Mahurat trading

Mahurat trading is the auspicious stock market trading for an hour on Diwali (Deepawali), the biggest festival for Hindus.

Sensex Biggest fall in Indian stock market history

The rise and fall of the Sensex has been dizzying. The markets are back to the point it scaled three years ago. . . The BSE Sensex on Friday crashed by 1,071 points to close at 8,701 points. This has been an incredible year for the markets, after scaling the 21,000 peak in January 2008, the markets are at 8,000 now.

The Sensex plunged by 1070.63 points (10.96 per cent) to close at 8,701.07. The National Stock Exchange's Nifty ended at 2,557.25, down 13.11 per cent or 386 points. The BSE Midcap closed 8.38 per cent lower and BSE Smallcap Index ended 7.66 per cent down.

On Friday, the Reserve Bank of India gave the markets its biggest blow as it left key interest rates unchanged and lowered the GDP target to 7.5-8% for 2008-09.

Markets across the globe crashed on Friday. Japan's Nikkei shed 9.6% (812 points) to 7,649. Hang Seng plunged 6% (822 points) to 12,939. The Seoul Composite index tumbled 10.5% (111 points) to 939.

The worst hit stocks were DLF, Ranbaxy Laboratories Hindalco Industries, Tata Motors, Reliance Industries and Mahindra & Mahindra.

On Thursday, stock markets plunged following sustained capital outflows, shaky global markets, poor company results, and the International Monetary Fund's warning that economic growth in advanced nations will be close to zero. The BSE Sensex fell by 398.20 points, or 3.92%, to fall to 9,771.70.

Gold crashes ahead of festivals

Spot gold prices hit a one-year low and slipped below Rs 12,000 per 10 gram in Mumbai while spot gold in London hit a 13-month low of $703.45 an ounce on a wave of long liquidations in the international markets exacerbated by below expected gold sales ahead of Diwali in India, the world’s largest consumer of the metal.

Local gold spot prices fell by 2-3% on Thursday in line with the trends in world markets. Experts said a rising dollar vis-à-vis euro & pound and flight of cash-strapped investors looking to liquidate their position in all commodities pulled down gold.

The euro fell to the lowest in almost two years against the dollar, while the pound traded near its lowest in more than five years. Spot gold traded at Rs 11,640 per 10 gm in Mumbai on Thursday, down by nearly Rs 300 and Rs 11,541 per 10 gm in Ahmedabad, down by Rs 600 per 10 gram over the previous day. On the MCX platform, gold December futures also fell to the day’s low of Rs 11,601 per 10 gram, down by nearly Rs 900 over the previous day.

As the prices of the noble metal fell, gold exchange traded funds (ETFs), once among the top performing funds, too slipped to the bottom. Valueresearchonline.com data shows gold ETFs have given a negative monthly return of 5.93%. Annual returns are still positive, at 22.70%.

The softening of gold prices could not have come at a better time for festival buyers in India. After months of waiting, buyers thronged jewellery shops to make their yearly purchases. Traders said prices inching below the psychological mark of Rs 12,000 per 10 grams should spark good demand ahead of two busiest buying days for precious metals next week.

India imports about 700 tonnes of gold a year, with more than 50% bought in the festival season of October-December.

“Gold price in the international market may now see the $650-level”, said Bhargav Vaidya, a leading bullion expert.

Samir Shah of Riddhi Siddhi Bullion Ltd also said, “Price may slip below $700 an ounce. Gold spot prices in the physical market are expected to fall in the run-up to the Dhanteras and Diwali festivals next week.”

In some cities, such as Udaipur and Indore, sales were in line with the trend of the previous years but in some other places like Ahmedabad and Mumbai, sales were just half of what they were last year, sources said. Silver also eased on lack of industrial demand.

Rupee falls to record low of 50.15 per dollar

The Indian rupee opened trade on Friday at a record low of 50.15 per dollar, weighed down by heavy losses in Asian stocks which raised worries of more outflows from the local share market.

At 9 a.m. (0330 GMT), the partially convertible rupee was at 50.00/15 per dollar, compared with 49.81/82 at close on Thursday.

Asian stocks fell on Friday, led by a 4% drop in Japan's Nikkei, as the global economic slowdown slashed earnings prospects for an array of companies, forcing investors to look to safer government bonds

Another black friday - Sensex below 9000, down 900 pts

The markets refused to relent despite the finance minister's appeal to investors to take informed decisions and not sell in panic.

Finance Minister P Chidambaram said the RBI's policy decision to keep rates steady was on expected lines. He said the RBI would infuse liquidity and if required, would adopt conventional and unconventional tools.

Chidambaram said, RBI will continue to manage financial price stability along with sustainable growth. He asked investors to remain calm and not resort to panic selling in the market. At 1:25 pm, Bombay Stock Exchange's Sensex slumped 776.19 points to 8995. The index plummeted to a low of 8,940.48 in trade so far.

National Stock Exchange's Nifty tumbled 8.48 per cent or 249.7 points to 2693.45. The low, so far, was 2661.45.

Among frontline stocks, Hindalco Industries (-19.15%), Mahindra & Mahindra (-12.07%), Tata Motors (-12.05%), Tata Steel (-11.78%) and Reliance Infrastructure (-10.52%) were under severe pressure.

