CFS

: Cash Flow Statement:

The following is a list of the various areas of the cash flow statement and what
they mean:
Cash flow from operating activities - This section measures the cash used or pro
vided by a company\'s normal operations. It shows the company\'s ability to gene
rate consistently positive cash flow from operations. Think of "normal operation
s" as the core business of the company. For example, Microsoft\'s normal operati
ng activity is selling software.
Cash flows from investing activities - This area lists all the cash used or prov
ided by the purchase and sale of income-producing assets. If Microsoft, again ou
r example, bought or sold companies for a profit or loss, the resulting figures
would be included in this section of the cash flow statement.
Cash flows from financing activities - This section measures the flow of cash be
tween a firm and its owners and creditors. Negative numbers can mean the company
is servicing debt but can also mean the company is making dividend payments and
stock repurchases, which investors might be glad to see.

Read more: http://www.investopedia.com/articles/01/110701.asp#ixzz3cYX6gxMM

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EVEBITDA is like PE ratio i.e low value means the company is under valued ideall
is <15
---------------------------------------------------------------------------------The Graham-and-Buffettsville Smart Alpha Framework
Start with 4000+ companies
Apply First Criterion: Sales > INR 1000 crores
609 companies are left, more than 3000 removed
Apply Second Criterion: Debt-to-Equity <30%
187 companies left, more than 400 removed
Apply Third Criterion: ROE>15%
99 companies left, nearly half removed
Apply Fourth Criterion: Dividend Yield >2%
25 companies left, more than 70 removed
- See more at: http://www.moneycontrol.com/master_your_money/stocks_news_consump
tion.php?cat=stocks&autono=1347453#sthash.bb8U55K4.dpuf

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------"Be patient with winning trades; be enormously impatient with losing trades. Rem
ember it is quite possible to make large sums trading/investing if we are 'right
' only 30% of the time, as long as our losses are small and our profits are larg
e."
Dennis Gartman

Investors who make money in the markets are OK with losing a little bit of money
on a trade but they're not OK with losing a lot of money.
What is more important is to let a winning trade run and get out of a losing tra
de quickly.
"It's Far Better to Buy a Wonderful Company at a Fair Price than a Fair Company
at a Wonderful Price"
Warren Buffett
look at the quality of the company and the price "The quality of the company is
most important and requires that you understand balance sheets, listen to confer
ence calls and have confidence in the management"
Only after you have confidence in the quality of the company should the price be
evaluated.
"Do you really like a particular stock? Put 10% or so of your portfolio on it. M
ake the idea count. Good [investment] ideas should not be diversified away into
meaningless oblivion." Bill Gross
It's OK to trade stocks on a short or medium term basis, but the bulk of your po
rtfolio should be invested in longer term holdings.
great investors invest now for what will happen later. They are always forward t
hinking & always anchor your portfolio with great companies that have a long tra
ck record of steady growth.
good company by these three characteristics:
Competitive advantage
Above-average management
Market leadership

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------To me most important indicator after price is volume. An extreme oversold indica
tor with huge volume means further fall is possible stay away , wait for long po
sition. Oversold with feeble volume means long position is a good option.
Prices moves in trend. Thats what MACD /ADX indicates. So when you see Rising RS
I after steep fall, there would be chances that MACD/ADX also supports. That is
a good setup. With volume even better. Retracing from a important Fibonacci leve
l should give you more confidence.
Last but not the least, trendline. Look for previous support and resistance leve
l. If Indicator gives you signal when a trend line is broken or retraced from th
en you can go little aggressive. For intraday pivot points should also be consid
ered.
Bottom line , take a indicator and get confirmation from at least one more. Addi
ng more that four will leave you confused.

