Learning sharks-Share Market Institute

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Getting started!

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Basics of stock market

• Why invest?
• who regulates
• financial interdependence
• IPOs
• Stock Market returns
• Trading system

• Day end settlements
• Corporate actions
• News and Events
• Getting started
• Rights, ofs,fpo and more
• Notes

 
 

Getting started

Firstly, You are now ready to delve deeper, assuming you have finished reading and comprehending all 12 chapters in our first module, Introduction to Stock Markets.

Secondly, Your quick, practical introduction to the stock markets is the goal of the first module. We have chosen the concepts you should understand with care in our effort to introduce the stock markets to you, especially if you are completely unfamiliar with markets. It is a good sign if you still have a lot of questions at this point. As we move on to other modules, you will discover your answers.

You need to comprehend why we have so many different learning modules and how they relate to one another at this point.

You need to comprehend why we have so many different learning modules and how they relate to one another at this point. To give you a head start, I’ve listed some of the Varsity modules we’ll be studying.

  1. Introduction to Stock Markets
  2. Technical analysis
  3. Fundamental Analysis
  4. Futures Trading
  5. Option Theory
  6. Option Strategies
  7. Quantitative Concepts
  8. Commodity Markets
  9. Risk Management & Trading Philosophy
  10. Trading Strategies & Systems
  11. Financial Modeling for Investment practice 

how are they interrelated?

The goal of “Varsity at Zerodha” is to build a library of excellent market-related educational materials. The information will include topics like risk management, financial modelling, derivatives, trading strategies, and fundamental and technical analysis. Each major subject is divided into a module. If you’re unfamiliar with the financial markets, you might be wondering where each of these subjects stand in relation to the bigger picture.

 

Allow me to post a straightforward question to you in order to help you gain perspective.

 

What do you consider to be the single most crucial element for market success? Market success is simple to define: if you consistently make money, you are successful; if not, you are not!

So if you were to answer this question for me, chances are you will think about risk management, discipline, market timing, access to information, etc. as the key to success in markets.

 

While one cannot deny the importance of these factors, what is even more compelling and primary is developing a point of view (POV).

A point of view is the art of developing a sense of direction on a stock or the markets in general. If you think the stock is going up, your POV is bullish hence you would be a buyer of the stock. Likewise, if you think a stock is going down your POV is bearish, you would be a stock seller.

 

Having said that, how do you actually develop a point of view? How do you figure out if the stock is going up or down?

 

To develop a point of view, one needs to develop a systematic approach to analyze the markets. A few methods are using which you can figure out/ analyze what to buy or sell. They are:

 

  1. Fundamental Analysis (FA)
  2. Technical Analysis (TA)
  3. Quantitative Analysis (QA)
  4. Outside views

 

 

Here is an example of a trader’s typical thought process when determining a POV (whether to buy or sell stocks) based on a specific method of analysis to give you a sneak peek:

 

FA-based POV: The third-quarter results appear to be impressive. The business reported a 25% increase in top line revenue and a 15% increase in bottom line revenue. The company’s forecast appears promising as well. The stock looks bullish because all the fundamental factors are in favor; as a result, it is a buy.

 

QA-based POV – The stock’s price to earnings (PE) recently increased and reached the third standard deviation. The PE’s chance of crossing the third standard deviation is just 1%. Therefore, it is wise to anticipate a return to the mean; as a result, the stock is a sell.

 

From a distance, the stock appears to be a buy because the TV analyst suggested it.

 

You should always adopt a point of view that is based on your own analysis rather than on what someone else thinks, as doing so almost always leads to regret.

 

  1. Buy the stock in the spot market.
  2. Buy the stock in the derivatives markets.
    1. Within derivatives, you can choose to buy the futures.
    2. Or choose to trade via the options market.
      1. Within the options market, there are call options and put options.
      2. You can also do a combination of call and put options to create a synthetic bullish trade       

 

 

Therefore, what you decide to do after developing a POV is entirely different. Trading successfully depends heavily on selecting the appropriate instrument that supports your point of view (POV).

 

For instance, I would be better off making a delivery trade if I had a 1-year outlook and was extremely bullish on the stock. But if I’m blatantly bullish on the stock from a short-term (let’s say, one-week) perspective, I’d rather pick a futures instrument to trade.

 

It would be wise to pick an option instrument if I’m bullish with restrictions (for instance, if I expect the markets to rise as a result of a strong budget announcement but don’t want to take on much risk).

 

So the message here is – the market participant should develop a point of view and complement the POV with the right trading instrument. A well researched POV combined with the right instrument to trade is a perfect recipe for market success.

 

Also by now, hopefully, you have got a sense of how all the different modules in “Varsity” play an important role in assimilating the market.

 

Go ahead and explore the content on Varsity at Zerodha while keeping this in mind.

 

The concepts that will enable us to develop POV based on Technical and Fundamental Analysis will be covered in the following two modules.

 

You will have a better understanding of how to develop a point of view on markets after reading these two modules. We will talk about the various trading instruments you can use to complement your perspective in the later modules. In order to help you start calibrating your trades with efficient risk management strategies, we will speed up the flow as we go along.

Without a doubt, Learning Sharks Institute puts a lot of effort into keeping our list of share market training courses current. However, if there is a conflict between the programs listed on this list and those in the Learning Sharks Academic Calendar, the Calendar will take precedence.