There were no gainers in the 30-share index. Market breadth was extremely negative with 2095 declines outnumbering 335 advances

Sensex below 10,000

The benchmark Sensex dipped below the 10,000 mark on selling by funds at mid-session after opening on a strong note.

The 30-share index, which opened higher by 205 points, fell by 314.69 points to 10,266.80 at 1330 hrs.

The wide-based National Stock Exchange index Nifty, which gained 66.65 points at the initial stage, plunged by 98.15 points at 3,171.15 points.

Barring technology majors Satyam Computers and Tata Consultancy Services, all other 28 index participants were in the red.

Oil falls below $78 on recession fears

Oil prices fell below $78 a barrel Wednesday in Asia on concern a massive bank bailout by the U.S. and Europe won't keep the global economy from slipping into a severe slowdown that would erode crude demand.

Light, sweet crude for November delivery was down 98 cents to $77.65 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell overnight $2.56 to settle at $78.63. Oil prices have fallen by 47 percent since peaking near $150 a barrel in mid-July.

"People are worried that the world economy is heading for recession," said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney. "The bailout may save the banks, but companies are still laying off workers and demand is going to suffer."

The U.S. plans to spend as much as $250 billion this year of a $700 billion bailout buying stock in private banks, President George W. Bush said Tuesday. Governments across the globe have pledged more than $3 trillion to prop up ailing banks in a bid to stabilize a credit crisis that began last year in the U.S. sub-prime mortgage market. Former U.S. Federal Reserve Chairman Paul Volcker said Tuesday the U.S. and Europe face a "considerable recession."

"The banks might be ok, but the rest of the economy needs help as well," Rigby said.

Investors are watching for signs of slowing U.S. demand in the weekly oil inventories report to be released Thursday from the U.S. Energy Department's Energy Information Administration. The petroleum supply report was expected to show that oil stocks rose 3.1 million barrels last week, according to the average of analysts' estimates in a survey by energy information provider Platts.

The Platts survey also showed that analysts projected gasoline inventories rose 3.1 million barrels and distillates went down 850,000 barrels last week. Crude stocks have grown as oil installations in the Gulf of Mexico that were shut down by Hurricane Ike last month begin operations again.

"There is some demand destruction in that forecast, but there's also hang over from the hurricane as refineries come back on line," Rigby said.

In other Nymex trading, heating oil futures rose 2.26 cents to $2.2823 a gallon, while gasoline prices fell 0.34 cent to $1.8814 a gallon. Natural gas for November delivery rose 0.05 cent to $6.732 per 1,000 cubic feet.

In London, November Brent crude was down 84 cents to $73.69 a barrel on the ICE Futures exchange.

Source: Associated Press

Sensex hits 2008 low

The Sensex opened with a negative gap of 524 points at 10,285, and soon tankex to a fresh calendar year low of 10,151. The index is now down 543 points at 10,266.

The NSE Nifty is trading at 3,174, down 164 points.

Reliance Infrastructure, Sterlite and Jaiprakash Associates have slumped around 9% each to Rs 504, Rs 266 and Rs 66, respectively.

Grasim has tumbled over 8% to Rs 1,370. TCS and Reliance Communications have plunged 7.5% each to Rs 501 and Rs 218, respectively.

Reliance and Bharti Airtel have shed 7% each at Rs 1,413 and Rs 669, respectively.

The Sensex opened with a negative gap of 588 points 10,221.

The index is now down 618 points at 10,191.

Recession worry pulls Wall Street lower at open

New York: U.S. stocks slid at the open on Wednesday as investors worried that efforts to ease the credit crisis would not avert a recession, overshadowing solid profits from Coca-Cola Co, a bellwether for consumer spending.

The Dow Jones industrial average gave up 161.76 points, or 1.74 percent, at 9,149.23. The Standard & Poor's 500 Index fell 21.32 points, or 2.14 percent, to 976.69. The Nasdaq Composite Index lost 24.83 points, or 1.40 percent, to 1,754.18.

Options: The basics of ‘call’ and ‘put’

What is an option?

An option contract gives the buyer the right, but not the obligation to buy/sell an underlying asset at a pre-determined price on or before a specified time. The option buyer acquires a right, while the option seller takes on an obligation. It is the buyer’s prerogative to exercise the acquired right. If and when the right is exercised, the seller has to honour it. The underlying asset for option contracts may be stocks, indices, commodity futures, currency or interest rates

 

What are the types of options?

Broadly speaking, options can be classified as ‘call’ options and ‘put’ options. When you buy a ‘call’ option, on a stock, you acquire a right to buy the stock. And when you buy a ‘put’ option, you acquire a right to sell the stock. You can also sell a ‘call’ option, in which, you will acquire an obligation to deliver the stock. And when you sell a ‘put’ option, you acquire an obligation to buy the stock.

 

What do you understand by the term option premium?

Option premium is the consideration paid upfront by the option holder (buyer of the option) to the option writer (seller of the option). The option holder gets the right to buy / sell the underlying.

 

What is the strike price or the exercise price of the option?

The right or obligation to buy or sell the underlying asset is always at a pre-decided price known as the ‘strike price’ or ‘exercise price’, which is linked to the prevailing price of the underlying asset in the cash market. Usually, option contracts are available on the underlying asset on various strike prices (generally, five or more)-divided equally on either side of its spot price.

