividend yield is a stock’s annual dividend payments to shareholders expressed as a percentage of the stock’s current price. This number tells you what you can expect in future income from a stock based on the price you could buy it for today, assuming the dividend remains unchanged.|
For example, if a stock trades for INR 100 per share today, and the company’s annualized dividend is INR 5 per share, the dividend yield is 5%. The formula is annualized dividend divided by share price equals yield. In this case, INR 5 divided by INR 100 equals 5%.
|Downtrend||A downtrend refers to the price action of a security that moves lower in price as it fluctuates over time. A downtrend can be contrasted with an uptrend.|
|Entry Signal||When the entry conditions that you entered in your strategy are met, Streak triggers an entry signal and notifies you with an entry window, too.|
|Equity||Equity can be defined as the difference between the value of the assets and the cost of the liabilities.|
Equity= Assets – Liabilities
The above accounting equation represents that while starting a business, the funds invested in it can be divided into two parts. Firstly, equity signifies the amount which the owner himself has invested and other is liabilities which is the amount borrowed from outsiders and is used in the business.
Example: An entrepreneur has invested INR 90000 in his business but in order to expand, he requires more INR 10000. For this, the entrepreneur can raise a loan from a bank. This way, the balance sheet of his business will show INR 10000 as a liability and INR 90000 as equity or owner’s funds.
|Equity Shares||Equity shares or ordinary shares are the types of shares wherein the holders have ownership rights and can control the functioning of the company through the voting rights that they possess. Equity shareholders enjoy the benefit of liquidity at any time, as the ownership of shares can be easily transferred or converted into cash. They can earn a return on their investment through dividends and capital appreciation. However, they are the biggest risk-takers as there is no collateral security attached to their investments, and returns in terms of dividends or capital appreciation are not guaranteed.|
|EMA/Exponential Moving Average||EMA solves the lag that Simple Moving Average (SMA) cannot, it gives better signals & doesn’t allow you to miss the highs and lows as much as the SMA.|
|Exchange||The exchange is an open, organized marketplace where stocks, bonds, commodities, derivatives, and other financial instruments are traded at prices, discovered based on the demand and supply principle.|
|Exit Signal||When the exit conditions, stop loss, or target profit that you entered in your strategy are met, Streak triggers an exit signal and notifies you with an exit window, too.|
|Face Value/Par Value||Par value or face value is the amount that the investor will receive at the time of maturity. For example, if the investor bought a bond at a par value of INR 1000. At the maturity date, the investor will get back the INR 1000.|
|Forex||Forex, an acronym for foreign exchange is a decentralized market where trading of the world’s different currencies is done. Trading is done based on the exchange rate of the two currencies in consideration. Even though there is no specific designated market to carry out these trades, the most important centers are located in London, New York, Hong Kong, Paris, Sydney, and Frankfurt where much of the Forex trading takes place. These centers are spread across almost every time zone implying when the US trading time ends; trading in Tokyo and Hong Kong starts which facilitates foreign currency trade 24 hours a day. Example: Consider a trade on forex involving a currency exchange rate of 1.2171 EUR/USD, this implies that if a trader has to buy one Euro (price currency), he will have to pay 1.2171 U.S dollars (base currency).|
|Fundamental Analysis||Fundamental analysis is the examination of the factors that affect the well-being of the economy, industry groups, and companies. The fundamental analysis determines the health and performance of an underlying company/stock by looking at all the factors that can affect the price of the security. These factors include overall economic state, industry growth, sector performance, the company’s relative performance to its peers, and the company’s own future prospects. There are several possible objectives of fundamental analysis like, to perform a company stock valuation and predict its probable price evolution, calculating its credit risk, to find out the intrinsic value of the share. Investors also perform a fundamental analysis by observing the financial statements of various companies to derive their true values (intrinsic values) which help them to understand whether a company is overvalued or undervalued and take a call to buy or sell accordingly.|
|Futures||A Future contract is a type of standardized derivative contract made between two parties through an organized exchange to buy or sell an underlying asset on a future date at an agreed-upon price. Both the parties engaged in the contract, are obligated to perform the trade on the specified date. The payoffs for futures are similar to that of forwards; however, there is no credit risk of the opposite party, as the exchange clearing house clears all the trades. To mitigate risk, exchanges demand a margin payment at the time a trader enters into a contract which is further maintained on a mark to market basis.|
Futures are generally used to hedge the risk of price fluctuations by fixing the price in advance. Speculators also use futures to make a profit through analyzing and forecasting future price movements.
Example: Futures of grade A rice are being traded on a commodities exchange and each contract is for 100 kgs. Neil wants to buy 5,000 kgs of grade A rice during the last week of the month while Russell seeks to sell 5,000 kgs of grade A rice during the last week of the month. The futures contract is suitable for both parties, as a trade could be executed between the two parties for 50 contracts on the exchange. The disadvantage of the futures is that the contracts are not customized as forwards. For example, if both the parties in the above example wanted to trade 4000 kgs then the futures contract would not have served its purpose.
|FX Trading||Forex Trading is simply the trading of currencies from different countries against each other. It is one of the largest markets and considering the need to exchange currencies, it is also the most liquid market in the commonly traded currency exchange pairs, with an average daily turnover of INR 4 trillion. The FX market is open 24 hours a day, 5 days a week, and all trades are conducted over the counter through computers between traders around the world. FX prices are influenced by a range of different factors including interest rates, inflation, government policy, demand, and supply etc.|
|Growth Stocks||A growth stock is any share in a company that is anticipated to grow at a rate significantly above the average growth for the market. These stocks generally do not pay dividends. This is because the issuers of growth stocks are usually companies that want to reinvest any earnings they accrue in order to accelerate growth in the short term. When investors invest in growth stocks, they anticipate that they will earn money through capital gains when they eventually sell their shares in the future.|
|Hammer||Inside bars after breakout refers to the bar in a candlestick pattern between the previous bar’s range after a breakout occurs. The hammer is a candlestick that looks like a hammer. It forms into this shape because the open, close, and high are close to each other, while the low is long, simulating a hammer handle. Traders generally view hammers as a reversal of a trend.|
|Harami||The harami is characterized by an upward or downward trend with a corresponding fall or rise in opening and closing prices. A smaller candle is next to it, with a price movement opposite the trend direction and a smaller gap in the opening and closing prices. Haramis generally signify a trend change.|
|Hedge Funds||Hedge funds are a pool of funds, whose main aim is to generate returns that outperform the market returns. Hedge Funds take both long and short positions, buy and sell equities, initiate arbitrage, trade bonds, currencies, commodities, and derivative products to generate high returns at reduced risk. Hedge funds require a large initial investment, so their investors include high net worth individuals and families, and institutional investors. They are under less scrutiny from regulators and hence are accessible to accredited investors only. The fund managers have a sound financial acumen and generally deal in derivatives and take on huge leverages. Hedge funds charge both an expense ratio and a performance fee. This general fee structure is known as “Two and Twenty – a 2% asset management fee and 20% cut of any gains generated. Some of the largest hedge funds include Bridgewater Associates, Man Group, and Two Sigma Investments.|
|Hedging||Hedging is an investment strategy designed to offset a potential loss. In other words, hedging is investing to reduce the risk. Hedging against market price risk means protecting yourself from the adverse movements in prices by attaining a price lock. This is done by using offsetting contracts against the natural position you hold while hedging against credit risk.|
Hedging can be done using derivatives, as the relationship between derivatives and their corresponding underlying is clearly defined in most cases. Other financial instruments like insurance, future contracts, swaps, options, and many types of over-the-counter products are used to hedge.
|High-Frequency Trading/HFT||HFT is a special category of algorithmic trading characterized by holding periods of securities ranging from microseconds to a few minutes. HFT requires powerful computers and excellent network architecture to transact with data at very high speeds. HFT needs to have low-latency response times and high trading volumes for it to work successfully. HFT also requires Tick-by-Tick data and a good understanding of market microstructure. HFT strategies are mainly divided into market-making, statistical arbitrage, and quantitative low latency strategies. High-Frequency Trading helps in:|
– Liquidity increases: As the number of trades entered increases, orders may dump more liquidity in the market.