Straddle is when an investor simultaneously buys Calls and Puts of the same stri

ke price and same expiry. This strategy allows an investor to reap benefit in wh
atever direction the market moves.
In a long straddle, an investor buys a Call and a Put for a premium on expectat
ion of continued market volatility. But if the market remains flat on expiry, th
e premium paid on the Call and Put are lost. That is the maximum loss that an in
vestor will have to bear
A short straddle is just the opposite of a long straddle. Instead of buying a C
all and a Put, the investor is trying to sell a Call and Put with the same expir
y and same strike price. When you expect the stock or market is not going to be
volatile you sell straddle. When you are selling straddle, you get premium becau
se you are selling Calls and Puts.
Investors must use a long straddle only for an event such as corporate results
. And invest only if you expect the results to have an explosive impact either u
pside or downside. Also look at your breakeven points very carefully. If the sto
ck moves after the announcement of results, go for a long straddle. If you know
the stock is not going to move another 15 days in the beginning of the month, th
en you go for a short straddle.
Use a long straddle for highly volatile stocks with an added event. This also
necessitates investors to look at implied volatilities (IV) and set the breakeve
n points. For stocks with very low volatility, investors should sell the straddl
e whenever there is an opportunity despite the inherent risk.
What is a strangle?
You buy an OTM (Out of The Money) Call option and an OTM Put option on the same
day, with the same expiry. When the markets are very volatile then the OTM Call
option will become ATM or At The Money (ATM) if market moves in the estimated di
rection, then there is a chance of making money. So your cost is low because you
are buying OTM options. Overall, premiums and risk are low if the market does n
ot move. So the difference between a straddle and strangle is on the risk.
In case of a long strangle

look for volatility.

Bull Spread
Buy ATM call option and sell OTM call options - best for moderately bullish stan
ce.
Exit strategy: When you carry out a bull spread, you buy at the money call optio
n or in the money call option and sell the call option with a higher strike pric
e. When you are buying if the higher strike price is achieved before expiry, you
exit both the options and pocket the returns because you don t want to wait again
for the price to come down further. Your maximum profit is the difference betwe
en the two strike prices and the premium paid.
bear spread
In a bear spread, the level of risk is very low because you buy a money put opti
on only to sell it at a lower strike price. In case of a put option, you buy atmoney and a lower strike price because it will be out-of-money. When you sell th
at, your risk is low but this offers an opportunity to make money when the marke
t goes down
Q: When carrying out a bull spread, how can investors exploit the benefits the t
ime factor?

A: If you are going to buy a call option in the

beginning of the month and you are bullish on mk yhn a stock, you will have a l
ot of time value which will erode if the stock price doesn t move upwards. To over
come this and mitigate this risk of losing out on the time value, the bull sprea
d comes in very handy.
The strategy involves buying at-the-money call option or in-the-money and sellin
g out-of-the-money. Both when you buy and when you sell, you are covering your t
ime value, mitigating cost and lowering risk. This gives you more time and lower
cost to recover your money.
Q: In carrying out a bear spread, how should the investor use time in his favour
?
A: The bear spread strategy is similar to the bull spread. Psychologically going
short is not easy for most investors. Playing the bear spread is ideal which in
volves no great loss of money. It is a very popular strategy as the risk involve
d is lower.
Q: At what level should a Put buyer set his stop loss if the market does not tak
e the direction on which he has bet on?
A: Whenever you buy a Put or Call option, you need to keep your stop loss accord
ing to the value and time. If the market does not move as estimated in five days
, then an investor must exit to avoid incurring losses.
The portfolio which consisted of software, pharma, FMCG, entertainment sectors w
ould have seen those stocks outperforming by huge margins.
Margin of Safety
DESCRIPTION:
The filter criterion Upside, also known as margin of safety, is defined as the p
ercentage difference between the fair value estimate of a stock and its last pri
ce. A positive Upside number means that a stock is undervalued and a negative Up
side number means that a stock is overvalued according to its estimated fair val
ue.
Our Automated Valuation Model employs three distinct methods to estimate the fai
r value of a given stock:
Mean Multiple Value: fair value based on the long-term historical average st
ock valuation multiple, i.e. EV/Sales or P/BV for financials, respectively .
Graham Intrinsic Value: fair value based on capitalized long-term average ea
rnings.
Greenblatt Fair Value: fair value based on capitalized sustainable trend ear
nings.
Note: Both the Graham and the Greenblatt Value method are based on the income ap
proach to business valuation, while the Mean Multiple Value method is based on t
he market approach to business valuation. The Graham model assumes that profits
will revert to their historical mean over the cycle, and the Greenblatt model as
sumes that profits will broadly follow their historical sustainable trend.
PRESET GREENBLATT VALUE SCREEN CRITERIA