 

How does an American option differ from a European option?

In ‘European’ options, a buyer can exercise his option only on the expiration date, that is, the last day of the contract tenure. Whereas in ‘American’ options, a buyer can exercise his option any day on or before the expiration date.In the Indian equity market context, index options are European style, while stock options are usually American in nature.

 

How do options differ from futures?

In futures, both the buyer and the seller are obligated to buy and sell, respectively, the underlying asset-the quid pro quo relationship. In case of options, however, the buyer has the right, but is not obliged to exercise it. Effectively, while buyers and sellers face a linear payoff profile in futures, it’s not so in the case of options. An option buyer's upside potential is unlimited,while his losses are limited to the premium paid. For the option seller, on the other hand,his maximum profits are limited to the premium received, while his loss potential is unlimited.

Call Option and Put Option

Call Option is an agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

It may help you to remember that a call option gives you the right to "call in" (buy) an asset. You profit on a call when the underlying asset increases in price.

 

Put Option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.

A put becomes more valuable as the price of the underlying stock depreciates relative to the strike price. For example, if you have one Mar 08 Taser 10 put, you have the right to sell 100 shares of Taser at $10 until March 2008 (usually the third Friday of the month). If shares of Taser fall to $5 and you exercise the option, you can purchase 100 shares of Taser for $5 in the market and sell the shares to the option's writer for $10 each, which means you make $500 (100 x ($10-$5)) on the put option. Note that the maximum amount of potential proft in this example ignores the premium paid to obtain the put option.  

 

Simply put a call is the right to BUY the stock at a certain price. A put is the right to SELL at a certain price. If you own an option, you can either buy (if you hold a call) or sell (if you hold a put) the stock itself, as agreed, or you can sell your option, that is, the right to buy (call) or sell (put) while it can still be exercised in the future.

The option gives you the right to buy (call) or sell (put) but not the obligation to do so.

If you decide to buy (call) based on your call option, actually doing it is called"exercising" the option. Similarly for put options, if you decide to sell, actually doing it is called "exercising" your option.

If you decide to sell someone else an option to buy (a call) stock that you already own, this is called a "covered call". It is one of the safest ways to participate in the options market.

Selling options is another way to participate in the options market. You can either buy them and sell them, or you can create one. This is called writing an option. You will receive a fee If you sell an option for the option itself. If it is a call, you will also receive the agreed price, if the call that you sell is exercised. If you write a call in stock that you do not own, and the buyer from you of the call exercises it, you then have to buy stock to meet your obligation, and this will virtually always cost you money, since the buyer of the call will not exercise it unless it is "in the money", which means that the call price is lower than the market price.

Options are more volatile than the underlying stock. They can move quickly and significantly. You can make, or lose a lot of money in a hurry.

Trading in options, and/or writing them can be exciting, but it is risky. Substantial study of the topic is recommended before engaging in it.

What is wrong with investing in Gold?

In one scene in the James Bond film "Goldfinger", the gold-intoxicated villain - the film's namesake - watches delightedly as a laser inches closer to a gold-topped table to which Bond is tied at the ankles and wrists. Before bidding farewell, Goldfinger leaves Bond with this thought: "This is gold Mr. Bond. All my life I have been in love with its color, its brilliance, its divine eminence." Movies like this epitomize the human fascination with this precious metal and the greed that it sometimes inspires. Contrary to what Goldfinger thought, gold may not be the most valuable investment in the world - it may be nothing more than a form of insurance.

 

Here we look at the major issues facing gold, such as its demand/supply imbalance and its potential to share the same fate as silver, and we examine what gold really means as an investment.

 

Gold's Unique Demand/Supply Imbalance The biggest factor influencing gold's price is the staggering amount of it held by central banks around the world. This is a legacy from the days of the gold standard, which existed in one form or another between 1821 and 1971. During this period, U.S. and European central banks hoarded massive amounts of gold.

According to the World Gold Council, in 2003 this stockpile consisting of 33,000 metric tons accounted for nearly 25% of all the gold ever mined. In that same year, a total of only 3,200 metric tons of gold was supplied to the marketplace through mining and scrap - this means the central banks' stockpile of 33,000 tons could overwhelm the market if it were sold. In other words, there is enough gold in the vaults of central banks to satisfy world demand for 10 years without another ounce being mined! What other commodity has this kind of demand/supply imbalance?

Furthermore, without a gold standard, this precious metal has limited strategic use for these central banks. Because gold does not earn any investment interest, some central banks - like that of Canada during 1980-2003 - have  already eliminated their gold stock. The potential for gold supply to dwarf its demand poses a hindrance to the metal's potential return well into the future.

 

Does Silver Foreshadow Gold's Future? Silver and gold have shared a common history over the past five millennia. Prior to the 20th century, silver was also a monetary standard, but it has long since faded from this monetary scene and from the vaults of central banks around the world. According to the Economist article "Goldbears" (May 30, 2002), silver's elimination from the central banks' reserves may help explain why its return has not exceeded inflation rates over the past 200 years. If the current stockpile of gold were to be sold off, the downward pressure on its price could result in it having the same fate as silver. 