– Spread Narrowing: The HFT traders may provide the most competitive bid-ask prices, which may result in the narrowing of spreads.
– Improve Market Efficiency – HFT algorithms help in incorporating information in a short time. Thus the market reflects prices quickly and accurately.
|High Volume Trading||High volume trading is when the total number of securities traded during a given period of time by a trader is very high. It is usually done by institutional investors like banks, insurance companies, and mutual funds who possess a high volume of securities. High volume traders use VWAP (Volume Weighted Average Price) and TWAP (Time Weighted Average Price) to reduce the impact cost of the securities while buying or selling in high quantities.|
|Historical Price||Historical price is the past price of a stock, which can be used to forecast the stock’s future price. We can analyze the historical price of a stock to observe the patterns in the share prices and make buy or sell decisions using various technical indicators. Backtesting is also done on historical prices to check the validity of a strategy. There are various websites like Quandl, Yahoo Finance, Investopedia research from where one can easily get the historical price of the stocks and indices.|
|HMA/Hull Moving Average||Call it HMA. Call it a gem. The Hull Moving Average solves the dilemma of making a Moving Average more responsive to current price activity whilst maintaining curve smoothness. This indicator is designed to reduce the lag often associated with EMAs and WMAs by providing a faster signal on a smoother visual plane. It was developed by Alan Hull and has found its way into the charting programs around the world.|
As we already know that Moving Averages work best with Cross-Overs. But the Alan Hull, the developer of this indicator doesn’t recommend this strategy with the HMA. So why exactly is that the case? When we use two moving averages in a cross-over strategy, we are actually trying to identify the lag between the two moving averages. But with the HMA, the lag has already been reduced significantly.
|Index||An index is a statistical measure of change in the securities market. An index may track stocks, bonds, mutual funds, or any other security, including other indices. The value of indices increases when the aggregate value of the underlying securities increases, and decreases when the value decreases. The index’s value may be weighted. It can be weighted by any outstanding shares, market cap, or any other factors that the indexer chooses. This means that securities with higher prices or greater market cap may affect the index’s value more than others. Example: NIFTY, SENSEX.|
|Institutional Investors||Institutional Investment is a kind of investment done by an organization on behalf of its clients. Institutional investors pool together their funds and invest in a variety of financial instruments such as stocks, bonds, real estate, etc. There are different types of institutional investors such as pension funds, endowment funds, insurance companies, mutual funds, and hedge funds.|
Institutional investors trade securities in large quantities so they get preferential treatment and lower commissions. Moreover, these investors generally need to deal with fewer regulations and participate in the private placement of securities by companies. Because they trade in large quantities, they are the largest force behind demand and supply, and also have a major influence on the prices of many securities.
|Intrinsic Value of Option||Intrinsic value is used in options to indicate the amount by which the option is in the money. The intrinsic value of in-the-money call option is determined by taking the difference between the current trading price of the underlying asset and the strike price. An option has zero intrinsic value if it is out of the money or at the money. Only options that are in the money have an intrinsic value.|
For a call option, if the stock price (S) exceeds the strike price (X), the option is in the money. the call owner exercises the option and receives (S-X). However, if S<=X, that is the call option is out of the money or at the money, then the intrinsic value of the option is zero. For a put option, if the stock price (S) is less than the strike price (X), the option is in the money and the intrinsic value of the put option is (X-S). If S>=X for a put option, the intrinsic value is 0. Example: If a stock is trading at INR 35 and a call option’s strike price is INR 25, then the intrinsic value of the call option is INR 10 (INR 35-INR 25). For a put option of the same stock with a strike price of INR 45, the intrinsic value is INR 10 (INR 45-INR 35).
|In The Money||A call option is said to be in the money when the strike price is below the current trading price of the underlying asset. A put option is said to be in the money when the strike price is above the current price of the underlying asset. An in-the-money option indicates that the buyer of the option would most likely choose to exercise the option contract. Example: Suppose a stock ABC is trading at INR 15. If the strike price of a call option is INR 14, then the call option is said to be in the money. If the strike price of a put option is INR 17, then the put option is said to be in the money.|
|IPO/Initial Public Offering||Even novice investors have probably heard the term “IPO” before. IPO stands for “initial public offering” in the stock market. A privately held company that completes an IPO offers, for the first time, shares of itself to the public. Those newly issued shares begin trading on domestic stock exchanges like NSE and BSE or foreign ones like NYSE, NASDAQ, etc.|
|Issue Price||Issue price is the price at which the bond issuer originally sells the bonds in the market. This price is discovered in the market, which is majorly based on the coupon rate of the bond by the issuer, the market interest rate at that point in time, the credit risk of the issuer, and other issuer-related factors. This issue price may or may not be different from the par value of the bond. The debt raised by the bond issuer is the issue price multiplied by the number of bonds sold.|
|Large-Cap Stocks||Large-cap stocks have market caps of more than INR 20,000 crore. Most of the best-known companies in the world are large caps, and these are typically the companies that have established themselves as the leaders in their industries. While many deal with the ups and downs of their industry’s cycles, these are often the strongest companies and have proven capable of holding off competitive threats. Large caps are often where you’ll find the best dividend stocks. These large companies often generate more cash than they need for the business and return that extra capital to investors in dividend payments.|
|Lagging Indicator||A lagging indicator lags the price. They closely follow the price action signal the occurrence of a reversal or a new trend ‘after’ it has occurred. But then why use these indicators? They’re typically easy to identify, measure and compare against previous trends, which makes lagging indicators very useful.|
|Leading Indicators||As the name suggests, these indicators lead the price. They give trade signals when the trend is about to start. It might signal the occurrence of a new trend in advance. You might be excited right now? An indicator that predicts the future? Let’s make one thing very clear – these indicators are notorious for giving false signals. Hence, traders need to be extra careful. To support the trend, you can always use it with the combination of a lagging indicator.|
|Leverage||Leverage is the use of various financial instruments or borrowed capital to increase the potential return on investment. Leverage can also refer to the amount of debt used to finance assets. When one refers to something as “highly leveraged,” it means that the item has more debt than equity.|
For example, if you have INR 50,000 in cash and borrow INR 30,000 to start a business, having a total cost of INR 80,000. You are using INR 80,000 for investment in your business with only INR 50,000 of your own. This remaining INR 30,000 is financial leverage.
|Limit Order||A limit order is an order to buy or sell a stock at a specific or better price. A buy limit order would only get executed at the limit price or lower, and a sell limit order would only get executed at the limit price or higher. A limit order is appropriate if getting a specific price is more important than getting filled.|
The benefit of a limit order is that you can protect yourself from receiving a price that is worse than your targeted price. The risk is that your order may not get filled if the price of the security is no longer within the range specified in your order.
