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How to Trade Options in India?

How to trade options

What are the options?

An option is a contract, traded in the stock market just like stocks are, but how to trade options where they give you the right to buy or sell the underlying stock at a certain fixed price. Options are having 2 kinds of contracts call and put options to learn more about options terminologies to understand better about options trading.

Basic Options Trading Terminology

Sometimes it is difficult to define options trading terminologies so we simplified things a little so they’d be easier to understand. 

Here is a list of the terminology you need to know about options trading:

  • CALL OPTION: A call option gives the buyer the right to buy shares at a fixed price (strike price) before a specified date (expiration date)
  • PUT OPTION: A put option gives the buyer the right to sell shares at a fixed price (strike price) before a specified date (expiration date)
  • PREMIUM: The price of an option contract paid is called a premium.
  • STRIKE PRICE: The strike price is the price per share at which the holder can purchase (for call options) or sell (for put options) the underlying stock/INDEX.
  • LONG: Being “long” in an option means to have buy [call/put] and hold it
  • SHORT: Being “short” in an option means to sell [call/put] and hold it. (A short position is carried as a negative on a statement and must be purchased later to close it.)
  • EXERCISE: If exercising, calls owners will buy the underlying stock, while put owners will sell the underlying stock under the terms set by the option contract.
  • EXPIRATION DATE: The expiration date is the last day on which the option may be exercised. It can be monthly or weekly expiry contracts.
  • HEDGING: A risk management strategy used in limiting or offsetting the probability of loss from fluctuations in the prices of stocks or Indices [Nifty/Bank Nifty]
  • INTRINSIC VALUE: The intrinsic value of an option is the amount of profit that can be obtained if the option is exercised at that moment and the stock either purchased (for calls) or sold (for puts) at the current market price.
  • TIME VALUE: Time value is the period by which an option’s contract will exceed its intrinsic value.
  • TIME DECAY: As each option have an expiration date, they lose time value erodes to zero by expiration. This erosion of premium is known as time decay.

Is options trading good for beginners?

As a beginner, you need to first start from the very basics where You need to learn the concepts of volume, trend and market sentiment of Index or stocks. Then, you can learn easily how to trade derivative contracts for INDEX Future and options.

Trading in derivatives for a beginner is like learning to run before you learn to walk.

These are the few reasons why options trading is not good for beginners:

  • As futures and options are leveraged products most beginners don’t know how to trade leverage products the right way
  • Options work very differently from stocks and futures as time decay and implied volatility are also at work here apart from the direction of the stock
  • Lack of knowledge about how futures and options markets work in general.
  • Not willing to invest in learning the basics like training, books, mentoring. 

Many people only realise this when they have lost a lot of money.

Futures & options contracts designed to protect your Investments by creating hedges strategies on your portfolio. These are heavily traded and it’s even bigger than the actual market.

Why Trade Options? [Advantages and Disadvantage]

The options market is one of the most versatile trading instruments available to trade. They can be traded on a variety of underlying instruments such as stocks, stock indexes, currencies, futures, exchange-traded funds, commodities, and bonds.

The wonderful thing is that options trading concept is, it works the same for all Trading Instrument. So once you had understood how to trade option, you can be able to trade options in any underlying instruments whether it is stocks or Commodities.

Advantages of options trading:

  • The price of buying an option contract (the premium plus the trading commission) is very less when compared to what an investor would have to pay to buy shares.
  • If your assumptions about the time frame and direction of a stock’s trajectory are incorrect, your losses are limited to whatever you paid for the contract 
  • you can Make good money based on a relatively small movement in the stock/ Index
  • Some options Hedging strategies enable you to generate a monthly passive source of income.
  • Learn about options strategies that give the options trader the ability to make money from any market conditions whether the market is up, down or sideways with limited risk exposure and potentially good profits.