Perhaps history demonstrates that it is just too difficult for the world to work under a monetary standard based on a commodity because the demand for these metals depends on more than monetary needs. When these metals were used as monetary standards, the divergence of the market price and mint price for these metals seemed to be in continual flux. (The mint price refers to the price a mint would pay someone to bring gold or silver in to be melted down into coinage.) And continual arbitrage opportunities between market and mint prices created havoc on economies. The rise and fall of the silver standard - which just happened to be the first victim - perhaps demonstrates how gold's price as a commodity cannot absorb the demand/supply distortions created by its past position as a monetary standard.  

 

The Real Meaning of Gold So how should an investor really view gold? For the most part, it is a commodity, just like soybeans or oil. So, when making any buy or sell decision, an investor should put future supply and demand issues at the forefront.

At the same time, gold can be seen as a form of insurance against a catastrophic event hitting the global financial markets. However, if that were ever to happen, it's possible that gold would be of use only to those investors who held it physically. The attacks on the World Trade Center in 2001 demonstrated this point all too well. Hundreds of millions of dollars worth of gold may have been stored in vaults underneath these towers, but these vaults became inaccessible after the towers collapsed.

 

Gold also may be helpful during periods of hyperinflation as it can hold its purchasing power much better than paper money during these periods. However, this is true for most commodities. Hyperinflation has never occurred in the U.S., but some countries are all too familiar with it. Argentina, for example, saw one of its worst periods of hyperinflation from 1989-90, when inflation reached a staggering 186% in one month alone. In such situations, gold has the capacity to protect the investor from the ill effects of hyperinflation.

Conclusion Gold means many things to many people. Its history alone has lured some investors. One of gold's most important historical roles has been as a monetary standard, functioning much like today's U.S. dollar. However, with the gold standard no longer in place and industrial demand representing only 10% of its overall demand, gold's luster - as an investment - is not quite as bright.

Until the fate of the gold stockpile accumulated by governments is determined, the price of it will have difficulty surpassing the US$850 per ounce reached in 1980. According to the "Goldbears" article, if gold undergoes the same monetary fate as silver, gold will trade around $68 per ounce. 

Therefore, holding gold as an investment is really a form of insurance against a period of hyperinflation or a catastrophic event hitting our global financial system. Insurance comes at a price, though. Is that price worth it?

 

Investing in Gold

From gold exchange-traded funds (ETFs) to gold stocks to buying physical gold, investors now have several different options when it comes to investing in the royal metal. But what exactly is the purpose of gold? And why should investors even bother investing in the gold market? Indeed, these two questions have divided gold investors for the last several decades. One school of thought argues that gold is simply a barbaric relic that no longer holds the monitory qualities of the past. In a modern economic environment, where paper currency is the money of choice, gold's only benefit is the fact that it is a material that is used in jewelry.

On the other end of the spectrum is a school of thought that asserts gold is an asset with various intrinsic qualities that make it unique and necessary for investors to hold in their portfolios. In this article, we will focus on the purpose of gold in the modern era, why it still belongs in investors' portfolios and the different ways that a person can invest in the gold market.

 

A Brief History on Gold
In order to fully understand the purpose of gold, one must look back at the start of the gold market. While gold's history began in 3000 B.C, when the ancient Egyptians started forming jewelry, it wasn't until 560 B.C. that gold started to act as a currency. At that time, merchants wanted to create a standardized and easily transferable form of money that would simplify trade. Because gold jewelry was already widely accepted and recognized throughout various corners of the earth, the creation of a gold coin stamped with a seal seemed to be the answer.
Following the advent of gold as money, gold's importance continued to grow. History has examples of gold's influence in various empires, like the Greek and Roman empires. Great Britain developed its own metals based currency in 1066. The British pound (symbolizing a pound of sterling silver), shillings and pence were all based on the amount of gold (or silver) that it represented. Eventually, gold symbolized wealth throughout Europe, Asia, Africa and the Americas.

 

Following the advent of gold as money, gold's importance continued to grow. History has examples of gold's influence in various empires, like the Greek and Roman empires. Great Britain developed its own metals based currency in 1066. The British pound (symbolizing a pound of sterling silver), shillings and pence were all based on the amount of gold (or silver) that it represented. Eventually, gold symbolized wealth throughout Europe, Asia, Africa and the Americas.

The United States government continued on with this gold tradition by establishing a bimetallic standard in 1792. The bimetallic standard simply stated that every monetary unit in the United States had to be backed by either gold or silver. For example, one U.S. dollar was the equivalent of 24.75 grains of gold. In other words, the coins that were used as money simply represented the gold (or silver) that was presently deposited at the bank.

 

But this gold standard did not last forever. During the 1900s, there were several key events that eventually led to the transition of gold out of the monetary system. In 1913, the Federal Reserve was created and started issuing promissory notes (the present day version of our paper money) that guaranteed the notes could be redeemed in gold on demand. The Gold Reserve Act of 1934 gave the U.S. government title to all the gold coins in circulation and put an end to the minting of any new gold coins. In short, this act began establishing the idea that gold or gold coins were no longer necessary in serving as money. The United States abandoned the gold standard in 1971 when the U.S. currency ceased to be backed by gold.