Example: An investor wants to buy a stock ABC for no more than INR 70, which is currently trading at INR 75. The investor places a buy limit order to purchase a stock of ABC at INR 70. If the price of stock ABC drops to INR 70 or below then the order will be executed. If the price never drops to INR 70 or below then the order will not execute. There are risks involved in placing a limit order; if the stock drops to INR 71 and after that, the stock climbs up to INR 100. The investor may miss out on the opportunity given by the INR 29 rally seen in the stock from INR 71.
|Live Strategy||When you create a strategy on strategy on Streak, you can also deploy it. A deployed strategy is known as a Live Strategy. You can define the entry and exit conditions as well as the stop loss, target profit, and the number of cycles.|
|Long||A long or a long position is the buying of securities such as stocks, bonds, currency, etc. If a trader is long a security then it means that the trader owns the security. An investor takes a long position, with the expectation to sell a security at a higher price in order to realize a profit. For example, suppose you bought 100 shares of Microsoft stock, it can be said that you are long 100 shares.|
In the context of options, it is the buying of an options contract that is considered a long position. Buying an option contract gives you the right but not the obligation, to buy or sell the underlying for a specified period of time at a specified date.
|LTP||LTP stands for Last Traded Price. The last traded price is the price at which the seller and the buyer agreed to trade or exchange ownership of a particular security. The exchanges display these prices for every registered security. This is different from the bid-ask price of securities quoted by the trader, which is known as the market price. Depending on the liquidity of a security, the last traded price could have occurred at any point of time, ranging from less than a second to a minute, or maybe even an hour ago.|
For stocks that get heavily traded at the close, the LTP may or may not be a true indicator of close, because a few moments pass before the orders are processed in all these heavily traded stocks, and their last trade price during the closing period is determined. Depending on the exchange or quote service, these trades may be posted anywhere from 30 seconds to 30 minutes after the closing bell. Trading also takes place during the ‘after-trading hours’ which ultimately decides the price of the security at the end of the day. This price traded at the end of the day is different from the LTP of the day for a security.
|MACD||MACD is built out of Moving Averages and is a popular momentum indicator. It is all about convergence and divergence.|
|Margin||The simple definition of margin is investing with money borrowed from your broker. This also means buying stocks you can’t afford. There are two primary types of brokerage accounts. In a cash account, you invest your own money. In a margin account, you can borrow from the brokerage based on how much you have invested. When you invest with a margin account, you’re able to purchase stocks according to your “buying power,” which includes both your own cash and a loan against the money you have invested.|
|Margin Trading||Margin Trading, also known as buying on margin is a mechanism of borrowing money from a broker to purchase stock. For margin trading, a trader needs to have a “margin account”, in which the broker lends the trader a certain amount of cash to purchase the securities, and the broker uses these securities purchased as collateral for the loan. The broker charges interest on the loan to the investor. As the interest charges accrue over time, the debt level increases as time passes. Therefore, buying on margin is mainly used for short-term investment. For example: Let us say that the margin account has a 50% margin available, then it means that if you deposit INR 1000 in your margin account then you have INR 2000 worth of “buying power”. As you have put up 50% of the purchase price and the other 50% is given as a loan to you from the broker.|
|Market Order||In a Market Order, the broker or the trading destination is instructed by the trader or investor to buy or sell a stock immediately at the best prevailing price in the market. Market orders are therefore used when the certainty of execution of the order is a priority over the price of execution. A market order is the most common order used to purchase a financial security. In fact, if the investor doesn’t specify any order types, then in many cases, by default, the order type is set to be a market order. Also, because it doesn’t contain any restriction on price and time frame in which order can be executed, a market order is also called an unrestricted order.|
Also, there is some time difference (known as latency) between you submitting your order and the order reaching the trading destination. This can cause slippage, i.e. there could be a difference in the price you enter and the final execution price you get. In most cases, the difference is small. However, due to high market volatility, there can be a large difference between the price you targeted and the one you actually get.
Example: An investor places a market order to buy 1000 shares of XYZ stock when the best offer price is INR 3.00 per share. If other orders are executed first, the investor’s market order may be executed at a higher price.
|Market Risk||Market risk, also known as systematic risk, is a possibility that a trader or investor can incur losses due to factors that are not under his control. These risks are common to each and every investor who invests in the same type of market space. The causes of market risks include recession, change in interest rate, terrorist attacks, or political turmoil.|
The intensity of market risks can be reduced to a certain extent through diversification into alternative asset classes that are not correlated with the market. This is different from the diversification of assets within the market. For example, Diversifying investments in gold (commodity market) in your portfolio will reduce the intensity of stock market risk, in the event of political unrest in the country.
|Margin Call||When you buy stock on margin, your brokerage firm lends you cash, using assets in your account as collateral, to purchase securities. To trade on margin, you must have a margin account with your brokerage firm. There is a difference between a margin account and a cash account. In a cash account, all transactions must be made with available cash, while a margin account allows you to borrow against the value of the assets in your account to purchase securities.|
Though using margin increases your purchasing power, there’s a flip side to buying with borrowed funds. Not only do you pay interest on the money you borrow, but buying on margin leaves you open to the potential for larger losses. In fact, you can even lose more money than you invested.
If the securities you’re using as collateral go down in price, your firm can issue a margin call. This is a demand that you repay all or part of the loan with cash, a deposit of securities from outside your account, or by selling securities in your account.
|Margin Trading||Buying stocks on margin is essentially borrowing money from your broker to buy securities. That leverages your potential returns, both for the good and the bad, and it’s important for investors to understand the implications and potential consequences of using margin.|
First, using margin means paying interest to your broker for the money you’re borrowing. At Fidelity, for example, the interest rate you’ll pay on margin balances up to INR 24,999 is 8.325%. When you compare that rate to the 9% to 10% potential annual return in stocks, you’ll quickly recognize that you’re taking the risk, but the broker is getting much of the rewards. Because of interest, when you use margin you have to worry about your net profit margin, or your profits after paying interest, which will be less than your investing gains.
Investors should also be aware that brokerage firms have initial margin requirements, or minimum margin requirements, requiring the investor to put a minimum amount in the account before they can borrow from the broker. At Fidelity, you must put in INR 2,000 to use margin. In order to buy an individual stock, the margin requirement is 50%, meaning if you want to buy INR 10,000 of a stock, you have to put in INR 5,000 in equity. There are also maintenance margin requirements of at least 25% equity, which would apply when account values fall, and that rate may be adjusted depending on how the account performs and broader market volatility.
|Market Capitalization||Market cap refers to the total value of a publicly traded company’s shares. Shorthand for “market capitalization,” market cap is one way an investor can evaluate how much a company is worth.|
To determine a company’s market cap, simply multiply the share price by the number of shares outstanding.
|Market Crash||A stock market crash occurs when there is a significant decline in stock prices. While there’s no specific numeric definition of a stock market crash, the term usually applies to occasions in which the major stock market indexes lose more than 10% of their value in a relatively short time period.|
Market crashes typically happen without warning, often on the heels of a long bull market run during which stock prices steadily rise. The hallmark of a stock market crash is panic-selling by investors who attempt to quickly liquidate their positions to either curb their losses or satisfy a margin call.
|Maturity Date||Maturity is the date on which the bond will mature and the bondholder receives the par value of the bond.|
|Max. Drawdown||A drawdown refers to how much an investment or trading account is down from the peak before it recovers back to the peak.|
|Mean||Mean is one of the measures of central tendency which is calculated by adding all the observations and dividing by the number of total observations. Mean is the most common and general-purpose measure of the midpoint (around which all other values cluster).|
|Mean Reversion||Mean Reversion theory suggests that considerable deviations in security prices tend to return to their historical mean. In other words, if the price moves too far away from its long-term average, it will revert back to its average. This theory considers only the extreme changes and does not include the normal growth and other market events that take place.|
When the current market price is less than the average price, traders purchase the stock with an expectation that the price will rise. Similarly, When the price is above the average price, investors will sell that security. Pairs trading strategy is based on the mean reversion theory.