Disadvantages of options

  • Unlike stock where you can hold on to it for many years or even passes on to your children, all options have an expiration date.
  • If you hold onto a trade that goes against you and the options are out of money at the expiration date, you may lose that money you invested in the options.
  • The reward and danger of leverage is especially powerful when you are selling naked calls or puts or entering into any unlimited risk option strategies. 

How to trade options, where do I start trading?

I have traded for more than 10 years in hedge funds & Many big financial institutions in my life on derivatives Segment. I will summarize everything that I learned from options trading in a few points:

  1. Trading is not gambling If you follow a systematic approach.
  2. Trading is purely based on psychology & mindset of a trader
  3. Learn to preserve your capital for good trades with a high probability of success
  4. You need to analyze each trade you do & maintain a track to improve trading 

list the things which are required for you to start trading options:

  • Basic laptop with at least 4 GB of RAM or a good  Smartphone with 4 GB ram
  • You need to speed internet connection to stream the live price movements
  • You will need trading and Demant account for analyzing charts, orders & positions
  • Open a trading account with discount brokers to get started 
  • You need a bank account with at least 6 months of active transactions.

The next question will be the right knowledge of trading options. To start trading in options you need to ask yourself the following questions?

Do I Know the complete technical Analysis on how to trade options?

  • Knowledge of Technical Analysis is a must for any kind of trader. Learn basics on Technical Analysis from Trade Psychology.

DO I Know which trading Instrument to trade that gives better ROI?

  • You need to decide what kind of an option you want to trade is it an index option is it a stock option or you will trade in futures.

How much money will you put in your trading account?

How much of a loss are you willing to take if the trade goes in the wrong direction?

How to open options trading account?

Zerodha is one of the leading discount brokers in India for trading in Stock, Currency Derivative and Commodity Market With a High volume of Trader database. It also charges a brokerage of 0.01 paisa which is lowest broker.

Documents required in Account opening Process:

  1. Copy of Pan Card
  2. Copy of Adhar Card
  3. Passport Size Photo
  4. Bank statement 
  5. Copy of Address Proof
  6. Your Signature 

Read more about Zerodha Discount Brokerage features here

How much money you need to start trading in options?

The minimum money required for buying an Option would be the premium paid in addition to brokerage and other charges. 

Options are available in lot sizes which varies from stock to stock. So, you would need to pay a premium for 1 lot minimum, whatever be the number of shares in it. 

Let take the example of an options chain data for week 6-Nov-18 expiry

How to Trade Options in India? 1

As on options chain can see on the left-hand side there are call options and right-hand side there are put options. If you are willing to buy any options then you have to pay the money for “number of lots * premium “.

e.g. Bank nifty 25,400 call option current premium is 166.1 so you have to pay

166.1 *20 = 3,322 rupees to buy this options contract

But if you are on the selling side you have to pay more because sellers have to pay more margin,

How to Trade Options in India? 2

So if you are selling one lot of Bank nifty at 39.05 premium then for Intraday (Rs. 15,240) and for Delivery you have to pay (Rs. 40468 ).

Another factor you need to consider is brokerage charges where discount brokerage like Upstox, Zerodha charge a fix brokerage Rs  20 for any number of lots where SBI, HDFC securities have more charges on option and future.

So if you want to save money in brokerage in F & O please go with a discount broker like Zerodha or Upstox

How much money you can make trading options?

Let’s assume your goal is to make 10% a month and your max loss is 10%. 

Assuming you have a 1,00,000 in your account, you can invest at 50%-50k. You start trading with 50% of your capital and keep the rest for adjustments for better returns

If you make 10% a month, that’s 5k a month, which is 60k a year and that would be 60% on the entire account. 

In some months you will make fewer profits also you may event lose, so as per me you can make anywhere between  30–35% to be realistic with hedging in Nifty & Bank Nifty options

I employ large capital to sell options i.e. be a call or put writer. This strategy helps me to generate a guaranteed return of 3–5 % every month on my capital employed, also I diversity my hedging capital with Nifty & Bank Nifty options to generate consistent income every month.