 

The Importance of Gold In the Modern Economy
Given the fact that gold no longer backs the U.S. dollar (or other worldwide currencies for that matter) why is it still important today? The simple answer is that while gold is no longer in the forefront of everyday transactions, it is still important in the global economy. To validate this point, one need only to look as far as the reserve balance sheets of central banks and other financial organizations, such as the International Monetary Fund. Presently, these organizations are responsible for holding approximately one-fifth of the world's supply of above-ground gold. In addition, several central banks have focused their efforts on adding to their present gold reserves.

Gold Preserves Wealth
The reasons for gold's importance in the modern economy centers on the fact that it has successfully preserved wealth throughout thousands of generations. The same, however, cannot be said about paper-denominated currencies. To put things into perspective, consider the following example.

Example - Gold, Cash and Inflation
In the early 1970s, one ounce of gold equaled $35. Let's say that at that time, you had a choice of either holding an ounce of gold or simply keeping the $35. Both would buy you the same things at that, like a brand new business suit, for example. If you had an ounce of gold today and converted it for today's prices, it would still be enough to buy a brand new suit. The same, however, could not be said for the $35. In short, you would have lost a substantial amount of your wealth if you decided to hold the $35 and you would have preserved it if you decided to hold on to the one ounce of gold because the value of gold has increased, while the value of a dollar has been eroded by inflation.

 

Gold as a Hedge Against a Declining U.S. Dollar and Rising Inflation
The idea that gold preserves wealth is even more important in an economic environment where investors are faced with a declining U.S. dollar and rising inflation (due to rising commodity prices). Historically, gold has served as a hedge against both of these scenarios. With rising inflation, gold typically appreciates. When investors realize that their money is losing value, they will start positioning their investments in a hard asset that has traditionally maintained its value. The 1970s present a prime example of rising gold prices in the midst of rising inflation.

 

The reason gold benefits from a declining U.S. dollar is because gold is priced in U.S. dollars globally. There are two reasons for this relationship. First, investors who are looking at buying gold (like central banks) must sell their U.S. dollars to make this transaction. This ultimately drives the U.S. dollar lower as global investors seek to diversify out of the dollar. The second reason has to do with the fact that a weakening dollar makes gold cheaper for investors who hold other currencies. This results in greater demand from investors who hold currencies that have appreciated relative to the U.S. dollar.

Gold as a Safe Haven
Whether it is the tensions in the Middle East, Africa or elsewhere, it is becoming increasingly obvious that political and economic uncertainty is another reality of our modern economic environment. For this reason, investors typically look at gold as a safe haven during times of political and economic uncertainty. Why is this? Well, history is full of collapsing empires, political coups, and the collapse of currencies. During such times, investors who held onto gold were able to successfully protect their wealth and, in some cases, even use gold to escape from all of the turmoil. Consequently, whenever there are news events that hint at some type of uncertainty, investors will often buy gold as a safe haven.

 

Gold as a Diversifying Investment
The sum of all the above reasons to own gold is that gold is a diversifying investment. Regardless of whether you are worried about inflation, a declining U.S. dollar, or even protecting your wealth, it is clear that gold has historically served as an investment that can add a diversifying component to your portfolio. At the end of the day, if your focus is simply diversification, gold is not correlated to stocks, bonds and real estate.

Different Ways of Owning Gold
One of the main differences between investing in gold several hundred years ago and investing in gold today is that there are many more options to participating in the intrinsic qualities that gold offers. Today, investors can invest in gold by buying:

• Gold Futures
• Gold Coins
• Gold Companies
• Gold ETFs
• Gold Mutual Funds
• Gold Bullion
• Gold jewelry

 

Conclusion
There are advantages to every investment. If you are more concerned with holding the physical gold, buying shares in a gold mining company might not be the answer. Instead, you might want to consider investing in gold coins, gold bullion, or jewelry. If your primary interest is in using leverage to profit from rising gold prices, the futures market might be your answer.

What is Day Trading and what are its benefit

Day trading means that the trader trying to make money buying and selling stocks in a day taking benefit of the daily price movement. Day traders end the day flat.

Some day traders focus on very short or short-term trading, in which a trade might last seconds to a few minutes. They buy and sell many times in a day, trading very high volumes daily and therefore receiving big discounts from the brokerage.

Some day traders focus only on momentum or trends. They are more patient and wait for a ride on the strong move which may occur on that day. They make far fewer trades than the aforementioned traders.

It is usually stated that 80-90pct of day traders lose money. Also price movements in a day are few, so why people trade only in a day? What are advantages of being a day trader?

Benefits of Day Trading

Fewer Stresses
To avoid the risk of price gaps day traders close all their positions at the end of a trading day. Due to this, day trading is less stressful than holding stocks overnight. After market closed you are not worried what will happen until tomorrow and what news will hand out. You never ‘lost sleep'; in the morning have a nice feeling because you don't care what the market's doing at the open.

Contemptible Commission
One thing that makes day trading potentially profitable is commission structure. Day traders pay ‘per share' instead of ‘per trade' structure. If you pay about $10 per trade now when you turn into a day trader, you might pay more than $0.01 per share.

Increased Leverage
Day traders could have 4 times their equity as intraday buying power. This great margin can raise your profits if used shrewdly. This increased leverage makes day trading very dangerous, especially if one has poor discipline, risk or money management.