Example: Let us assume that the 1-year average price of Stock ABC is INR 125 and the stock is trading at INR 150. There may be a gradual increase in the price of the stock over the year due to strong fundamentals but if the stock price increases by 8% within a trading day to INR 162, then one might short the stock assuming it will return to its long term mean and book a profit.
|Mid-Cap Stocks||Mid-cap stocks have market caps between INR 5,000 and INR 20,000 crore, occupying the middle ground between large and small companies. Mid-cap companies often have made considerable progress in building up successful business models, and that gives their investors some stability and protection against the future challenges smaller companies may face. Yet even with some track record, mid caps also may face the daunting task of beating out, or even disrupting, bigger and better-funded large-cap competitors to realize their own financial promise.|
Not all mid caps are growth stocks. They may be companies that operate in a smaller niche without big growth prospects, or they may be former large caps that have declined due to changes in the competitive landscape or (as with many brick-and-mortar retailers) some industry disruption.
|MOM/Momentum Indicator||Determines the momentum of stock when it’s gaining/falling. It compares the current price of a stock with the previous price from a given number of periods ago.|
|Momentum||Momentum is a tendency due to which a security has a tendency to continue its price movement in the given direction. For example; if a security is in demand, it will stimulate buying and the price of the security begins to increase and is likely to continue to rise. Similarly, when a security is not in demand, selling will push down the price of the security. If momentum is set at a stock’s price in the market, the trader will often take a long or short position in the stock with the hope that its momentum will continue in either an upward or a downward direction. This strategy relies on short-term movements in a stock’s price rather than its fundamental value.|
|Momentum Crash||Momentum is the tendency of a security to continue its movement in a particular direction. A momentum crash is basically the sudden reversal of a prevailing trend in the market.|
In April 2011, Kent Daniel published the research paper called Momentum Crashes which investigated this phenomenon. He discovered that there have been several periods in the past during which the momentum strategy dramatically crashed, most notably between March 2009 and December 2009 and the period from 1932 to the end of World War II. He observed that normally the portfolio with “winner stocks” (top 10% stocks with the strongest previous 12-month performance) outperforms the portfolio with “loser stocks” (bottom 10% stocks with the weakest previous 12-month performance), but during a momentum crash the loser portfolio outperforms the winner portfolio.
|Momentum Indicators||Before talking about this indicator, let’s discuss what exactly is momentum. As in Varsity, it is defined as the ‘quantity of motion a stock has.’ Momentum is a term used in Physics and shouldn’t be confused with the speed at which the markets move (although it’s partly true). Now momentum indicators will help identify the rate of change in price movements by comparing prices over some time. To understand the formula a little – it is calculated by comparing the current closing price to the previous closing price. Typically this is represented as a line below the price chart. A Divergence between the price and a momentum indicator can signal a change in future prices. Examples:|
– Relative Strength Index / RSI (type: leading) – Measures the stock’s recent trading strength, the velocity of a change in the trend, and the magnitude of the move.
– Stochastic Oscillator (type: leading) – Used to predict price points by comparing the closing price to its price range.
– Commodity Channel Index / CCI (type: leading) – An oscillator used to identify price reversals, price extremes, and trend strength.
|Momentum Trading||Momentum strategies seek to take profit from those securities which are trending and backed by high volume. In simple words, buy high and sell higher is the mantra for this strategy. This can be achieved by taking positions in a stock that is going up or down, and then holding this position until the security shows signs of reversal. Momentum traders may hold their positions for a few seconds, minutes, hours, months or even a couple of years, depending on how quickly the stock changes its direction.|
Momentum trading carries a high degree of volatility compared to most other strategies. It is important to time the buys and sells correctly to avoid significant losses. Momentum traders use stop losses, portfolio diversifications, and other risk management techniques to minimize losses.
|Moving Average||This indicator helps greatly in reducing the random ups and downs and filtering out the unwanted noise in the price charts. It shows you a clear trend by smoothening out the prices and following the ‘average value moving.’ Basically, you can easily – identify trends, confirm reversals & create lines of support and resistance with the help of Moving Averages. Tada! This seems to solve half your life problems. And it’s right there, a whole variety of moving averages, under the ‘indicators’ tab on your price chart.|
Let’s Understand the Math Behind the Simple Moving Average (SMA):
The most basic of all the MAs is the Simple Moving Average. It shows the average price of a stock over the past N days. For example, a 50-day Simple Moving Average is calculated by adding the closing prices of the past 50 days and dividing the sum by 50.
Now, If one wants to know the average of the past 5 days starting on 4th Jan’21 – we take 4th Jan as the last day & 30th Dec’20 as the first to calculate the average. And if we want to find the average on 5th Jan’21 – we start calculating from 31st Dec’20 instead of 30th Dec’20. To find out the average on 6th Jan’21, we start from 1st Jan’21 and so on. Hence, the term is known as a Moving Average. You can see a visual representation of these values as a line on your price chart.
|Moving Average Crossover||Moving average crossover is a common technical indicator used by many traders. This technique uses Moving Averages of different window lengths (time periods). Crossover occurs when a short-term Simple Moving Average crosses a long-term Simple Moving Average.|
A buy signal is generated when the short-term SMA crosses above the long-term average from below. While a sell signal is triggered when the short-term average crosses below the long-term average from above.
Let us understand the signal generation with the help of the following example:
If we look at the long-term 200-day SMA, it is in an uptrend. This is often interpreted as a signal that the market is bullish. When the 50-day SMA crosses above the 200-day SMA, a buy signal is generated, so we will be trading for the uptrend. Conversely, a trader might consider selling when the 50-day SMA crosses below the 200-day SMA.
|Narrow Range||When a stock trades sideways, it normally trades within a narrow range – this means that there is not much difference between the highest price and lowest price at which the stock has traded.|
|News-Based-Trading||News is one of the prime factors that affect the prices, volume, and volatility of financial assets in the market. In news-based trading, traders try to take advantage of the temporary mispricing of a security in the market. This mispricing is usually due to some events or news that have not yet been factored into the price of the security. This news could be the quarterly results of a security, the economic figures released by governmental or statistical agencies, or an out-of-the-blue merger & acquisition announcement.|
In algorithmic news-based trading, algorithms are designed to interpret such news. They scan the news articles based on keywords, process the data, identify its underlying meaning, assess its importance, and then execute trades based on it. One of the important tasks in news-based trading is to quantify news reports and articles. To do this, the algorithm assigns a score to each news article to interpret the underlying sentiment. These sentiments can be positive, negative, or neutral. It also takes into account the relevance and the source of the news article based on assigned keywords, while quantifying them to enable the algorithm to make trading decisions.