Here is my trading performance for the last 2 years trading INDEX Future & options.

My Trading Perfomance for past 2 years in Index Future and options

CLick here

Also, watch this video on how I am able to generate consistent income trading Nifty & Bank Nifty weekly options

So, reading this article you can be able to decide, How to trade options in India?

Let us know what is your experience in trading options, please mention in comments below,

I have a Free course on Trading Psychology for you, please check below.

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How to select your Blog name in 10 Minutes!

How to select your Blog name in 10 Minutes!

Finding the perfect new name for your website or blog can be a tricky task, But don’t worry we will teach you how to come up with a great blog name in your niche without spending countless hours searching for creative names.

How to select your Blog name in 10 Minutes! 3

I have started this website www.tradepsychology.com with blog name trade_psychology with Trading as niche but now I am also adding content on Blogging & Investing, From this I have learned one hard truth about blogging and website names: In general, they really do not matter.

Really!!!

You probably thought that your blog name was the most important part of your website, right!? Wrong.

 

The content matters much more than your blog name.

You can have a blog titled Investing.com and if all you do is write about news, it’s not going to matter.

K then, many of you will be interested in finding a great blog name, so we will give you some basic ideas on how to choose your blog name!

The process should take you around 10 minutes if you follow correctly,

Before we start:  What is the niche of your blog?

If you’re still in selecting your blogging niche or have not settled on one yet, check out our post: 3 Steps to find profitable blog niche!

Assuming that you have found your niche you want to be in, let’s find you that great blog name!

 

Most “common” blog names or ideas will be taken.

In most of the cases most common names will be taken by other people or worse: domain squatters purchase popular domain names with the intent to resell them back to users for thousands of dollars.

In case you have a great blog name you are thinking about buying from these people, Please don’t do it!

The domain name will not matter in comparison to content you are producing.

When ever someone asks me what our website for & why is it etc.. they will conclude by them self by going through my blog,

But, at the end we make great money with our site, and our customers love our content.  THAT is the only thing that matters!

Your domain will not define your blog.  Your content and ability to create valuable product WILL really matter!

Most people try to create their blog names by combining two or more words together. One of the words is usually related to their business, website or purpose such as TaskForce, tradepsychology and many others

Creating a new domain name for your blog that is available doesn’t have to be a long, You can find a amazing blog name in a flash with Lean Domain Search.

Once you have the domain name, you are ready to go!!!

 

Click here to sign up for Bluehost (special discount for our readers!) 

 

What happens if you change your niche?

We all start a blog with the best of intentions to focus on our niche. But things change. And sometimes we will end up switching or varying your original idea.That’s fine.

But one of the things you’ll need to consider at that point is whether your blog name and brand are right.

Are they open-ended enough to allow a shift in direction or do you need to re-brand and start over?

It’s a difficult question to consider because we don’t know what’s going to happen in the future. But if you have any doubts or ideas about possible changes, then you should choose a more open-ended, generic blog name.

However, it’s not the end of the world if you don’t. You can still change. But you might lose momentum in the process but your brand always remains the same.

Use different language:

If you’re struggling to find a unique name in your language, then consider trying a different one. Or combine words from different languages.

When you combine a foreign name with a familiar name, you can create a unique blog name.

Try using Google Translate to get some inspiration for foreign words, related or unrelated, to your brand.

 

Brainstorm with Pen and paper:

Sometimes the simplest tool is brainstorming. There’s nothing wrong with removing any distractions and just writing down what’s in your head. It’s a great way to clear your mind and often you’ll get more inspiration when you see words in front of you, as one idea leads to another.

You can take this one step further and invite friends and family to a brainstorming session. Everyone has a different perspective, and you’re sure to end up with ideas you hadn’t considered.

