Options Trading - Frequently Asked Questions

1 year, 1 month agoComments closed

faq options

Q: What is options trading?

Ans: Options is a form of derivatives which can be traded on stock exchanges.

Q: What are options recommendations?

Ans: Techpaisa provides option recommendations to its premium users. You can have a look at all old recommendations here.

Q: How to become a techpaisa’s premium user and get options recommendations?

Ans: You can get a free trial for 1 week by registering here. After 1 week, service is paid.

Q: Do you send options recommendations by SMS?

Ans: Right now, options recommendations are sent over email only and not by SMS. Emails are sent to your registered email-id between 3:00PM and 3:25 PM on every trading day. Note that there might not be a recommendation on a trading day if our trading system does not find any trading opportunity.

Q: How much quantity/lots to trade?

Ans: Quantity of lots to be traded depends on the capital you have. We generally recommend 1 lot of option to be traded.

Q: How to keep track of live recommendations?

Ans: Every recommendation is given with an exit condition. You have to keep track of exit conditions yourself and exit accordingly.

Q: Do you send an intimation to close the trade?

Ans: No. In the recommendation itself, we state the exit condition. A position can be exited under 3 conditions

  • When the price of underlying reaches certain target price or
  • When the price of underlying reaches specified stop loss or
  • When maximum number of trading days to hold the position have passed or
  • When expiry day of the option is there

You have to keep track of live prices of underlying and option yourself.

Q: How to learn options trading?

Ans: Get free trail of techpaisa’s premium service here. Then as you receive live recommendations, do paper trades i.e., don’t place traded with actual money but note them as if you would have done while actually trade. Then follow the trade everyday till it closes.

If you have any other query, feel free to mail us at feedback@techpaisa.com

Good Trading!

Techpaisa Team.

Stay tuned for latest updates:

Short-term (Swing) Trading - Frequently Asked Questions

3 years, 9 months agoComments closed

faq short-term swing

Q: What is short-term trading?

Ans: Short-term trading is a method of trading where positions are taken for a short-term time frame usually less than 20 trading days.

Q: What are short-term recommendations?

Ans: Techpaisa has developed a proprietary short-term trading platform where stocks are backtested on historical data under various strategies and the most profitable strategies are picked to give recommendations to users.

Techpaisa provide short-term recommendations to its premium users. You can have a look at all old recommendations here.

Q: How to become a techpaisa’s premium user and get short-term recommendations?

Ans: You can get a free trial for 1 week by registering here. After 1 week, service is paid.

Q: Do you send short-term recommendations by SMS?

Ans: Right now, short-term recommendations are sent over email only and not by SMS. Emails containing recommendations are sent to your registered email-id between 3:00PM and 3:25 PM on every trading day. Note that there might not be a recommendation on a trading day if our trading system does not find any trading opportunity.

Q: At what price to enter the trade?

Ans: Price will be mentioned in the recommendation.Price will be underlying equity. As you would be trading in futures, you should try to execute the trade “near” that price only. Near could mean plus minus 0.5%. Also, note that futures would be trading at a premium or discount. So you need to take that into account too.

Try to enter the trade at the price mentioned in the mail or very close to that price only.

Q: How much quantity/lots to trade?

Ans: You would be doing the trades in futures segment, so you need to atleast buy or sell one future lot. Depending on the margin and risk-appetite you have, increase the number of lots. But remember don’t put all your eggs in one basket.

Q: Do you send an intimation to close the trade?

Ans: No. In the recommendation itself, we state the exit condition.

You have to keep track of live prices yourself and exit when target or stop loss is reached. Note that for some trades, only holding period in terms of trading days is specified. Exit this trade after number of recommended trading days have elapsed.

For example, some recommendations have exit condition as hold position for 2 trading days then if you have entered position today then you have to exit after 2 trading days (day after tomorrow or if holiday comes then skip that day). In this case, you would ideally want to exit at closing price (sometime in between 3PM and 3:30PM).

Q: How to learn short-term trading?

Ans: First you need to understand basic technical indicators like rsi, macd, sma, adx etc. Please see out tutorial here.