One of the limitations of news-based trading is that if the new market-moving news lies outside the pre-defined domain of search, then that data may not be processed. This can lead to erroneous signals and thus an erroneous trade. Therefore strong risk management is required while trading with the news.
|NSE/National Stock Exchange||National Stock Exchange or NSE is India’s leading stock exchange. Incorporated in 1992, NSE paved the way for dematerialized and fully automated trading in India. It was established by a group of financial institutions with the objective of bringing increased transparency to capital market trading, and it continues to see the majority of derivatives trading in the country.|
|OHLC & HLC Averages||The average of the open, high, low, and close (OHLC) for a given time frame is the average value of – the opening price, the highest price that was reached, the lowest price that was reached, and the closing price. For example, a candlestick or price bar may have an open of 70, a high of 90, a low of 60, and a close of 75.|
The calculation of the open, high, low, close average is calculated as follows: OHLC Average = (70 + 90 + 60 + 76) / 4 = 74
The HLC Average is much the same except the open price is excluded, and the sum of the high, low, and close are divided by three: HLC Average = (90 + 60 + 76) / 3 = 73.33
Though the resulting averages are comparable, this shows how changing the parameters of the data being input affects the calculation of the indicator.
Usually, the closing price is taken into consideration. But there might arise situations where using the open, high, low, or an average would prove to be beneficial.
|One-Sided Market||Also called a one-way market, a one-sided market is a market in which market makers only show a bid or an offer price rather than both. In broader terms, the concept refers to situations in which the entire market is strongly heading in a certain direction.|
|Open Interest||An open interest is a total number of contracts outstanding (yet to be settled) for an underlying asset. In other words, it is the total number of contracts that have not yet been exercised (squared off), expired, or fulfilled by delivery.|
If one buyer and one seller are initiating a new position, open interest will increase by one contract. If both traders are closing an existing or old position, open interest will decline by one contract. If one old trader squares off his initial position to a new trader (one old buyer sells to one new buyer), open interest will not change.
To determine the total open interest, we only need to know the totals from either of the sides of a trade: buyers or sellers, but not the sum of both.
An increase in the open interest indicates that new contracts are being initiated, hence new money is flowing into the market. Correspondingly, a decrease in open interest shows that the market is liquidating.
|Opening Price||The opening price is the price of a security at the beginning of the trading day. It is a good indicator for people interested in making short-time trades, as a security’s opening price can help to determine the day’s trading momentum. It is important to note that a security’s opening price may not always be the same as its previous day’s closing price. For example; if good news for a particular company comes after the day’s closing, there would be an increase in the stock’s demand thus raising the fair/expected price from the previous day’s close.|
|Opening Range||The first hour of trading after the opening bell usually sees some of the biggest price movements of the day. The first 30 minutes of trading set a tone for the day—whether it will be high volume, volatile, low volume, sedate, trending, and/or choppy.|
On a candlestick chart, mark the high and low price of the first 30 minutes of trading. This is called the “opening range.” For this strategy, we want the price to hang around the 30-minute high or low or in between the 30-minute high and low. The price can’t blow by the opening range’s high or low, as that indicates a trend in that direction.
|Option||An option is a financial derivative that specifies a contract between two parties that gives the buyer (of the option) the right but not the obligation to buy/sell an underlying asset at a pre-decided price (strike price) on or before a specified date, while the seller (of the option) is obligated to fulfill the transaction. Option buyers are referred to as holders, while option sellers are called writers.|
In options, either of the two rights is given to the holder of the option: Right to buy the underlying asset (known as a Call option) or Right to sell the underlying asset (i.e. Put option) at the strike price. As the holder has a right, he has to pay an upfront amount to the seller called a premium.
|Oscillators||A majority of leading indicators are called oscillators as they oscillate between a local minimum & maximum. They are usually plotted above or below a price chart. Typically an oscillator oscillates between two extreme values, for example, 0 to 100. The interpretation varies based on the position of the oscillator on the chart. The most common examples are – Stochastic Oscillator, MACD, or RSI.|
|Out of the Money Option||A call option is said to be out of the money when the strike price is above the current price of the underlying asset. While for a put option, the same can be said when the strike price is below the market price of the asset. Example: Suppose, an underlying stock of a call option is valued at INR 255 per share. A call option will be considered out of the money if the strike price rises above INR 255. However, for a put option, a strike price of less than INR 255 will be said as out of the money.|
|Overbought||Overbought is a term that refers to a situation of very high demand for a security or an asset, which results in an increase in the price of the asset to levels that cannot be justified by its fundamentals. Generally, in technical analysis, oscillators such as the relative strength index (RSI), the stochastic oscillator, or the money flow index are used to identify the overbought condition among securities and assets.|
|Overlays||A majority of leading indicators are called overlays as they use the same scale as prices and are plotted over the top of the prices on a stock chart. Examples include Moving Averages and Bollinger Bands. In fact, Moving Averages are such a giant topic to talk about. So many important indicators out there are formed based on Moving Averages.|
|Oversold||Oversold refers to a situation when the price of a security or an underlying asset falls sharply below its justifiable or true value (ie undervalued). This usually occurs as a result of market overreaction or panic selling. Generally, in technical analysis, oscillators such as the relative strength index (RSI), the stochastic oscillator, or the money flow index are used to identify the oversold securities and assets.|
|Paper Trade||One of the ways of deploying a strategy is to “Paper Trade”. This method comes in handy if you are a beginner and want to want to learn how to Deploy without putting your capital at risk. ‘Paper Trade’ works similarly to the ‘Take Live’ option except for the fact that the orders placed are hypothetical and so in the profit and loss.|
|Period High||The top of the upper wick/shadow indicates the highest price traded during the period. If there is no upper wick/shadow it means that the open price or the close price was the highest price traded.|
|Period Low||The lowest price traded is either the price at the bottom of the lower wick/shadow and if there is no lower wick/shadow then the lowest price traded is the same as the close price or open price in a bullish candle.|
|Pivot Points||The simplest way to use pivot point levels in your forex trading is to use them just like your regular support and resistance levels.|
Just like good ole support and resistance, the price will test the levels repeatedly.
The more times a currency pair touches a pivot level then reverses, the stronger the level is. Actually, “pivoting” simply means reaching a support or resistance level and then reversing. If you see that a pivot level is holding, this could give you some good trading opportunities.
– If the price is nearing the upper resistance level, you could SELL the pair and place a stop just above the resistance.