 

Use your own name:

Plenty of bloggers have used their own name. It works well for personal branding services, but on the flip side, it doesn’t work as well if you’re selling a product. Always use the product name in that situation.

Here is an example of self-named blog:

How to select your Blog name in 10 Minutes! 5

Conclusion:

Choosing the ‘best’ blog name depends on your niche,products, and services. Taking time to weigh-up your options now will pay-off over time.

Try a few methods and tools. Play around with words and phrases. And, most importantly, get some feedback before making your final decision.

Check out the valuable resources from trade psychology,

 

Resources from trade_Psychology:

Now go out and create something awesome today!

 

Thanks for reading,

Mahabaleshwar Co-Founder, Trade_Psychology

P.P.S. Subscribe to our awesome YouTube channel for bloggers!!!

How to overcome the fear of starting a blog?

How to overcome the fear of starting a blog?

Having fears and anxieties about starting a blog or new endeavor is completely normal! Learn how to overcome your fear of blogging with these steps. Following are the incidents that  I was fearful of…

  • Trolls and people saying mean things about us
  • Starting in the wrong niche and having to start over again from scratch.
  • Choosing the wrong blog name
  • People thinking less of me for quitting our “real” jobs and becoming full-time blogger
  • Most of all: Fear of putting myself out there and exposing who I am to the world.

How to overcome the fear of starting a blog? 6

Everyone feels some or most of these fears to an extent.

Nobody just starts a blog without these doubts looming in the back of their minds.  Doubting yourself is as much a part of being human as breathing and loving chocolate. It’s just not realistic to think that you will ever feel 100% ready.   Remember that everyone starts at zero with a new blog and related social media accounts.  Everyone has to build their blog and community from the ground up.   It’s easy to look at the top bloggers sometimes and feel discouraged when you are first starting out (“I’ll never get there!”). Just remember that they started at the bottom too, and with the information age growing exponentially, you have even more tools at your disposal than they did when they started!

Check out the most common blogging tools used by professionals

Below are some of the strategies that I have found to deal with these fear.

 

  • Realize you cannot eliminate fear, so stop trying. 

I have read a lot of posts on this topic and I have to say, I feel like most people are doing this 100% wrong.

You cannot eliminate fear. Having fears keeps you alive.

Fear of losing your job keeps you start learning new things. Fear of getting fat keeps you to do regular exercises. Get comfortable with knowing that fear can actually be a good thing. The goal in life is not to eliminate all pain or fear (What are you, a robot?). The goal is to learn how to deal with fear and act accordingly. Confidence is feeling the fear and doing it anyway.  It’s being unsure of yourself and pressing on, not hypnotizing yourself into not feeling natural feelings anymore. Here is a great strategy for this…

 

  • Frame all mistakes and failures as learning lessons.

I never once felt like our previous blog was a mistake.  It was part of the journey that got us here. Even if your first blog does not succeed, guess what… you will learn a lot from it. As you continue to learn, you will continue to get better and better, eventually making your own blog and giving us lessons!

There are no mistakes, only learning opportunities. 

 

  • Write out what will happen to you if you do fail

I sat down and wrote down some worst-case scenarios.  If I quit my job and gave this our everything, what was the worst that could happen?

  • I will lose our safety net (well-paid full-time jobs) to spend 6+ months blogging and never actually figure out how to make any real money from it.
  • I have to tell my family and friends that I failed.

That’s it.  Notice that there is no “starvation or death” anywhere in there…

When you write out your fears, they become kind of silly.

The truth of it is, if that’s the WORST that can happen, I think you’ll be okay. Just having the ability to read this post wherever you are means that you a living a pretty good life by the world’s standards. A large percentage of the world is illiterate and does not even have the opportunity to read let alone blog for money… That’s just some food for thought for you.

 

Why Start a Blog?

The two most important reasons for starting a blog that come to mind immediately are: financial freedom and time freedom.