Then, get free trail of techpaisa’s premium service here. Then as you receive live recommendations, do paper trades i.e., don’t place traded with actual money but note them as if you would have done while actually trade. Then follow the trade everyday till it closes.

Q: Can I trade swing recommendations using stock options?

Ans: Usually, we suggest trading in futures. But you can also trade in options if following is true:

  • As most of the stock options traded on NSE are not that liquid, you must make sure that you are buying or selling an option only if it is liquid.
  • If you want to trade options, then we suggest trading options with delta 1 i.e. in the money options as they behave like futures as long as delta is one. However unlike pairs trading, you can trade short-term recommendations in other options also and can try different strategies like selling puts for bullish strategies and vice-versa for bearish strategies.
  • Trade in options only if you know the theory otherwise just trade in futures.

Q: Can I trade swing recommendations in cash segment?

Ans: Buy recommendations can be traded but you can short in cash.

Q: Some recommendations are generated repeatedly?

Ans: A signal can be generated any number of times and we send a recommendation whenever a signal is generated. Note that for one stock only one recommendation will be sent in one trading day.

It is upto you to accumulate more position as you receive repeated recommendations. Or you can choose to ignore repeated recommendations.

Note that we send repeated recommendations for people who join late i.e. people who have registered today should get this recommendation even if the same recommendation was given out yesterday or before.

Q: How is backtesting done?

Ans: Please note that we can not give you all the details as this is proprietary platform but here are some details (liable to change without notice):

  • In every recommendation, we give a link to detailed analysis about that strategy and why that recommendation was generated. We strongly advise you to visit that link and study as it is a great way to learn algorithmic and rule-based trading.
  • Backtesting is done once in a month. Its not done more frequently to avoid churning of strategies between trade and no-trade zone only due to effect of 1 or 2 trades.

Q: What does 1 Trading day mean for a recommendation which has been triggered at 11:00 AM today? Today’s close? Tomorrow’s close? Tomorrow 11AM?

Ans: Tomorrow’s close i.e., exit trade between 3PM and 3:30PM as close price is weighted average price of all the trades in this last half hour.

If you have any other query, feel free to mail us at feedback@techpaisa.com

Good Trading!

Techpaisa Team.

Stay tuned for latest updates:

Pairs Trading - Frequently Asked Questions

3 years, 9 months agoComments closed

faq pairs-trading

Q: What is pairs trading?

Ans: Pairs trading is a market-neutral strategy where one stock is bought and another is sold simultaneously. Read more here.

Techpaisa has developed a proprietary pairs trading platform where you can test pairs for feasibility for pairs trading free of cost. Check out the platform.

Q: What are pairs trading recommendations?

Ans: Techpaisa provide pairs trading recommendations to its premium users. You can have a look at all old recommendations here.

To understand pairs trading recommendations, please check our tutorial.

Q: How to become a techpaisa’s premium user and get pairs trading recommendations?

Ans: You can get a free trial for 1 week by registering here. After 1 week, service is paid.

Q: Do you send pairs trading recommendations by SMS?

Ans: Right now, pairs trading recommendations are sent over email only and not by SMS. Emails are sent to your registered email-id between 3:00PM and 3:25 PM on every trading day. Note that there might not be a recommendation on a trading day if our trading system does not find any trading opportunity.

Q: How to keep track of live divergence?

Ans: Read our tutorial here.

Q: How much quantity/lots to trade?

Ans: To find the number of future lots to trade for a given pair, you need to login on techpaisa.com and visit that particular pairs page. You will find the required information on the pairs page itself.

For example, for pair Sunpharma-Lupin, on this page, it is recommended that For every 3 futures lot of LUPIN, trade 2 futures lot of SUNPHARMA.. That is, if recommendation is Long Sunpharma and Short Lupin, you should buy 2 future lots of Sunpharma and sell 3 future lots of Lupin. If you have spare margin and want to put more money in this trade then you can buy 4 future lots of Sunpharma and sell 6 future lots of Lupin.

Note that on the recommendations page here, quantities are chosen such that total investment in one trade is Rs 2 Lacs. While actually doing trades, you will be trading in future lots and you have to trade such that ratio of quantity remains as stated here.

Q: When trading in futures, future of which expiry date should we trade?

