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[vramesh]

Risk/Reward Ratio

The Best Thing About Share markets is That a Person can multiply wealth at a much faster rate by sensible trading. you need not invest Huge Amounts to earn Huge money. The most widely accepted risk/reward ratio is 1:3 . For Example , if you are taking expecting a return of Rs 300 from a stock , you must take a risk of 1/3 rd amount of returns.
This means a risk of Rs 100 . Limit the stop - loss or the risk to 1/3 rd of the returns that you are expecting from that particular stock. If you use this principle in your trading and you will find a remarkable change in your trading fortunes .

Blue chip companies

Blue Chip is a general term used for those companies which are considered as good for investment. A ‘Blue Chip’ company will have the following features:-

• Large market capitalization
  
• Well known for efficient management
  
• Goodwill in the market for its honest business practices
  
• Gives dividend on time
  
• Regarded as one of the best in their respective industry and use the best technology

Hi Traders,, you must understand the WORDS used in the daily language of the Indian stock markets.



Bear Market – a market condition when the stock market prices are continuously falling. It is better to adopt a defensive plan in a bear market


Bull Market – a market condition when the stock market prices are continuously increasing. It is often termed as a sign of robust economic growth.


Portfolio- these are the list of stocks in which you have invested.


Stock Broker- usually this is an agency / person representing your share trading account. Ex :- India Infoline , Motilal Oswal , Karvy


Moving average - it is the average price of a particular stock during a particular time frame. So, a 50 day moving average is the average price of the stock over the past 50 days.


Calculation of 100 day Moving average (MA) - total price of the stock in last 100 days /100 (number of days)


Support- this is the important price level at which the stock attracts more buyers than sellers in the market.


Resistance- this is the important price level at which the stock attracts more sellers than buyers in the market.


Long – a term specially used in futures trading. It means buying at lower price and selling at higher Price.


Short – it is the opposite of long in futures trading. It means selling at higher price and buying at Low price. Shorts are very common trades in a bear market.

Edited by moderator, 24 March 2012 - 10:03 AM.