A blogging career allows you the financial freedom to control your income. Sure, there are risks involved and some people are never able to make money blogging.   But if you stick with it and really commit yourself to growing your blog, there aren’t too many limits on how far you can take it.   Blogging also allows you the time freedom to travel, work when you want to, and completely design your days.

 

How can I start a blog and make money?

If you already have an idea of what you want to blog about, you can get started in less than 10 minutes with our step-by-step tutorial on how to start a successful blog.

Leave us a comment below if you enjoyed this article on fear of blogging or have any questions for us!

 

Thanks for reading,

Mahabaleshwar Co-Founder, Trade_Psychology

P.P.S. Subscribe to our awesome YouTube channel for bloggers!!!

5 Real passive income Ideas that will generate consist income!

5 Real passive income Ideas that will generate consist income!

I started my carrier by working in an office for many years (what people call 9 to 5, but I called 9 to 9 when I was lucky…) and I got burnt out. Its very frustrating to work on daily basis where you end up being a loser every day dedicating your valuable time & energy to build their dreams.

A while ago, I decided that I wanted more freedom. I really couldn’t spend another 30 years in an office, working 60+ hours a week! But in order to have freedom, you still need to make money somehow. That’s when I really became obsessed with passive income ideas and ways to make money while you sleep!

After watching many videos from YouTube & Learning books on Passive Income, I knew there had to be ways to make enough money to replace my full-time job with passive income, but I had no idea where to start. So I began researching how to make passive income a reality.

RELATED ARTICLE: How I am making consist income from Bank Nifty Weekly options Trading Intraday!

5 Real passive income Ideas that will generate consist income! 7

But is it really possible to make money doing nothing?

The definition of passive would mean earning an income without having to do anything at all. Wouldn’t that be amazing?

Dreaming is nice, but the reality is a bit different. Although there are some residual income opportunities that require less work than others, most passive income ideas need you to put in some effort at the beginning.

But the amazing thing about passive income is that no matter how much work you have to put in to start with, later down the line you will start to make money with a minimum amount of effort. If the only way you have to make money is to go to the office, you will never be able to quit!

Why passive income?

During the last 3 years, I have been working really hard to find the best ways to earn money for my ultimate goal: FREEDOM! I want to have more time to do all the things I really love: spending time with family, traveling the world and enjoying a flexible schedule. In order to do that, I had to find ways to make passive income a reality.

5 Real passive income Ideas that will generate consist income! 8

The great things about passive income are:

  • Passive income isn’t dependent on how many hours you work: once your income stream is set up, you can make money with little work needed to maintain it. Isn’t this alone a great motivation to find your passive income stream?
  • It requires you to put in the work upfront, but you will then be able to generate revenue day after day!
  • You will have more time to do what you love, while still being able to make money and pay your bills.

But there is one thing I really want you to remember which I learned during these years:

Passive income is not EASY: it takes time and hard work to build. Whether your passive income stream will come from a product or investments, you need to have the motivation to create it in the first place!

But if you put in the hard work and do your research, you will learn how to make money while you sleep.

Best Passive Income Ideas

Below you will find all the passive income ideas I researched during the years (including the things I am doing to build my passive income stream). Some of these passive income ideas require more work than others upfront, and some of them come with financial risks that you will have to evaluate before jumping in.

I classified these money making ideas by:

  • MONEY: the amount of money you’ll need to have to generate a significant passive income.
  • RISK: how risky this passive income idea is. This will also depend on your risk tolerance.
  • TIME: how much time you will need to put in, which could be research time at the beginning or actual work to set up your passive income stream.
  • GAIN: how much passive income you can generate. This is based on an average. Every passive income idea can generate an amazing gain (or very little if poorly executed, or if dependent on external factors).

This score, of course, is just based on my view and experience.

Investing money you already have:

If you are able to save money, or you already have a substantial amount of funds sitting in your bank account, there are plenty of passive income opportunities for you to chose from.