Profit in any market direction
Day trading often will utilize short-selling to take advantage of downwards stock prices. The ability to lock in profits even as markets drop throughout the trading day is very useful during bear market conditions. Some Techniques of Day Trading

Range trading
A range trader watches a stock that has been increasing off a support price and declining off a resistance price. That is, every time the stock hits a lofty, it falls back to the low, and vice versa. Such a stock is said to be "trading in a range", which is the opposite of trending. The range trader therefore buys the stock at or near the low price, and sells the high.

Trend following
Trend following, a strategy used in all trading time frames, assumes that financial instruments which have been growing bit by bit will continue to increased, and vice versa. The trend follower buys an instrument which has been increasing or short-sells a falling one, in the hope that the trend will continue.

Scalping
Scalping initially referred to spread trading. Scalping is a trading style where small price gaps created by the bid-ask spread is exploited. It usually involves establishing and liquidating a position rapidly, usually within minutes or even seconds. Scalping extremely liquid instruments for off the floor day traders involves taking quick profits while minimizing risk (loss exposure). The basic idea of scalping is to exploit the incompetence of the market when volatility increases and the trading range enlarge.

Rupee falls to 48.03, lowest since Dec 2002

The rupee fell to its lowest since December 2002 on Tuesday, weighed down by a stronger dollar overseas and losses in the local stock market which raised concerns on more foreign fund outflows.

At 12:16 p.m., the partially convertible rupee was at 48.03/04 per dollar, its lowest since Dec. 20, 2002 and 0.5 per cent weaker than 47.80/81 at close on Monday.

India's main share index was down 1.5 per cent as investors were unable to shake off jitters about global economic woes, after initially rising as much as 3.2 per cent on liquidity boosting measures by regulators.

Sensex dips below 12k, rupee at a five-year low

The Sensex plunged to its lowest in more than two years, and the rupee declined to its lowest level in five years to 47.81 against the dollar, as the credit crisis deepened in Europe, reinforcing concerns about the pace of growth of the global economy. The Indian markets declined after Germany bailed out Hypo Real Estate Holding AG for $68 billion and the UK too said it would rescue its lenders.

The Sensex of the Bombay Stock Exchange (BSE) tumbled 724.62 points, or 5.8%, to 11,801.70, the lowest since September 12, 2006. The BSE 200 Index too declined 6.1% to 1,423.32.

The S&P CNX Nifty of the National Stock Exchange fell 5.7% to 3,602.35. Nifty futures for October delivery fell 5.2% to 3,640. According to provisional figures furnished by BSE, FIIs continued offloading stocks in the domestic markets. They were net sellers at Rs 1,169.33 crore, while domestic institutional investors were net buyers at Rs 661 crore.

Amitabh Chakraborty, president-equity, Religare Securities Ltd, said, “A lot of heavy selling kicked in the second half of the trading session as the news of Fortis getting bailed out by the UK govt came in and all European indices opened down by 6%.

Markets witnessed a lot of panic-selling in frontline stocks as well as in select mid-caps by the FIIs and selective HNIs whose positions were highly leveraged.”

And it was not just in India, stocks tumbled worldwide. In fact, emerging market stocks headed for their biggest one-day decline since 1997 as the global banking crisis escalated in Europe. The trigger in the European market was the news that BNP Paribas SA agreed to take control of Fortis after a government rescue failed, and German state and financial institutions put together a $68-billion rescue package for Hypo Real Estate Holding AG.

Oil falling below $90 a barrel for the first time in eight months also did not cheer the markets. The MSCI Emerging Markets Index slumped 6.9%, putting it on course for the biggest slide since the Asian markets meltdown of October 1997.

Russia’s stock market decline, along with China and Brazil, has pushed the benchmark MSCI emerging market gauge down 44% this year, the steepest drop in at least two decades. China’s benchmark CSI 300 Index slid 5.1%, its biggest one-day decline since August, after resuming trading on Monday after a week-long holiday.

Hitesh Agarwal, head-research, Angel Broking, said, “Indian stock markets are feeling the heat of the global liquidity crunch. The present decline is a fallout of the redemptions by foreign institutional investors (FIIs).”

The move by the Securities and Exchange Board of India (Sebi) to relax the norms pertaining to FII investments has come as a welcome relief for the Indian stock markets, Agarwal added.

The slump in share prices prompted overseas funds to reduce holdings, and pushed the rupee to the lowest level since February 2003. The Indian currency fell 1.5% to 47.81 against the dollar, the lowest close since February 14, 2003. The rupee, the second-biggest loser this year among the 10 most-actively traded Asian currencies excluding the yen, is headed for its first annual loss since 2001. The rupee also fell on speculation companies bought dollars to pay for cheaper crude oil. Crude oil fell below $90 a barrel in New York for the first time since February.

Sensex components took a massive beating with Reliance Industries Ltd dropping 6.8% to Rs 1,641.60. Tata Consultancy Services Ltd, the largest software developer in India, declined 5.9% to Rs 619, its lowest since July 2005. Sterlite Industries (India) Ltd, the nation’s biggest copper and zinc producer, dropped 15% to Rs 335.50, the lowest in more than two years.