– If the price is nearing a support level, you could BUY and put your stop just below the level.
|Portfolio||A portfolio is a collection of financial instruments such as stocks, bonds, cash equivalents, funds held by an individual, investment company, or financial institution. An investment portfolio can be regarded as a pie that is divided into various parts, each representing a financial instrument with the objective of achieving a particular level of risk and return. Investors should construct a portfolio according to the investment objectives, risk tolerance, and time frame.|
|Price Action||Price action trading is a methodology that relies on historical prices (open, high, low, and close) to help you make better trading decisions. Price action tells you what the market IS DOING, and NOT what you think it should do.|
If a stock price begins climbing, it shows that investors are buying because prices rise as traders buy. They then assess the price action based on the aggressiveness of buying; the historical charts; and real-time price information such as bids, offers, volume, velocity, and magnitude.
|PROC/Price Rate of Change||This is a momentum indicator that measures the percentage change in price between the current price and the price a certain number of periods ago. PROC can be used to spot divergences, overbought and oversold conditions, and centerline crossovers.|
|Pullback||A pullback is a temporary pause or dip in an asset’s overall trend. The term is sometimes used interchangeably with ‘retracement’ or ‘consolidation’. However, a pullback should not be confused with a reversal, which is a more permanent move against the prevailing trend.|
|Put Option||Put option is a derivative instrument that gives the buyer of the option (holder) the right but not the obligation to sell the underlying asset at a fixed price (exercise or strike price) after a specified period of time (on maturity for European and anytime before maturity for American option). The seller of the put option (put writer) has a contingent obligation to purchase the underlying asset if the put holder wishes to exercise the option. As the option gives the buyer a choice to exercise the option or not, the seller charges a fixed upfront fee from the buyer (known as a premium). Example: ABC is an American company with a project in Australia. It has some account receivables in the Australian Dollar (AUD) which will be realized after 3 months. The USD value of this receivable will reduce if AUD depreciates. It can purchase put options on AUD with a 3 months maturity to sell the AUD at a fixed exchange rate after three months.|
|Quantitative Trading||Quantitative trading involves the use of trading strategies based on quantitative analysis, mathematical computations, and statistical techniques to identify trading opportunities in the market. Quantitative traders take advantage of modern technology, mathematics, and the availability of comprehensive databases for making rational trading decisions. Some example of Quantitative trading techniques is algorithmic trading, High- Frequency trading, etc. These techniques are immensely powerful, which constantly monitor market movements, trading patterns, and market-moving news. These strategies are capable of dynamic updations to send a large number of orders within a fraction of a second. Quantitative trading techniques were mostly used by large financial institutions but with the advent of publicly available tools, individuals are also increasingly using these techniques.|
|Regression||Regression is a statistical process of determining relationships between variables. It helps one to understand how the value of the dependent variable changes when any one of the independent variables is varied. It also allows comparing the effects of variables measured on different scales, such as the effect of price changes. In trading, regression is used extensively, especially in pairs trading strategy, and when it is required to evaluate the performance of a stock in comparison to market returns.|
Broadly speaking, regression can be of two types linear regression and multiple regression. Linear regression is the measurement of regression that uses one independent variable to predict the value of the dependent variable. Multiple regression considers more than one variable to estimate the value of the dependent variable. Other types of regression include logistic regression and polynomial regression to name a few. We choose different regression techniques according to their use and application.
|Resistance||As the name suggests, resistance is something that stops the price from rising further. The resistance level is a price point on the chart where traders expect maximum supply (in terms of selling) for the stock/index. The resistance level is always above the current market price.|
|Retail Trading||Retail trading involves trading done by individual investors who buy or sell securities for their personal accounts. Retail investors buy in smaller quantities as compared to institutional investors and hence cannot alter the cost of the security in a big way. However, the use of online trading and better access to financial information has increased the number of retail investors. As they invest a small amount in trading, they generally invest in small-cap companies. Additionally, they generally invest in stocks, bonds, options, and futures and they have very minimal access to IPOs.|
|Retracements||A retracement refers to the temporary reversal of an overarching trend in a stock’s price. Distinct from a reversal, retracements are short-term periods of the movement against a trend, followed by a return to the previous trend.|
|Returns||A return is a profit or a loss on an investment during a particular time period. If investment results in a profit, it is said to bear a positive return while if it results in a loss, it is described as a negative return.|
The rate of return is calculated by determining the difference between the final value (or the current value) and the initial investment value, then dividing the result by the initial investment value.
Example: Suppose an investor buys 100 shares of a company at a price of INR 10 per share, the cost of investment is INR 1000 (INR 10*100). If the market value of the share increases to INR 12 after one year and the investor sells the shares at INR 12, then the amount received will be INR 1200 (INR 12*100). In such a case, the return can be calculated as: Return = (INR 1200 – INR 1000) / INR 1000 = 0.20 or 20%
Similarly, if the market price of the share reduces to INR 800, then the investment will be said to have a negative return which can be calculated as: Return = (INR 800 – INR 1000) / INR 1000 = – 0.20 or -20%
|Risk Management System||Risk management is the identification, assessment, and mitigation of risks. This will be followed by a coordinated and economical application of resources to minimize the impact of unfortunate events or to maximize the realization of opportunities.|
|RSI/Relative Strength Index||Relative strength index is a momentum oscillator to indicate overbought and oversold conditions in the market. It oscillates between 0 and 100 and its values below a certain value, usually, 30 indicate an oversold market while values above another, say 70, indicate overbought conditions. Typically, a look-back period of 14 days is considered for its calculation and can be changed to fit the characteristics of a particular asset or trading style.|
Calculation of RSI involves the following steps:
Average Gain = (previous average gain x 13 + current gain)/14
– First average gain = sum of gains in last 14 days/14
Average Loss = (previous average loss x 13 + current loss)/14
– First average loss = sum of losses in last 14 days/14
Relative Strength (RS) = Average Gain / Average Loss
RSI = 100 – 100 / (1+RS)
In the chart above, red lines indicate both 14 days RSI plot and the levels for RSI,
while the blue line indicates the close price of the cryptocurrency BTC/USD. As discussed above, at around 30 RSI plot is indicating oversold conditions and at around 70, the plot is indicating overbought conditions.
These overbought and oversold indications shouldn’t be interpreted as direct buy/sell signals. Though, they can be a part of the signal generating decision process.
|Scanner||This is a tool on Streak that helps you filter stocks based on certain conditions. These stocks should have met your requirements or criteria. Scanners are used to identify Stocks in Play based on various setups and strategies.|
|Sell Order/an order to a broker to sell a security||A sell order may take any of a number of forms. Depending on the nature of the order, the broker may execute it at the best available price when the order is made, at a set price designated by the client, or according to a more complicated formula.|
|Sensex||The term Sensex refers to the benchmark index of the BSE in India. The Sensex is comprised of 30 of the largest and most actively traded stocks on the BSE and provides a gauge of India’s economy. It is float-adjusted and market-capitalization-weighted. The Sensex is reviewed semiannually each year in June and December. Created in 1986, the Sensex is the oldest stock index in India and is operated by Standard & Poor’s (S&P). Analysts and investors use it to observe the cycles of India’s economy and the development and decline of particular industries.|
|Sentiment Trading||Sentiments can often drive the direction of the markets. Traders can gauge the sentiment expressed in news blogs, tweets, and macroeconomic reports. Based on this information they take positions in the market. These positions can be momentum-based i.e. going with the market sentiment or these can even be contrarian i.e. opposite to the market sentiment.|
There are various sentiment indicators that traders can use to trade. These indicators are based on market data like security price, traded volume, open interest, etc. A few examples of such indicators are the Put/Call ratio, the Volatility index (VIX), Arm index or Short term trading index (TRIN), Short interest ratio, etc.
|Short||Shorting a stock is confusing to most new traders. In the real world, you have to own something to sell it. You can enter short trades (sell assets before buying them) in the hopes that the price will go down so that you can sell it to another trader.|
Example: If you go short on 1,000 shares of XYZ stock at INR 10, you receive INR 10,000 into your account, but this isn’t your money yet. Your account will show that you have negative 1,000 shares, which will need to be replaced. Note that you’re “short” 1,000 shares, not INR 10,000.