1| Investing In Education

MONEY: 4/10
RISK: 1/10
TIME: 9/10
GAIN: 9/10

What kind of education? Learning how to trade options & make profit consistently!

5 Real passive income Ideas that will generate consist income! 9

Intraday trading in options is one of the most demanded skill, but many are not able to succeed in this filed due to lack of knowledge. Investing yourself in learning the skill to predict the future option movement using Technical Analysis is one of the Key skill which gives you freedom to trade independently without Tips or any advice.

Many new traders start trading based on small understanding form YouTube & they try to apply real time which lead them to huge losses, after these circumstances they look for searching for training courses to learn how to trade profitably.

So, I would recommend you to start learning right at the beginning stage where you will gain key insights from professional traders, which helps you to grow your trading account significantly.

To start investing in stock open a Free Demat account from India’s Leading stock broker; ZERODHA

2| Options Hedging strategies

MONEY: 8/10
RISK: 6/10
TIME: 2/10
GAIN: 9/10

Do you know we can generate consist income from Hedging weekly & monthly options from Major Indices by various strategies we can generate consist income every week!

5 Real passive income Ideas that will generate consist income! 10

Do you know we can sell weekly Bank Nifty options & collect premium every week leading to generation of consist income, do you want to learn howto generate consistent income by selling weekly options click her how it is done!,

We have developed E-Courses based on options trading strategies for generation consistent profits no matter what the market direction is, weather the market is Up or Down or trading side ways we can generate consistent profits by Hedging strategies, which we teach in E-Courses, to Learn more here are the helpful material:

 

Following is the most demanded E-courses:

Options Trading Masters course: Click Here

5 Real passive income Ideas that will generate consist income! 11

5 Real passive income Ideas that will generate consist income! 12

3| Start A Blog

MONEY: 2/10
RISK: 1/10
TIME: 9/10
GAIN: 7/10

5 Real passive income Ideas that will generate consist income! 13

Really? Yes really! Blogging isn’t 100% passive and requires A LOT of hard work in the set up phase. Believe me, I did it! It took me 3 months before I launched to generate enough good content, and don’t trust anyone who tells you that you can create a money-making blog in a week!

But what I found out myself is that if you put in the hard work, and you are clever about what you write about, you can quickly generate traffic, and TRAFFIC = MONEY.

 

You can generate income by adding ads to your blog, or you can generate money using affiliate marketing. With affiliate marketing, every time people click on affiliate links on your site and make a purchase, you receive a small commission at no additional cost to them.

I managed to get over 180,000 page views and earn over 3,00,000 after 3 months! by Blogging!

 

And if I did it, you can do it too!

 

4| Write An E-book

MONEY: 1/10
RISK: 1/10
TIME: 8/10
GAIN: 7/10

5 Real passive income Ideas that will generate consist income! 14

Writing an E-book requires a bit of time investment upfront, but it can be an amazing source of passive income month after month. And with digital technology, it has never been easier to become an author!

If you love writing content, you won’t find it hard to write an 80-100 page e-book on the things you love. Make sure you pick a profitable niche and you market your book through bloggers and influencers in that niche. Non-fiction e-books that educate your potential audience on specific topics like finance, online marketing and business are going to make you more money than fiction books. Of course, there are always exceptions and you could write the next Harry Potter book, but if you want to create some residual income opportunities quickly, I would suggest you go for what sells first!

 

Using the Amazon Kindle Direct Publishing platform is an easy way to get your e-book on Amazon as quickly as possible and start making some money!

 

5| Set Up Your YouTube Channel

MONEY: 3/10
RISK: 1/10
TIME: 9/10
GAIN: 7/10

5 Real passive income Ideas that will generate consist income! 15

I won’t lie: it’s not easy to make money out of a YouTube Channel. You will need to create quite a lot of video content before you can start to earn any significant amount of money. But if you pick the right target, and manage to create great and useful content, you will be able to get organic traffic from YouTube and Google.

