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Investment Vs Trading

Investment Vs Trading

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Investment Vs Trading. Investment Basics. Why People Invest in Financial Markets To achieve financial goals To increase income To gain wealth and feeling of security Based on long term / short term financial goals investments could have Targeted Rupee amount Targeted maturity date. - PowerPoint PPT Presentation

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Page 1: Investment Vs Trading

Investment Vs Trading

Page 2: Investment Vs Trading

Investment BasicsWhy People Invest in Financial Markets• To achieve financial goals• To increase income• To gain wealth and feeling of security Based on long term / short term

financial goals investments could have

• Targeted Rupee amount• Targeted maturity date

Page 3: Investment Vs Trading

• They are often thought of as interchangeable actions while they are not

• Commonality is the application of capital in the pursuit of profits

• Investing is more open ended; trading is close ended with exit targets

• With the same process and stock, intention and definition of objectives separate trading from investing

Investment Vs Trading

Page 4: Investment Vs Trading

Investing

• When savings are put buy stock that will earn a decent amount of income and/or go up in value over time

• Decisions are made for the longer term. Stock is bought because it is valuable now or likely to become more valuable in the future

Page 5: Investment Vs Trading

Trading

• Time the market — buying low and selling high as quickly as possible

• Successful trading requires close attention to price trends, insight to market movements and the courage to make quick decisions

Page 6: Investment Vs Trading

Do not trade like an investor or invest like a trader

Page 7: Investment Vs Trading

INVESTING v/s TRADING

• Buy and hold/wait for the markets to come back

• Never Buy or hold/wait for the market to come back

Page 8: Investment Vs Trading

INVESTING v/s TRADING

• Averaging • Never Average

Page 9: Investment Vs Trading

INVESTING v/s TRADING

• Never use a stop

• Never trade without a stop loss

Page 10: Investment Vs Trading

INVESTING v/s TRADING

• Shorting is a integral part of trading

• Never short the market

Page 11: Investment Vs Trading

INVESTING v/s TRADING

• Focus on the fundamentals

• Focus on Technical Parameters

Page 12: Investment Vs Trading

Which One is Better?

• Both the styles have numerous arguments in favor and in against. A client should stick to its goal and investment objectives.

• HOWEVER combining both would be an excellent ‘style’ diversification. Obviously one should not miss the opportunity when market offers it on any given day.

Page 13: Investment Vs Trading

The winning Combination1. Have clarity in terms of investment

objectives

2. Set targets / rules for opening and closing the position, closely follow the calls.

3. Define exposure. Follow it and manage it closely.

Page 14: Investment Vs Trading

Portfolio : An Example

Investment Positional Trade

Day Trade Exposure

100% 0 0 100%

80% 20% 0 100%

80% 10% 10% 130%

Page 15: Investment Vs Trading

• Before going for a transaction ask this very basic question:

What type of transaction this is?

Page 16: Investment Vs Trading

Decide Before Ordering

• Investments

• Positional Trade

• Intra-day

Page 17: Investment Vs Trading

Investments

• Few months to few years

• Fundamental Factors

• BUY & HOLD till the theme & under valuation persists

• Let long term remain long term and do not book short term profits.

Page 18: Investment Vs Trading

Products

• Inquire Research Reports

• Updates, Visit & Result Notes

• MOSt Value

• Results Preview

Page 19: Investment Vs Trading

Positional

• Overnight to few days• Technical Factors• May not be in Sync with Fundamental

factors• Always make use of STOP-LOSS loss

levels• Should not be converted into Long-term

Investments- HFCL, GTL etc..

Page 20: Investment Vs Trading

Positional

• Market Diary

• Awacs or Derivative Products

Page 21: Investment Vs Trading

Intra-day

• Same day square-off • Technical Factors• May not be in Sync with Fundamental

factors : Remember MAY 17th

• Always make use of STOP-LOSS loss levels

• Should not be converted to Positional or investments

Page 22: Investment Vs Trading

Product GridInvestors are advised by dedicated relationship managers through various advisory products

  Market Analysis Technical Analysis Fundamental Research

Thematic Research

Regular                                      Inquire Company & Sector reports

 

Yearly                                        Wealth Creation report                                  Budget Coverage Quarterly                                      Results

Preview                                  India Strategy

Monthly                                    MOSt Momentum

                                 MOSt Value                                  MOSt Mutual

 

Weekly                                    Futures Weekly Guide

   

Daily                                  MOSt Commodity

                                 Morning Calls                                 

Derivative Strategy                                  Market Dairy                                  Pivot Points                                  MOSt Market Action

                                 MOSt Morning Research

 

Market Hours

                                 Market Information & Intraday Calls

     

Page 23: Investment Vs Trading

Mathematics of Trading

Page 24: Investment Vs Trading

Intraday- Assumptions

• Success Ratio of not more than 60-65%

• Reward –Risk Ratio of 2:1• For an expected profit of

Rs.2, you are accepting a risk of losing Re.1

Page 25: Investment Vs Trading

Success

Ratio

No. of times Stop-loss(Re.1)

is hit

Total Loss No. of times

(Re.2) is earned

Profit

Earned

Net

Position

40% 6 6*1=Rs.6 4 4*2=Rs.8 +Rs.2

50% 5 5*1=Rs.5 5 5*2=Rs.10

+Rs.5

60% 4 4*1=Rs.4 6 6*2=Rs.12

+Rs.8

70% 3 3*1=Rs.3 7 7*2=Rs.14

+Rs.11

Page 26: Investment Vs Trading

If you know where you're going and why, you will

Thank You