Ans: Consider two points:

  • Liquidity should be reasonable, i.e., volume traded in that futures should be large enough and bid-ask spread should not be big.
  • We mention a maximum holding period in pairs trading recommendation. Decide expiry date based on this number. However, a trade would be closed before the maximum trading days prescribed if target or stop loss divergence is reached.

Remember you would need to roll out open positions to the next expiry if positions are open on an expiry day.

Q: Do you send an intimation to close the trade?

Ans: No. In the recommendation itself, we state the exit condition. A position can be exited under 3 conditions

  • When target divergence is reached or
  • When stop loss divergence is reached or
  • When maximum number of trading days to hold the position have passed.

You have to keep track of live divergence yourself.

Q: How to learn pairs trading?

Ans: Get free trail of techpaisa’s premium service here. Then as you receive live recommendations, do paper trades i.e., don’t place traded with actual money but note them as if you would have done while actually trade. Then follow the trade everyday till it closes.

Q: What are least-risk recommendations?

Ans: Recommendations mentioned as LR (here) are least-risk recommendations where probability of loss is least. If you want to trade selective recommendations, then just trade LR recommendations. Note that it doesn’t mean that other recommendations are risky, we want to provide recommendations for users with lesser margin money to trade who can not trade all recommendations.

Q: Can I trade pairs trading recommendations using stock options?

Ans: Usually, we suggest trading in futures. But you can also trade in options if following is true:

  • As most of the stock options traded on NSE are not that liquid, you must make sure that you are buying or selling an option only if it is liquid.
  • If you want to trade options, then we suggest trading options with delta 1 i.e. in the money options as they behave like futures as long as delta is one.
  • Trade in options only if you know the theory otherwise just trade in futures.

If you have any other query, feel free to mail us at feedback@techpaisa.com

Good Trading!

Techpaisa Team.

Stay tuned for latest updates:

Understanding Pairs Trading Recommendations

4 years, 1 month agoComments closed

pairs-trading tips

Techpaisa sends exclusive pairs trading recommendations to its premium users. If you want to become premium user, register on techpaisa.com and send an email to feedback@techpaisa.com

We will go over a recommendation by using one example. We sent a recommendation on 19th Feb 2013 of buying NMDC and selling HINDALCO.

Here is the recommendation:
Sell NMDC - Buy HINDALCO
Timeframe: 3months
Entry Threshold: 1.5
Target Divergence: 0
Stop Loss Divergence: -2.5
Current Divergence is: -1.45785
NMDC is trading at 137.25.
HINDALCO is trading at 98.85.

Whenever you receive a recommendation, visit the pair page on techpaisa.com. For example, in this case, visit NMDC-HINDALCO page.

How to calculate divergence

When doing pairs trading, you should understand what divergence is. (Read our earlier tutorial on pairs trading.) Simply put, divergence is a function of stock prices of constituent stocks in pair. In the above case, divergence is calculated using the folloing formula:

[hindalco_price - (0.8 * nmdc_price) - mean_error]/standard_error

Mean error and standard error are available on pair page.

Here is an explanation of terms:
  • Time frame is 3 months which means divergence is tracked over a period of 3 months.
  • Entry threshold 1.5 means that take positions when divergence is close to 1.5 (or -1.5) and current divergence specifies the exact divergence at which recommendation was given.
  • Target divergence is 0 and stop loss divergence is -2.5.
  • For this trade, it doesn’t make sense to recommend target prices and stop loss prices as we are dealing with a function of two prices. We suggest that on the pairs page, you follow real time divergence regularly and when the real time divergence hits target divergence or stop loss divergence (stated above for this pair), exit positions.
Other things to keep in mind:
  • Take positions around the above prices. When you will do trades, you will be trading in future contracts of above stocks/indices, so the prices you get will be different from above because future contracts trade at certain premium/discount.
  • Hold positions for a maximum of 40 trading days (in this example). This is calculated using half life of pair. Again, since you will be trading future contracts which have an expiry date, so when entering the trade, make sure expiry day is beyond the expected duration of trade which we have stated here.
  • Maximum number of trading days is specified in each recommendations.

Hope this article clears some doubts about the terms used in recommendations. If there is any doubt, feel free to mail us at feedback@techpaisa.com

Good Trading!