Rank companies by highest sustainable earnings yield and return on capital

Earnings yield = EBIT / Enterprise Value.
Return on capital = EBIT / (Net fixed assets + working capital)
PRESET GRAHAM VALUE SCREEN CRITERIA
Low P/Book Ratio
Low P/E Ratio
High 5-Year EPS Growth
high 5-Year Dividend Growth
High Current Ratio

Growing and declining businesses: Deviations between Graham Intrinsic Value and
Greenblatt Fair Value arise when a given company's earnings are on a long-term u
pward trend, i.e. structurally grow, or when they are on a long-term downward tr
end, i.e. structurally decline:
Indication for a growing business: Greenblatt Value Upside greater than Grah
am Value Upside.
Indication for a declining business: Greenblatt Value Upside less than Graha
m Value Upside.
Going-concern: Fair value estimates are based on the going-concern principle, wh
ich is a basic concept in accounting that assumes a company will continue to ope
rate in the foreseeable future. The significance of this concept becomes apparen
t when the value of a running business is compared with the value of one being l
iquidated.
Companies in decline: Caution is warranted on companies with declining long-term
profitability and stocks with unusually high fair value upside as the going-con
cern principle might be impaired.
Top Stock Picks:
We will name our top stocks presenting best investment opportunities and capable
of long term wealth creation. Most of the stocks in this category will be chara
cterised by business that are simple to understand, with high entry barriers, ru
n by honest and competent management, debt free or with very little debt, genera
te high RoE/RoCE, sector leader, reasonable dividend payout, grown consistently
in past and capable of maintaining the growth momentum in years ahead. Our top s
tock picks can be viewed only by the subscribers.
----------------------------------------------------------------------PIVOT
Introduction
The pivot point is the level at which the market direction changes for the day.
Pivot Point trading is the most basic in trading and lots of traders use this so
market finds support and resistance at Pivot Levels.
Pivot Points are support and resistance levels that are calculated using the ope
n, high, low, and close, from the previous trading day. Standard pivot points in
clude the pivot point itself, three full support levels, and three full resistan
ce levels.
If the market opens above the pivot point then the bias for the day is long trad

es. If the market opens below the pivot point then the bias for the day is for s
hort trades.
Most important points while trading using Pivots are Pivot Level,R1 and S1.
To Trade using Pivots look for a reversal or break of R1 or S1. By the time the
market reaches R2,R3 or S2,S3 the market will already be overbought or oversold
and these levels should be used for exits rather than entries.
How to Trade Using Pivots
1.Before the start of trade we should be ready with the pivot levels for a parti
cular stock/Index we want to trade.I have made an auto update sheet which gets u
pdate EOD Basis Click Here
2.Market Open following scenarios Apply:
Open is above Pivot: Buy
Open is below Pivot: Sell
3. First Fundamental Of Pivot Trading After the opening range (first 15-30 min.
to one hour), if price is above/below the Pivot, Price Action will strongly tend
to remain above/below the Pivot for the session.
Although this rule bids us to wait out the Opening Range and thus avoid much of
the wildness and whipsawing,
4.If the market opens, or later trades at the extremes (R2, R3 or S2, S3), it wi
ll exhibit a tendency to trade back toward the Pivot. Thus, the general rule, 'A
void buying the High or selling the Low', becomes increasingly more stringent as
price moves farther from the Pivot.
Practical Examples
Lets take the Example of Reliance.
Trading Levels for Reliance on 17 Feb were High@ 1037.8 Low@1022 Close@1032
When we calculate the Pivot Levels we get the Following Levels
Pivot:1030.6
R1:1039.6
R2:1046.4
R3:1055
S1:1023.4
S2:1014
S3:1007
Now lets see how the trading goes on next day ie. on 18 Feb
Reliance opens @ 1030 ie. at Pivot Level and makes a high of 1038 that is the R
1 as we have already calculated.But we need to see for sustained of levels and a
s told previously once price touch R1 we need to see whether they reverse from R
1 or break it.