If you repurchase the shares at INR 9.60 per share, you will pay INR 9,600 for the 1,000 shares. You received INR 10,000 when you sold them (went short), so you make INR 400 before commission fees. If the stock price rises and you rebuy the shares at INR 10.20, you will pay INR 10,200 for those 1,000 shares. Here, you’ve lost INR 200 and still need to pay broker fees.
|Short Selling||Short or Short selling is the practice of selling securities that are not currently owned by investors in the hope that they will decline in value. Selling short is the opposite of going long. Short-selling is a strategy used by investors if they believe the price of the underlying asset will decrease in the future. To short a stock, an investor borrows the shares from a third party, paying interest as the fee. If the share price falls, the investor can buy back those shares at a lower price, return them to the lender and earn a profit from the price difference. If the share price increases, the investor takes a loss and owes that money to the lender.|
Short-selling is unlimited risk and a limited reward strategy. For example, if an investor enters into a short position on a stock trading at INR 100, the most that he can gain is INR 100 minus the fees, while the maximum loss in the strategy is unlimited as theoretically, the stock price can rise to infinity.
|Small-Cap Stocks||Small-cap stocks are generally defined as having market caps less than INR 5,000 crore. They are generally growth stocks or upstarts just getting their feet under them and looking to do something big. While small-cap stocks have historically delivered above-average returns as a group, many fail to live up to expectations. Small-cap stocks are more volatile than larger caps, meaning there is more risk of losses in the short term. These stocks are generally best owned as a diversified group, and for many years, in order to reduce those risks.|
|Spot Price||A spot price is the current market price of a particular commodity/security at which it can be bought or sold for immediate payment. The spot price is commonly used for pricing future contracts and to make projections about the future price movement of the security. Futures price is usually higher than the spot price, this is known as ‘Contango’. And, if the future price is lower than the spot price, the underlying is said to be in ‘Backwardation’. Example: Suppose the current market price of gold is Rs 20,000 for 10 grams and a seller agrees to sell you gold at market price. If you paid him Rs 20,000 for 10 grams of gold then the transaction happens at a price that is said to be at the spot price of gold.|
|Strategic Trading||Simply put, strategic trading means defining your Entry & Exit points based on a set of conditions that you decide. This may be through technical analysis or based on price.|
|Strike Price||The strike price is the specific price at which a derivative contract can be exercised. Strike prices are fixed for options contracts through the life of the contract. For call options, the strike price is the price at which the option holder has the right to buy the underlying. Similarly, for put options, the strike price is the price at which the underlying can be sold. Every option contract is exercised at the strike price which makes it an important element of the option contract.|
The difference between the strike price and the spot price of the underlying determines the price or the premium of the option.
|Stochastic||Stochastics measures the momentum of price. If you visualize a rocket going up in the air – before it can turn down, it must slow down. Momentum always changes direction before price.|
|Stocks||A stock is a type of security used to signify ownership in a corporation. Stocks are generally bought and sold on an exchange. Stocks are of two types: common stock and preferred stock. The holder of the common stocks is entitled to certain voting rights which enable them to participate in the company’s governance processes. However, preferred shareholders do not enjoy any voting rights but are entitled to receive a certain amount of dividend payment before any dividends can be issued to other shareholders.|
|Stock Market Correction||Seems like every time the stock market goes up for any length of time, someone starts forecasting imminent doom. Usually, this involves predicting the dreaded “stock market correction.” A stock market correction is a drop of between 10% and 20% in a major market index. |
The most important thing to know about a market correction is this: You won’t know it’s a market correction until it’s officially over.
A market correction is by definition a drop of less than 20%. Between the time when the market enters the “correction territory” of a more-than-10% decline and when it stops falling, you won’t know if it’s “just” a correction, or a more serious market crash — usually defined as a rapid market drop of more than 20%. Or, potentially, it could become a bear market, a prolonged period of market decline of more than 20%.
|Stop Limit Order||An investor can avoid the risk of an order executing at an unexpected price by placing a stop-limit order. A stop-limit order combines the feature of both stop and limit order. Once the stop price is reached, a stop-limit order becomes a limit order that will be executed at a specified price. The benefit of a stop-limit order is that the investor can control the price at which the order can be executed but the limit price may also prevent the order from being executed if the stock’s price may move away from the specified limit price, which may occur in a fast-moving market.|
Example: Suppose you buy the stock XYZ at INR 50 per share. You don’t want to lose more than INR 5 per share, so you set a stop-limit order for INR 45. If the stock dips to INR 45, the stop price triggers a limit order to sell at INR 45. If the price drops quickly lower than INR 45, the limit will ensure that you don’t sell at the lower price. The limit order will only execute when the stock reaches INR 45 again.
Note: With all limit orders, if the limit price is never reached, the order will never be executed.
|Stop Loss||Stop Loss is a buy or sell order which gets triggered when the stock price reaches a specified price known as the stop price. Stop loss is extremely useful for the investor who doesn’t want to monitor the security on a continuous basis. The other advantages of using stop loss are to offer protection from excessive loss and to enable better control of your account. One of the disadvantages of the stop loss is that it is mostly a market order and hence, it exaggerates the loss.|
Example: Suppose you buy the stock XYZ at INR 50 per share that you feared might drop in price, you could use a stop order to sell if the price dropped below INR 45 per share to protect yourself against a larger loss.
|Support||As the name suggests, support is something that prevents the price from falling further. The support level is a price point on the chart where the trader expects maximum demand (in terms of buying) coming into the stock/index. Whenever the price falls to the support line, it is likely to bounce back.|
|Swing Trading||Swing trading refers to the practice of trying to profit from market swings of a minimum of 1 day and as long as several weeks. If losses can be kept to acceptable levels using stop loss techniques, swing trading can be profitable and provide a good perspective to learn about both the short-term and long-term market movements. The downside of swing trading is that you must work hard all the time to manage trades, which means you might miss out on potential profits due to market moves.|
|Take Live||As the name suggests, Streak gives this option to let you take the strategy LIVE in the market. When you deploy using this option, Streak starts tracking the stocks in real-time and notifies you with an order window once your strategy conditions are met. You can then place orders with your stockbroker using this window. |
It is important to note that all the orders placed are routed through the stockbroker you are connected to.
|Take Profit||Take-profit orders are used to lock in a targeted profit on a long and short position. The profit price can be expressed in terms of absolute price or as a percentage from the buying price or the current price of assets purchased or shorted. Take profit order automatically closes an open order when the price reaches the specified threshold.|
Example: Suppose you are long stock ABC at INR 110.50 and want to book your profit when the rate reaches INR 120. Place a take-profit order at INR 120. When the price moves in the favorable direction and reaches INR 120.0, the take profit order will be automatically executed, closing your open position and realizing the profit.
|Technicals||Technicals is the most basic and simplistic section on Streak. You can say that it is the best way to kickstart your journey of Strategic Trading. Technical indicators are an integral part of strategic trading. They include moving averages such as SMA, EMA, Hull, etc, and Oscillators such as RSI, MACD, CCI, etc. And you can familiarize yourself in and out with these indicators using ‘Technicals.’ Once you master this section you can easily transition to creating both strategies and scanners.|
|Technical Analysis||Technical analysis is a study of forecasting the price of financial securities by analyzing the historical market data. Technical analysis employs models and trading rules based on price and volume, such as the relative strength index, moving averages, oscillators, or through recognition of chart patterns & waves. A technical analyst examines the price action of the financial markets instead of the fundamental factors that affect market price. Technical analysis is based on three assumptions:|
– The market discounts everything: It assumes that, at any given time, a stock’s price reflects everything that has or could affect the price – including the fundamental factors.