Techpaisa Team.

Stay tuned for latest updates:

Top stocks in FMCG sector

5 years, 7 months agoComments closed

screener tutorial

Very often, we are asked by investors how to find top stocks in a particular sector/index/industry for a holding period of atleast 2-3 years. At techpaisa.com, we specializes in making money technically but techpaisa screener has the capaibility to filter fundamentally strong stocks in a particular sector as well. As an example, how you can find top stocks in FMCG sector using tools on techpaisa.com for free.

Basic difference between trading fundamentally strong stocks and technically strong stocks is that your holding period changes. When you trade fundamentally then you are expecting that the company will post strong financial results and overall markets will rally and you are prepared to hold stock for a period of at least 2-3 years. However, when you trade technically, your holding period is mostly less than 1 month and you don’t really worry about financial results posted by company.

Index/Sector Discovery

Figure out the index or the sector in which you want to find the best stocks in the long-term. This step is very easy if you know one stock from the sector/index you are looking for. For example, from FMCG sector, ITC is one of the well-know stocks. Search for ITC on techpaisa.com and go to ITC stock page. In the top corner, you can see ITC is part of FMCG-Food-and-Beverages (FMCG-FnB) which is a sub-sector of broader Conumer Goods sector. Also, scroll down to see that ITC is part of various indices. We suggest you to note the most specific index which is CNXFMCG. So we have figured that we want to find fundamentally strong stocks which are good for long-term in index CNXFMCG or sector Consumer Goods. Since consumer goods (contains 50 stocks) sector is broader than FMCG, we should use CNXFMCG (comprises 15 stocks) in the screener.

Finding Top Stocks

After identifying the sector or index, now we use techpaisa screener to find good stocks in long-term. We suggest you read screener tutorial before proceeding further. We will discuss two methods of finding 2 methods. One is completely fundamental and in the other we mix long-term moving average with fundamental indicators like PE ratio.

Method 1

We are going to use “PE Cheap” filter and index as CNXFMCG (Click here to access the filtered stocks). If you use this filter, stocks are sorted in increasing P/E ratio, which means that cheap stocks come first. Moreover, we also make sure that last 3 quarters of the stock have been positive Earning Per Share.

Method 2

In the second method, we will just add one more filter in the last screener which is that stock price is above 200 Day Moving Average. When stock price is above 200 DMA, its an indicator that stock is in a long-term uptrend (Click here to get filtered stocks).

Here, we explained how to find fundamentally strong stocks in FMCG sector which can give good returns in 2-3 years period. Similarly you can find best stocks in other sectors for the long-term.

Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Data of NSE Stocks from 1995

5 years, 8 months agoComments closed

techpaisa

We are pleased to announce that now we have got prices of stocks from 1995. Previously we had prices from 2010. Now you can view analysis of NSE stocks from 1995. Good thing is that it’s free.

We have normalized the prices for various corporate actions like bonus and face value splits. If you find out any stock which has not been normalized, please let us know. Soon we are launching more new features.

Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Deliverable Quantity

6 years ago261 Comments

deliverable-quantity analysis tutorial

Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. Any price movement up or down with relatively high volume is seen as a stronger, more relevant move than a similar move with weak volume.

However, day trading volumes are just noise and are mostly made up of speculative trades. Any ratio derived from day trading volumes, cannot be a reliable indicator. That’s why, we look at deliverable volume which is all the trades which were not closed on the same day i.e. all trades which were not intraday trades.

If a stock’s price goes up sharply, with a substantial increase in delivery volume, it is a bullish indication. If a stock’s price falls sharply, with a substantial increase in delivery volume, it is a bearish indication.

I don’t think a stock can be traded just by looking the the delivery statistics. Along with the delivery data, one should also look at the entire technical setup of the stock i.e. the technical charts.

Another important idea in technical analysis is that price is mostly preceded by volume. Volume is closely monitored by technicians and chartists to form ideas on upcoming trend reversals. If volume is starting to decrease in an uptrend, it is usually a sign that the upward run is about to end.

