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Showing posts from April, 2012

Nifty Futures Flash Crash

There was huge and abnormal activity in Nifty Futures on 20 April 2012 around 2.40 pm, when it fell from 5338 to 5000, a drop of 7% within few seconds. Later it recovered and settled around 5250/5300.  During this crash the number of contracts traded were 35,000 lots or 17.5 lakh shares.  What could have happened and how can a trader protect himself from such wild swings? To start with, there could be many possibilities which could have caused this crash.The error could be due to wrong punch or entry of  a sell order with a wrong quantity or price. Another possibility is that it may be due to algorithmic trading or prominently known as Algo trading, which is so programmed, that in case there is a fall below a particular price level, the algo will initiate a sell order no matter what the price is. There was also a similar flash crash in US markets in 2010, when Dowjones crashed about 1000 points in a matter of few seconds. What does this all mean for a trader? As a trader, if you are

Akshaya Tritiya - Gold, Gold ETFs or Gold Funds?

Akshaya Tritiya , by Indian tradition, is considered an auspicious day for buying gold. Nowadays, there are quite a few options for investors who want to invest in gold, other than physical gold. Prominent among them are Gold ETFs,Gold Funds and Gold coins from banks. Let us take a look some of the advantages and disadvantages of these products. Physical Gold or Gold coins:  Buying and selling physical gold adds substantial costs to your purchases, since jewelers always charges a making cost of 7 to 21 per cent over and above the price of gold. Also, when you want to sell it back to the same jeweler, you would be offered lesser price than the market price, which is a big disadvantage in investing in physical gold.Also storing your physical gold in lockers can cost you about Rs.1000-5000, depending on the institutions which offer you lockers and there are always risks associated with such placements. As far as Gold coins are concerned, they are similiar to physical gold, involving

High Dividend Yield Stocks 2012

What is Dividend Yield? Dividends are payments made by a company to their shareholders and these payments are paid out of the profits made during the year. Dividend yields are returns from dividends, which can be calculated by dividing the dividend per share by the current market price of the stock. For e.g., a company quoting at 200, declares a dividend of 10, the dividend yield works out to 5%. High dividend yield stocks are for those investors who are looking for regular income as well as capital appreciation over a longer period of time. These stocks can be picked up during market down trend or when market trend is not clear. In a downtrend, dividend yields of such companies goes up as the stock prices fall. Before investing in companies that provide high dividend yields, care to be taken that these companies have sound fundamentals, regular dividend paying and  enjoy healthy cash flows. We have picked few stocks which have high dividend yields in the range of 6-9% and with a low

Is Short Selling Dangerous ?

What is short selling? Short selling is a a trading technique a trader uses to profit from the falling price of a stock. It is a technique of selling a stock without owning it, with the view that the price is likely to fall further and, hence, there is profit to be made by buying it back at a lower price. When the market is bearish or in downtrend, it presents a window of opportunity for traders to make money by 'shorting' stocks with the hope that the market will continue to be bearish and this is where short selling comes into picture.   Is short selling dangerous? To start with, traders should be aware that short-selling is trading and not investing. They should also be aware that trading requires lot of skills and discipline and there are risks involved with it. To find whether short selling is dangerous or not, let us look at some of the key points below.  Historically, individual stocks and equity markets, both domestic and global, have moved upwards (short-term movement