– Price moves in trends: It is assumed that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it.
– History tends to repeat itself: The repetitive nature of price movements is attributed to market psychology; i.e. market participants tend to provide a similar reaction to similar market stimuli over time.
|Technical Indicators||To define it in the most simple terms, indicator-based trading is a method of trading using technical analysis indicators. These indicators are often built on a preset logic or a set of mathematical formulas using the price, volume, or open interest of a stock.|
Most traders find this an important ‘add-on’ to their technical study (candlesticks, volumes, S&R) to arrive at a trading decision. These indicators can help you with the timing of trades and alert you about specific trends. They also focus on evaluating a stock’s strengths or weaknesses. You can predict what the market will do and where it will go with precision – if you learn to use the indicators effectively.
|TEMA/Triple Exponential Moving Average||This is nothing but the EMA (Exponential Moving Average) of an EMA of an EMA and its sole purpose is to reduce lag.|
|Tick||Tick is a measure of minimum upward or downward movement in the price of a security. A tick can also refer to the change in the price of a security from trade to trade.|
If a trade is at a higher price than its last traded price by its tick size or more, then it is called uptick.
Similarly, if a trade is at a lower price than its last traded price by its tick size or more, then it is called downtick.
Example: If the tick size is INR 0.01 and the stock goes from INR 10 to INR 10.01 then it would be considered as an uptick. Conversely, if it goes from INR 10 to INR 9.99, it would be a downtick.
Also, if a stock had a tick size of INR 0.1 and a current price of INR 10, the associated price can move to INR 10.1, INR 10.2 or INR 9.9, INR 9.8 but cannot move to INR 10.05 or INR 9.95 as it does not meet the tick size of INR 0.1.
|Multiple Time Frame Analysis||Multiple time frame analysis, or multi-time frame analysis, is the process of viewing the same currency pair under different time frames. Usually, the larger time frame is used to establish a longer-term trend, while a shorter time frame is used to spot ideal entries into the market.|
|TMA/Triangular Moving Average||The Triangular Moving Average is basically a double-smoothed curve. This means that the data is averaged twice (by averaging the simple moving average).|
|Trailing Stop Loss||A trailing stop loss is a way to move the exit point if the price is moving in your favor. It helps you trail your stop-loss either up or down. Not only that, it helps you exit a trade if the stock price moves against you. ATR is a great way to identify your stop-loss.|
|Trend||Trend is the general direction or momentum of the market, price of an asset, economy, or other measures. Trends are classified as secular if they last for 5 to 25 years. The trend is called primary when they last for a year or more and secondary if they last for a few weeks or few months within a primary trend. Trends are important in technical analysis to determine the future direction of prices.|
For example, if the price of a security is going upwards with few losses within a specified time period then it is said to be in an upward trend.
|Trend Breakout||A breakout occurs when the price moves beyond a certain level. It is basically a shift from a ranging/choppy market to a trending market.|
|Trend Following||Trading the trend is a strategy, which tries to take advantage of a trend already established in the market. Traders who employ a trend-following strategy do not aim to forecast any specific price levels. Such traders normally enter the market after the trend establishes itself. If there is a move contrary to the current trend, these traders exit their positions and wait until the new trend is confirmed. Trend following technique involves a risk management system that uses current market price, the equity level in your account, and market volatility. Traders will look to different types of indicators such as moving average, moving average crossover, RSI, Stochastics, etc, while implementing a trend-following strategy.|
|Trend Indicators||They measure the direction & strength of a trend. The formula is such that it keeps a specific type of price averaging as the baseline. As price moves above the average, it can be thought of as a Bullish trend. If it moves below the average, it signals a bearish trend. |
– Moving Average / MA (type: lagging) – Used to identify current trends and trend reversals. Moving Averages as also used to set up Support and Resistance levels.
– Moving Average Convergence Divergence / MACD – (type: lagging) – Used to reveal changes in strength, momentum, and duration of a trend in a stock price.
– Parabolic Stop and Reverse / SAR – (type: leading) – Used to find potential reversals in the market price direction.
|Uptrend||An uptrend describes the price movement of a financial asset when the overall direction is upward. In an uptrend, each successive peak and trough is higher than the ones found earlier in the trend. The uptrend is therefore composed of higher swing lows and higher swing highs. As long as the price is making these higher swing lows and higher swing highs, the uptrend is considered intact.|
Some market participants only choose to trade during uptrends. These “long” trend traders utilize various strategies to take advantage of the tendency for the price to make higher highs and higher lows.
Uptrends may be contrasted with downtrends.
|Value Stocks||Value stocks are not always cheap stocks. But one of the places you can look for value stocks is on the list of stocks that have hit 52-week lows. Investors like to think of value stocks as bargains.|
Value stock’s prices are low because the market has undervalued them for various reasons. The idea is to get in before the market corrects the price.
|Volatility||Volatility measures the frequency and magnitude of price movements, both up and down, that a financial instrument experiences over a certain period of time. The more dramatic the price swings in that instrument, the higher the level of volatility. Volatility can be measured using actual historical price changes (realized volatility) or it can be a measure of expected future volatility that is implied by options prices.|
|Volatility Indicators||These measure the rate of price movement, regardless of direction. This is generally based on a change in the highest and lowest historical places. They provide useful information about the range of buying and selling that takes place in the stock market. This will help you to determine points where the market may change direction. Examples:|
– Bollinger Bands (type: lagging) – Used to measure highness or lowness of the price, relative to previous trades.
– Average True Range / ATR (type: lagging) – Used to know the degree of price volatility.
|Volume||Volumes indicate how many shares are bought and sold over a given period of time. The more active the share, the higher would be its volume. For example, you decide to buy 100 shares of Amara Raja Batteries at 485, and I decide to sell 100 shares of Amara Raja Batteries at 485. There is a price and quantity match, which results in a trade. You and I together have created a volume of 100 shares. Many people tend to assume volume count as 200 (100 buys + 100 sells), which is not the right way to look at volumes.|
|Volume Indicators||They use some form of volume average and smoothening to determine the strength of a trend or confirm a trading direction. You might have seen instances where the trend suddenly becomes strong. It is usually the increase in trading volume that can lead to large movements in price. Examples:|
– Volume Weighted Average Price / VWAP (type: lagging) – It is the average price the stock has been traded at in an entire day, taking into consideration both volume and price.
– On-Balance Volume / OBV (type: leading) YouYoutempts to measure the level of accumulation or distribution by comparing volume to price movements.
|VWAP/Volume Weighted Average Price||Are you in search of an indicator that shows the equilibrium level of stocks? Your search is over! The VWAP aka Volume Weighted Average Price provides you with the equilibrium level as well as acts as a support and resistance indicator.|
|Watchlist||A watchlist is a key part of a trader’s toolkit, enabling you to group markets of your choice together in a single easy-to-find place and streamlining your trading. So whether you’re trading at your desk or on the move, there’s no need to search for markets manually when time’s not on your side.|
|WMA/Weighted Moving Average||In the world of trading, it is said that the ‘most recent data’ is more sacred compared to the historical data of the distant past. Just like the Exponential Moving Average, the Weighted Moving also put more ‘weightage’ on the recent price points. But the WMA is even more sensitive.|
|Whipsaws||A signal is provided by the indicator but the price doesn’t follow through after that signal and money is lost on the trade.|