Terminologies

COT stands for Carry Over Transactions. These transactions are moved by the customer to the next trading day and the carry over is arranged by the brokerage house.

Day Trade: A day trade is made when a customer buys a particular share and sells it during the same day.

Dividends are returns on shareholding. The return is paid by the company out of its profits. This return may be in the form of cash or additional shares referred to as ‘bonus shares’. Dividends are announced by the company usually once or twice a year depending upon company policy.

Earnings per share (EPS): A profitability indicator calculated by dividing the earnings available to common stockholders during a period by the average number of shares actually outstanding at the end of that period.

Spot Market: A commodities market in which goods are sold for cash and delivered immediately. A futures transaction which will expire in 1 month or less.

Spot Price: The current price at which a particular commodity can be bought or sold at a specified time and place.

Buy Back: The buying back of shares by a corporation in order to reduce the number of shares in the market.

Buy and Hold: A passive investment strategy with which an investor buys stocks and holds them for a long period regardless of fluctuations in the market.

Trading Style

Match Your Trading Style To Your Lifestyle.

Your choice of trading style is especially important from a lifestyle perspective. Day trading usually means you will be at your computer for hours at a time. Longer term online stock trading doesn't require as much attention.

As a rule, the shorter the time frame the more intense the trading.

Types of Technical Indicators

Three types of technical indicators are commonly used to get a handle on the technical picture. They are:

• Trend indicators, such as moving averages and moving average convergence/divergence (MACD)
• Momentum indicators, such as the relative strength index (RSI)
• Volume indicators, such as Chaikin money flow (CMF)

Trend indicators are used to ascertain the general direction of price. Rising peaks and troughs form an uptrend, while falling peaks and troughs form a downtrend. Moving averages and moving average convergence-divergence are among the more commonly used trend indicators, which are often lagging indicators.

Momentum Indicators measure the rate of price change of a security and are usually leading Indicators. Momentum is often assessed using oscillators that compare the magnitude of recent losses with magnitude of recent gains and indicates this by a number ranging between 0 and 100. The relative strength index (RSI) is a popular momentum indicator.

Volatility

• In general, volatility is a statistical measure of the tendency of a market or security to rise or fall sharply within a short period of time. Volatility is typically calculated by using variance or annualized standard deviation of the price or return. 
• Volatility is a variable that appears in option pricing formulas. In the option pricing formula, it denotes the extent to which the return of the underlying asset will fluctuate between now and the expiration of the option.

Things to AVOID When trading in Stock Market

• Greed; being greedy can be a problem as it corrupts wisdom, 
• Making the same mistake twice, 
• Following the crowd, as the loss at the end is of the individual and not the crowd itself 
• Putting all your ‘eggs in one basket’. You should diversify and spread your investment, 
• Using rumors as tips, as this can result in losses. A tip can end up as a ‘pit’ 
• Emotions; being emotional can effect reasoning. Traders should use research backed by fundamental reasoning. 
• Impatience; patience pays, perseverance gains, 
• Over borrowing; loan repayment is not an investment.

Why Use Indicators?

Indicators serve three broad functions: to alert, to confirm and to predict.

• An indicator can act as an alert to study price action a little more closely. If momentum is waning, it may be a signal to watch for a break of support. Or, if there is a large positive divergence building, it may serve as an alert to watch for a resistance breakout. 
• Indicators can be used to confirm other technical analysis tools. If there is a breakout on the price chart, a corresponding moving average crossover could serve to confirm the breakout. Or, if a stock breaks support, a corresponding low in the On-Balance-Volume (OBV) could serve to confirm the weakness. 
• Some investors and traders use indicators to predict the direction of future prices.

Bollinger Bands

• Bollinger Bands are placed two standard deviations above and below a central moving average. 
• When the stock price touches the lower band, it is often considered an oversold signal, and a bounce in the stock price is expected.
• Similarly, when the stock price touches the upper band, it is often considered an overbought signal, and reversal in the stock price is expected.