You will make money by display ads on your channel, and get paid every time someone watches your videos.

On the plus side, great quality video content is relatively scarce, compared to text-based content. Also, people prefer watching a 5-minute video recipe, than reading a long set of instructions. The market is less competitive. If you have great video and editing skills, you should give it a try!

 

What’s the bottom line?

 

Passive income through any of the passive income ideas above requires work but IT IS POSSIBLE to make money while you sleep! No matter what ideas you go for, you might have to sacrifice time and more, but if you want it badly enough it will be worth it!

 

My favorite passive income ideas (mostly because I am working on it already and can see the results) are:

  • Intraday options Trading
  • Monthly & Weekly options Hedging strategies
  • Writing A Blog with YouTube updates

And I am seriously looking into:

  • Writing An E-book

Are you interested in any of these passive income ideas? Yes or No?
What are the best passive income ideas that will work for you? 

Follow us on YOUTUBE for more money-saving hacks and financial tips!

The Complete Beginner’s Guide to Technical Analysis of Stock

The Complete Beginner’s Guide to Technical Analysis of Stock

Technical analysis is a term that we hear a lot in the stock market. But what does it actually mean and how can it help for technical analysis of stocks and options Intraday trading? Today, we’ll cover the basics and tell you everything you need to know.

What is Technical Analysis of stocks?

technical analysis of stocks

Technical analysis of stock (TA) is the use of past market data to analyze INDEX and make better trading decisions. It’s based on the idea that supply and demand will determine a options premium more accurately than the INDEX intrinsic or “true” value.

Technical analysts look at the price movement over time, trading volume, and other historical market data. Then, they find trends and patterns which can be used to predict future price movements.

It can seem complicated at first, but many traders actually find it easier than its counterpart, fundamental analysis. It’s less subjective, involves less research, and can be used even if you don’t know a lot about the industry or company.

To learn more about technical analysis, click here

The 3 Assumptions of Technical Analysis of stocks

Technical analysis of stocks is very popular, especially for traders who like Intraday trading.

But it’s important for you to understand it well before risking your hard-earned money. Before you go all-in, here are the 3 main assumptions in TA that you should know:

#1: The market discounts everything.

This is one of the strongest assumptions in TA. Here, we assume that all publicly available information is already “priced-in” or reflected in the options premium.

Our assumption is that when market players get information, they react to it by either buying or selling shares. Because of this, supply and demand will immediately adjust along with the options premium.

Any news, disclosures, or announcements won’t matter anymore because the market is always a step ahead. You can never have any “new” information that the market didn’t already account for,

#2: Prices move in trends.

Technical analysts believe that price movements are not random. They will always move in some general direction, whether upward, downward, or sideways.

For example, if a certain stock’s price is increasing, then it is more likely that the price will continue to increase. If the price is going down, then it is more likely that the price will continue to go down.

The trend can be short-, medium-, or long-term, but prices always tend to move in one direction and are more likely to continue that trend rather than move randomly.

#3: History repeats itself.

People behave in a predictable way. Because of this, similar events and information are usually met with similar reactions. Bad earnings will make people want to sell, expansion plans will make people want to buy, and so on.

For the year Fy17-18 we have traded Bank Nifty options Intraday options based on historical patterns which repeat over and over again which helped us to grow our account to over 110.64% in 12 months,

(Learn how we managed to generate consist income by trading Bank Nifty options, Click here)

This allows us to use past market data and chart patterns to predict future price movements and market behavior.

Basic Concepts in Technical Analysis

Now that you know a bit more about technical analysis and the assumptions behind it, let’s cover some of the basic concepts in TA. Each of these concepts can be a full article on its own, but for now we’ll just run through the most important facts to get you started.

1. Support and Resistance

Support and resistance are two of the most basic concepts in technical analysis. You can already use them to make trading decisions, but they also form the foundation of more complex strategies and trading systems.