All the stocks in the Sensex ended the day in red. Of the 2,677 stocks traded on BSE, only 281 stocks managed to advance, 2,369 stocks declined and 27 remained unchanged. All the sectors in the BSE sectoral indices ended the day in the negative terrain.

The move to remove restrictions on overseas derivative instruments and a 50-basis points cut in the cash reserve ratio of banks are expected to elicit a positive response on Tuesday. But the pressure for the indices to touch new lows is expected to remain for a while.

Sensex below 12000, lowest in 2 years

The stock market cracked under pressure from the boiling global financial crisis, with the barometer index tanking 725 points to trade at its lowest level in two years as foreign funds left in search of safer investment havens.

The 30-share stocks barometer Sensex, which lost 529.35 points in the previous session, plunged by another 724.62, or 5.78 per cent to close at 11,801.70.

Funds indulged in selling in consumer durables, metals, capital goods and realty stocks. The Sensex touched the day's low of 11,732.97 and a high of 12,284.49 points.

The slide came even as the subprime lending-induced crisis threatened Europe, prompting Germany to guarantee all private bank accounts worth 568 billion euros to prevent panic withdrawals. Questions about the effectiveness of America's USD 700 billion bailout package for its banks also negatively influenced the sentiment.

Analysts, however, said that the market may bounce back tomorrow as the Reserve Bank and SEBI on Monday announced measures to ease liquidity and trading norms in derivative segment respectively.

The wide-based National Stock Exchange index Nifty dropped by 215.95 points, or 5.66 per cent at 3,602.35 after dipping to a low of 3,581.60 during the session.

In Asia today, China was down by 5.23 per cent, Hong Kong by 4.97 per cent, Japan by 4.25 per cent, Singapore 5.61 per cent, Korea 4.29 per cent and Taiwan 4.12 per cent. European markets also resumed sharply lower.

The market seemed to be bear trap as the main driver, Foreign Institutional Investors (FIIs) pulled out a whopping Rs 1,662.26 crore on October 3 as per provisional data.

Financial crisis in the U.S

It's well past midnight and I am suddenly woken up by the ringing of my mobile phone. Today is one of those rare days when I have forgotten to put my phone on 'silent' mode.

'Why is the wall street going bust?' the rather feminine voice on the other end asks.
It takes me a few seconds to realise who is on the line.

"Mam. It is 2.30 am. Can we discuss this at a more appropriate time?" I thought you know question."Well. I understand things much better after midnight, is what I meant. So I will be highly obliged if you could explain."

"Okay. This is a rather complicated question. Where do we start? You remember in the year 2000, the dotcom bubble went bust. In the aftermath of that the US Federal Reserve started to cut interest rates.'"Let me interrupt. What is the US Federal Reserve," She asks.

"The US Federal Reserve is similar to the Reserve Bank of India. It is the central bank of the country and one of its tasks is to set interest rates. Therefore, after the dotcom bubble went bust, the Federal Reserve started to cut interest rates to ensure that the economy did not go into recession. By cutting interest rates it wanted to ensure that people continue to borrow and consume and hence the economy continues to grow."

"Interesting. But don't you think you are deviating from the point. I want to know about Wall Street not the US Fed."

"Patience, my dear. The long-term interest rate was reduced to 1% by the middle of 2003. That is where it stayed for around the next twelve months. With the interest rates at such low levels, people started to borrow to buy homes. The idea behind this was very simple. The rate of increase in the value of the house would be more than the interest rate to be paid on the loans that had been taken. As more and more people started to believe in this, the home prices in the US started to rise at a very fast pace.""Where is this heading yaar. First you talk about the Fed, now you are talking about homes. I want to know about the Wall Street," she screams on the phone.

"Don't interrupt. Let me continue. Low interest rates, combined with the belief in the idea that house prices will continue to go up, fuelled another bubble Banks and other financial institutions that gave out home loans decided that it was a good opportunity to expand the market. So they decided to give home loans even to those individuals who were not creditworthy enough and would not get a loan in the normal scheme of things, " I explain.

"Hmmm. This is getting interesting, though we are still nowhere near Wall Street."

"In a way the home loan lenders themselves believed in the bubble and hence gave out home loans to individuals who were not creditworthy. Such borrowers are referred to as the sub prime borrowers. In order to attract these borrowers, banks offered home loans with teaser rates. The interest rates would be lower in the first couple of years. This would mean a lower equated monthly installment (EMI) to pay off the loan. In the later years, a higher interest rate would kick in and that would mean a higher EMI. The borrower was completely sold out to the idea of housing prices continuing to go up and he planned to sell the house to make a profit before the higher EMI kicked in."

"But by following this strategy, weren't banks taking in a huge amount of risk?"

"Yes and no. One the face of it, yes it was a risky strategy. But banks and other financial institutions giving out home loans were smart enough to get out of these loans very quickly by securitising them,' I reply/

"Wait a minute. What is this securitising thing you are talking about," she asks.

What they essentially did in case of securitisation was bundle similar kinds of home loans together and make financial securities out of it. These financial securities were then sold to savvy financial investors, most of whom were based out of Wall Street in New York. By selling the financial securities, the bank or the financial institution giving out the home loan did not continue to carry any risk. At the same time, it freed up the money and the bank could lend again. A major part of the EMI paid by the borrower was passed on to the financial institution that bought these securities. " "But why did Wall Street financial institutions buy these securities," she questions.