In our case price reverses from R1 ie. 1039 in our case and closes below the Pi
vot levels.
Now we can take short once price moves below Pivot ie 1030 with SL @ R1 and tar
get of S1 1023,now once 1023 breaks than we can carry our short with target@ S2
This was an ideal trade which one can execute with patience and discipline.Usin
g Pivot trading one can make a decent living using trading when market are not m
uch volatile.Do some paper trading with levels given on the sheet for Monday tra
ding.
How To calculate Pivot Levels:
Calculation:
PP = (YHigh + YLow + YClose) / 3
S1 = (PP * 2) - YHigh
S2 = PP - (YHigh - YLow)
S3 = (2 * PP) - ((2 * YHigh) - YLow)
R1 = (PP * 2) - YLow
R2 = PP + (YHigh - YLow)
R3 = (2 * PP) + (YHigh - (2 * YLow))
YHigh = Yesterday High
YLow = Yesterday Low
YClose = Yesterday Close
I have made an autoupdate Google Spreadsheet which Update the Pivot Levels of Ni
fty 50 Stocks
Conclusion
Pivot points are yet another useful tool that can be added to any trader's toolb
ox. It enables anyone to quickly calculate levels that are likely to cause price
movement. The success of a pivot-point system, however, lies squarely on the sh
oulders of the trader, and on his or her ability to effectively use the pivot-po
int systems in conjunction with other forms of technical analysis. These other t
echnical indicators can be anything from MACD crossovers to candlestick patterns
- the greater the number of positive indications, the greater the chances for s
uccess.
Golden Rule:
If the days high or low get broken early in the morning trade then go in that di
rection, period. Don't think!
Note:
pivot should be mixed with other indicator and as mentioned in last line if days
low break down we need to short,even if u went long above pivot ur sl must have
triggred and as s1 was broken yoou should have taken short and ur losses would
have recovered.

HOW TO USE PIVOT SYSTEM

1. Pivot is an important value here.

2. Look at the price of stock/underlying at 09:45-09:50 am. (half hour after mar
ket opens)
3. For Resistance and support values, you can choose normal values or fibonacci
values. Both give good results. It depends upon you which suits you.
4. Keep a target of 0.75% or 1%. Put Stoploss of 0.5%.
5. There are various scenarios which can occur at 09:40 - 09:45 am.
1. The price is below the Pivot but above S1. In this scenario, you shou
ld buy the stock/underlying above Pivot (If price reaches above Pivot) and sell
below S1(if the prcies goes below S1).
2. The price is above Pivot but below R1. In this scenario, you should b
uy the stock/underlying above R1 (if the price reaches above R1) and sell below
Pivot(if the price goes below Pivot).
3. The price is very near to pivot (+/- 0.02%) In this scenario, you sho
uld buy the stock/underlying above R1 (if the price reaches above R1) and sell b
elow S1(if the price reaches below S1).
4. The price is between R1 and R2. In this scenario, you should buy the
stock/underlying above R2 (if the price reaches above R2) and sell below Pivot(i
f the price reaches below Pivot). the important here is not to sell below R1. Yo
u must sell below Pivot.
5. The price is between S1 and S2. In this scenario, you should buy the
stock/underlying above Pivot (if the price reaches above Pivot) and sell below S
2(if the price reaches below S2). The important here is not to buy above S1, buy
only above pivot.
6. The price is between S2 and S3. Same rule applies as rule 5. Buy abov
e pivot sell below S3.
7. The price is between R2 and R3. Same rule applies as rule 4. Buy abov
e R3 sell below Pivot.
-------------------------------------------------------------------------------TRIN
What Does TRIN Mean?
A value below 1 usually indicates bullish sentiment, and a value above 1
bearish
. A reading reaching 1.5 is very bearish.
A short-term technical analysis breadth indicator calculated as the following:
TRaders' INdex. A ratio of 1 means the market is in balance; above 1 indicates t
hat more volume is moving into declining stocks; and below 1 indicates that more
volume is moving into advancing stocks. This indicator was developed by Richard
Arms.
In general, strong market advances are accompanied by relatively low TRIN readin
gs vice versa i.e. TRIN appears to move inverse to the market.
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------http://bluechips4u.blogspot.in/
------------------------------------------------------------------------------------------------Using volume and open interest together:
Price