Support is the price that, historically, a Index has had difficulty falling below. This is the point where the market considers the price to be “cheap”. Demand becomes so strong that it stops the price from going any lower.

The Complete Beginner’s Guide to Technical Analysis of Stock 16

(Here the current resistance is @25500 levels & support is @24750)

Resistance is simply the opposite of support. This is the point where the INDEX price usually starts going down because there is too much supply and not enough demand. 

Support and resistance levels are not always precise and they can be broken, but it’s a simple and proven concept that many find useful. The basic rule when trading using support and resistance is to buy on support and sell on resistance.

2. Trend Analysis

There are always going to be ups and downs in the stock market and in every stock, but these ups and downs will eventually form a trend that moves in some general direction—this is actually one of the key assumptions of TA that we discussed above.

There are 3 basic types of trends

Uptrend:

The Complete Beginner’s Guide to Technical Analysis of Stock 17

(Currently Bank Nifty is in Uptrend in hourly chart)

Identified by a series of higher highs and higher lows. The general movement over time is going upward.

Downtrend:

The Complete Beginner’s Guide to Technical Analysis of Stock 18

(Red lines indicate down trend in hourly chart)

Identified by a series of lower highs and lower lows. The general movement over time is going downward.

Sideways:

The Complete Beginner’s Guide to Technical Analysis of Stock 19

There is no clear pattern going upward or downward. The general movement over time is horizontal or flat.

Similar to support and resistance, trends are not guaranteed to continue to hold. That’s why they can be further classified into short-, medium-, and long-term trends. Trends can and do change. But unless something happens to change the market behavior, then the trend is likely to continue.

The general rule of thumb? Buy Call on Uptrend & put options in Down trend

3. Volume

A lot of technical analysis involves looking at the option premium, but that’s not the only important statistic in TA. Another equally important, if not more important, number to look at is the trading volume.

The trading volume tells you the number of shares that were bought and sold in a particular time frame (usually a day). You can see the volume shown as a bar graph at the bottom of the options chart.

The Complete Beginner’s Guide to Technical Analysis of Stock 20

Volume is important because it gives context to price movements. It tells you how strong or weak a trend or chart pattern is.

For example: If the price of a down trending stock starts going up, does it mean the trend changed to an uptrend? Take a look at the volume and you’ll find out. If the volume is low, then the trend will probably continue going down. If the trading volume is high, it means that there is a strong demand for the stock and the trend will likely change to an uptrend.

4. CHART PATTERNS

There are many kinds of charts that traders can use to monitor the stock market, but the most popular is probably the candlestick chart.

A candlestick chart shows four key prices for the day—the opening price, closing price, highest price, and lowest price. These are based on that day’s completed transactions.

The Complete Beginner’s Guide to Technical Analysis of Stock 21

If the candle is green, it means that the closing price was higher than the opening price. If it is red, it means the opening price was higher than the closing price.

The colors might change depending on the chart you’re using, but one color will always show an increase in price over the day and another color will show a decrease in price.

Once you understand how to read charts, then you can also start seeing patterns forming. Because TA assumes that history repeats itself, we can use past patterns to predict future movements in the market.

Here are some basic chart patterns:

The Complete Beginner’s Guide to Technical Analysis of Stock 22

Helpful Information:

  1. Learn the basics of technical analysis : Click here
  2. Learn technical case studies : Click here
  3. Learn daily chart analysis: Click here

Conclusion

We talked about a lot in this article, but we barely scratched the surface of technical analysis! As you practice trading, you will learn how to combine these concepts and turn them into practical and useful trading strategies.

Stay tuned as we dive deeper into each of the concepts in our next articles and subscribe to Trade_psychology for more tips in options trading strategies!

In the meantime, try applying the concepts above in your trading! Leave your comments below and update us on how you’re doing.