Fibonacci Retracements

The basic reason people using retracement tools are any stock before further continuing in actual trend it corrects or recovers little and then continues further. Fibonacci retracement is useful in finding this particular stock behavior.

Fibonacci numbers were named after Leonardo of Pisa, also known as Fibonacci, even though they had already been described earlier in India. The best-known Fibonacci numbers are a simple series of numbers that form a sequence. After two starting values, zero and one, each number is the sum of the two preceding numbers.

The Fibonacci sequence of numbers is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. Each term in this sequence is simply the sum of the two preceding terms and sequence continues infinitely. One of the remarkable characteristics of this numerical sequence is that each number is approximately 1.618 times greater than the preceding number.

The key Fibonacci ratio of 61.8% - also referred to as "the golden ratio" or "the golden mean" - is found by dividing one number in the series by the number that follows it. For example: 8/13 = 0.6153, and 55/89 = 0.6179.

The 38.2% ratio is found by dividing one number in the series by the number that is found two places to the right. For example: 55/144 = 0.3819.

The 23.6% ratio is found by dividing one number in the series by the number that is three places to the right. For example: 8/34 = 0.2352.

Fibonacci retracement is created by taking two extreme points on a chart and dividing the vertical distance by the key Fibonacci ratios. 0.0% is considered to be the start of the retracement, while 100.0% is a complete reversal to the original part of the move. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels. The first thing you should know about the Fibonacci tool is that it works best when the market is trending.

The idea is to go long (or buy) on a retracement at a Fibonacci support level when the market is trending up, and to go short (or sell) on a retracement at a Fibonacci resistance level when the market is trending down. In order to find these retracement levels, you have to find the recent significant Swing Highs and Swings Lows. Then, for downtrends, click on the Swing High and drag the cursor to the most recent Swing Low. For uptrend, do the opposite. Click on the Swing Low and drag the cursor to the most recent Swing High.

Fundamental Analysis Vs Technical Analysis

Technical analysis and fundamental analysis are the two main streams in the financial markets. Technical analysis looks at the price movement of a security in past history and uses this data to predict its future price movements. Fundamental analysis, on the other hand, looks at economic factors, known as fundamentals.

At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements by looking at the balance sheet for Profit, Debt etc, a fundamental analyst tries to determine a company's value. Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts.

Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis. While technical analysis can be used on a timeframe of weeks, days or even minutes, fundamental analysis often looks at data over a number of years. 

Not only is technical analysis more short term in nature that fundamental analysis, but the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for trading purpose, whereas fundamental analysis is used to make a long term investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price

DTC and its impact

DTC – Direct tax code will be applicable in India from April 1^st,2012. The main points from DTC are as follows.

As per DTC tax slabs are as below

INCOME	TAX
Upto 2,00,000	No tax
2,00,000 to 5,00,000	10% amount by which the total  income exceeds 2,00,000
5,00,000 to 10,00,000	30,000+20% amount by which the total income exceeds 5,00,000
more than 10,00,000	1,30,000 + 30% amount by which the total income exceeds 10,00,000

DTC impact on 80C

The DTC will maintain the existing deduction of Rs1 lakh under 80C but DTC removes most of the categories of exempted income like ULIP s, ELSS funds, NSC, Infrastructure bonds, and term deposits. Additionally Tax deduction in principal part of the housing loan under 80C is also removed.

How insurance gets impacted

DTC will have significant impact on insurance. Under DTC, to be eligible for tax deduction, a policy should give life cover of at least 20 times the annual premium. If this condition is not met, you will not get any tax deduction on the premium and even the income from the policy will be taxable.

Right now income received from insurance policies is free. So make sure if you are looking for tax deduction on insurance plan, you buy a policy which offers a bigger cover. This is possible only if term plan is for duration of 20 to 25 years. Bigger the cover, better for the policyholder.

Another not so good news is that tax deduction limit for life insurance will get reduced from present Rs 1 lakh an year to Rs 50,000 an year. This annual limit of Rs 50,000 will include the amount paid for tuition fees of children as well as medical insurance for self and parents. So an insurance policy with a large premium, around Rs 80,000 to Rs1 lakh will fetch maximum tax deduction of only Rs 50,000.

DTC impact on Housing Loans

The repayment of principal of your home loan will not be eligible for tax deduction under the DTC, But  DTC  importantly has retained tax benefit on the interest paid on home loan. Also a bright spot wherein there is removal of tax on notational rent. Right now people who own more than one house have to pay tax on notational rental income even if second house is lying vacant. The DTC will remove this anomaly and make investment in second home more tax efficient. 

How inflation rate is calculated in India?

Most frequently hearing word in news is Inflation. We will give a brief explanation on what it is and how it is calculated

What is inflation?

Inflation: is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy. In india WPI used to calculate Inflation.

WPI - Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods. Some countries (like India and Philippines) use WPI changes as a central measure of inflation However, United States now report a producer price index instead. In India WPI s having 435 commodities in its basket

The Wholesale Price Index or WPI is the price of a representative basket of wholesale goods. Some countries use the changes in this index to measure inflation in their economies, in particular India – The Indian WPI figure is released weekly on every thursday and influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index.The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.

Stock Market Info for Investors and Traders

This blog is designed to give information on Equity, Futures and Options market,  and tips for successful intra day trading from basics to in depth.

Information in this blog is divided into different sections and information about each section can be accessed by clicking on above tabs.

Equity section will have information on what parameters need to be considered while buying stocks for holding long term. Similarly range of these parameters for optimal buy of a script for better returns over the period of a time.

Futures section will have basics about futures, stocks in CNX Bank and IT index and their weightage.

Options section will have basics about Options.It will teach you how one can benifit from selling options, what are ITM and OTM options.

Glossary section have frequently used words in stock market