You can view deliverable volume of all stocks traded on NSE at the individual stock page. (e.g. Reliance)

Stock Screener

6 years, 3 months agoComments closed

screener nse tutorial

We are pleased to introduce our own stock screener. You can access it here and use it for free. A stock screener is a tool to filter stocks based on various technical and fundamental criteria.

At techpaisa, you can filter stocks based on following technical criteria:
  • Near 200 SMA: If current stock price is within 1% range of 200 Day Simple Moving Average. Same filter for 20 and 50 Day SMA.
  • Above/Below 200 SMA: If current stock price is above/below 200 DAY SMA. Same filter for 20 and 50 Day SMA.
  • RSI Oversold/Overbought: If RSI is indicating that stock is oversold/overbought.
  • MACD Bullish/Bearish Crossover: See here to know about MACD.
  • MACD Bullish/Bearish Centerline Crossover
  • Bollinger Bands squeezing/squeezed: See this tutorial to understand bollinger bands.
  • ADX Trending: See here to know about ADX. It’s a measure whether a stock is trending or not.
Following fundamental criteria are supported:
  • Sector: You can use this filter to compare stocks from a given sector.
  • P/E (Price-to-Earnings Ratio): If you use this filter, stocks are sorted in increasing P/E ratio, which means that cheap stocks come first. Moreover, we also make sure that last 3 quarters of the stock have been positive Earning Per Share.
  • Traded in Futures: Whether futures for that stock are traded are not.
  • Promoter Shareholding: More the promoter shareholding, better the stock.
  • Absolute beta: View this tuorial for a brief introduction of beta.
  • Market Capital: Filter high market capital stocks usign this filter.
Our stock screener can be used in many interesting ways. We list some of the screens which we find interesting:
  • Stocks near 200 SMA and above 200 SMA and above 50 SMA and above 20 SMA and traded in futures: This screen filters all stocks above 200 Day SMA, 50 SMA and 20 SMA and which are close to 200 SMA. Stocks above 200 SMA, 50 SMA and 20 SMA are considered to be in an uptrend. And when a stock in uptrend comes near 200 SMA, then 200 SMA acts as a strong support for that stock and it is a good time to go long in that stock. Similarly, you can use this screener to find stocks in a downtrend and near 200 SMA. You can even apply ADX trending filter to refine the results.
  • Stocks with Cheap P/E and in education: This screener will give you all stocks in Education sector with cheap price-to-earnings ratio. We suggest whenever you apply P/E filter, you should choose a sector because P/E ratio of two stocks from different sectors can’t be compared.

Please let us know if you have any more suggestions for filters.

Stay tuned for latest updates:

Techpaisa Team.

Average Directional Index

6 years, 5 months agoComments closed

average-directional-index technical-analysis tutorial

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

Adding to our arsenal of technical analysis tools, we intoduce Average Directional Index (ADX) at techpaisa.

ADX tells us whether a stock or a commodity is in a trend or not. It also tells us the strength of the trend. However using ADX only, one can not determine whether a stock is in a downtrend or uptrend, that is, ADX only tells whether a stock is in a trend or a trading range.

Reading ADX values is pretty straight forward. If ADX is less than 25, then stock is in a trading range. If ADX is greater than 25 then the stock is in a trend. If ADX becomes very large (around 50) then it generally means, the trend is weak and expect ADX to fall from here.

As ADX does not tell us the direction of trend, it can not be used to generate buy or sell signals. However, you can combine ADX with other technical indicators to get an idea of stock’s movement in next few weeks.

Other Tutorials on internet:
Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Average True Range

6 years, 5 months ago840 Comments

average-true-range technical-analysis tutorial

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

We have introduced several technical analysis tools and talked about them here and here.

Quoting from stockcharts:

Developed by J. Welles Wilder, the Average True Range (ATR) is an indicator that measures volatility. It is important to remember that ATR does not provide an indication of price direction, just volatility.

At techpaisa,we use a 14-day period (most common period) to calculate ATR. You can find ATR in technical analysis section on each stock page at techpaisa. ATR is calculated using stock prices and is not normalized, which means, a stock with price Rs. 100 will have a lower ATR than a stock with price Rs. 1000. ATR can be used to identify breakouts. When a breakout occurs, ATR suddenly goes up.

For more details, check out following links.

Other Tutorials on internet:
Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.