"They bought it because these securities offered higher returns than other modes of investment available. But they were just investors. They failed to realise the true risk of these securities. The bank or the financial institution giving the loan was best placed to assess how risky a particular loan was. But since it was in a position to securitise the loan, it was only interested in giving out more and more loans, and not assessing the risk involved. Other than this, documents of a lot of sub-prime borrowers were fudged to give them loans that were well beyond their capacity to repay. Initially, with low interest rates, these borrowers continued to repay, but once the teaser rates were over and higher interest rates set in, they simply could not repay and started to default. Once the borrowers realised that they wouldn't be able to continue to repay, they started to sell the property. But, with a lot of selling hitting the market at the same time, there were not enough buyers and this ensured that housing prices started to fall, " came my long wielding explanation.

"Ah. Now I seem to get it. With higher interest rates setting in, sub-prime borrowers started to default. Once this happened, all the Wall Street financial institutions that had invested in these securities stopped getting their money back. And once more and more borrowers started to default these hallowed institutions went bust. Wow, in hindsight, everything seems so explainable, " she exults over the phone.

"Yes Mam. Now that you have understood, why don't you think about it and I'II go back to sleep.'

Three reasons why you shouldn't panic and sell your stocks

The government bailout that was supposed to save the financial sector from certain doom failed to pass vote on Congress. Does that mean we now face certain doom? I think not.

I don't want to sound Pollyanna-ish and I don't really have a crystal ball (as my headline promises), but here are some reasons why investors should not panic and sell their stocks now:

First, as frightening as the market looks -- the Dow fell 778 points for its worst one-day drop ever -- there is going to be a rebound.
If you sell at the bottom, you will miss out on an eventual recovery. If you really want to get out, wait for a bounce and then sell some of your stock holdings. Don't sell into a freefall. Think about it: the S&P fell an astounding 8.79% on Monday -- the worst percentage drop in more than 60 years, except for 1987's Black Monday crash. The Nasdaq fell 9.14%. Given the devastation, I think a bounce could come as soon as Tuesday since there will no doubt be some news that has to be better than Monday's.

Incidentally, this "don't sell in a panic" advice is the same you'll get from any financial advisor worth his or her salt. If you're invested in the market for the long term, you should ride out such waves and -- if you're really brave -- even use episodes of panic selling to buy more stocks.

Second, a private sector solution to this problem is possible.
We've seen Warren Buffett invest $5 billion of his capital into Goldman Sachs and stronger financial institutions step in to buy the weak. There is plenty of additional capital out there that could come in and boost the banks. Heck, Barron's just ran a cover story about how profitable the government's purchase of toxic waste would ultimately prove. If the magazine is right, some of those hedge funds will surely come in and slurp up some of this slop.

What if a private sector solution doesn't materialize? Then you should be glad that the bailout plan on the table Monday didn't pass. It could be a sign that the U.S. might well have been just throwing good money after bad by buying all those billions of bad debt.

Third, If credit markets stay frozen and banks keep going bust, I think Congress will pass some kind of Federal aid package that will stabilize the financial system.
It may take a few painful weeks of market turmoil and economic hand-wringing, but hopefully it will be better than the package that failed to pass the House today.

There are plenty of other options for how such a bailout could be structured -- such as the government getting preferred stock in exchange for injecting capital, or the Feds finding a way to provide a more direct boost to the long-suffering housing market. A lot of folks are going to be fighting it out to come up with a plan that will both work and pass and I think they will succeed.

A modest proposal: Ban credit cards

Well why not?

What if they outlawed credit cards? Would the world end? Would it be financial Armageddon? Would we shuffle from food line to water queue in our now-tattered $250 blue jeans?

It's never gonna happen, we know. So play along with me here. I'm not talking about business credit. That's an altogether different animal (currently in hibernation). I'm talking consumer debt. This idea that we can have the McMansion AND the boat AND the trips AND the kitchen remodel because we could, up until just a bit ago, borrow all that money to do so.

And look where we are today.

What if we *had* to live within our means again? What if we couldn't buy whatever we wanted because we didn't have credit cards? Would it suck? Heck yeah. But only because we've gotten so used to having credit, and being able to buy those cute shoes or fund our student film or buy that iPhone because it's so cool and you just gotta have it.

In other words, what would happen if we couldn't have all that...stuff...unless we actually had the cash for it? We'd have to get used to saving again. Saving actual dollars (while they're still worth anything at all, I mean). What if you had to do the now unimaginable and save a 20% cash downpayment before buying a new house? Wouldn't that kind of thinking actually help our economy down the road? A nation of savers is a good thing, isn't it?

We wouldn't be so in debt. We wouldn't have so much superfluous stuff. We might work less and live more. Thrift might come back into style.

Being truly forced to live within our means would really foul up our carefully-crafted consumer society, true. But as I'm told, many generations of people have managed to do so. My dad tells me that in the '60s you went to the bank on a Friday with your paycheck, and took out enough cash to get through until the next week. If you ran out...well...tough luck.

So set me straight please. Why couldn't we just ban credit cards forever? It's just a thought, given today's financial meltdown...caused by the credit crisis.