OI

Volume Forecast

Rising
Rising

Up
Down

Up
Down

Bullish (trend confirmation)

Bearish (possible trend reversal) -Short coverin

Falling
Falling

Up
Down

Up
Down

Bearish (trend confirmation)

Bullish (possible trend reversal)-profit booking

How To Read Open Interest, Put Call Ratio, And Volatility

by Mahesh Mohan as Stock Market
Open Interest is an important indicator that can help one in ascertaining the fl
ow of funds.
If the open interest rises with rise in price it is a bullish indication.
If open interest rises and prices fall it is a bearish indication.
If open interest falls and prices rise it is a sign of short covering by bea
rs.
If open interest falls and prices also fall it is a sign of profit booking b
y bulls or liquidation of positions.
Put Call Ratio is an important indicator that can help one in gauging the future
direction of the market.
If the Put call ratio rises then there is hope of higher prices in the near
future.
If the Put call ratio falls it is a sign of weakness in the market.
Generally put call ratio is read along with volatility.
PCR can be calculated for Open Interest/positions or no of puts and calls tr
aded.
Historically
1.06 -2.00 is bullish. Above 2 and below 1.06 one may expect a
sharp fall.
There are two types of Volatility
historic volatility and implied volatility. Hi
storic volatility is based on historic prices of the futures and implied volatil
ity is based on the volatility calculated from options i.e. volatility implied b
y premiums in options.
If volatility rises and PCR falls, it has bearish implications.
If volatility falls and PCR rises, it has bullish implications.

-------------------------------

7 Ps
Get Ahead reader Dhananjay Banthia's stock market success mantras.
The understanding of the 7 Ps of marketing is imperative for every management st
udent. Likewise the 7 Ps of stock market investing will give investors a deep in
sight into portfolio management and help them win over the volatile stock market
.
Every game has got its own set of rules that have to be followed. Likewise inves
ting in stocks also calls for few basic points that investors need to keep in mi
nd in order to ensure they make a fortune.
1. Price
If you don't understand the importance of price then you have to pay a heavy pri
ce for it: Anonymous.
This rule is universal in stock market investment. We use price in two terms: Is
it the right level to enter or exit the stock? Is it over valued or under value
d at this level? Few basic indicators that can help you answer the above mention
ed question would be: 52 week high and low, PE multiple, peers stock valuation,
company fundamentals, overall market sentiment and news specific to the particul
ar counter.
Secondly, value buying or growth buying involves asking questions like: are we b
etting on stocks that are on seventh heaven (growth stocks) or are we betting on
stocks that have been beaten down (value stocks), but still we can see light at
the end of the tunnel?
2. Portfolio tracking
Track, else you will be out of track: Anonymous
It is a must kind of thing for those investing in stocks. Portfolio review exerc
ise helps you do the re-balancing act. In case few stocks in your kitty are not
able to deliver may be because of stock-specific news affecting those counters,
then you can do the churning, and switch to better picks.
A monthly review is always called for given the current ping-pong movement in th
e capital markets.
Like entering at right price is important, the same way exiting at the right pri
ce is also called for.
3. Profit booking
Set your goals, stop being greedy: Anonymous
Define your desired level of return from equity investment and book profit, rath
er than waiting for few extra bucks and then sitting on bench for indefinite per
iod to reach the same point.
A return of 15 to 18 per cent over a span of one year is handsome. If stocks in
your kitty touch these levels proportionally at any given point of time within a
year of investment do exit if a situation calls for it (based on market sentime
nt). Do not wait for further uptrend as we may see profit booking or trend rever
sal happening.

The year 2008 was a perfect example. I saw people gaining 30 to 40 per cent stil
l they kept on holding the portfolio for extra gains, and the rest is history.
4. Professional recommendation
Before entering into any stock for investment purpose with a medium or long-term
time horizon, do take professional advice. They can provide you a basket of opt
ions to choose from; a professional can provide you tailor made solution to suit
your goals.
As per an old saying 'ask for suggestion from every corner and take your own dec
ision'

5. Patience
It pays rich dividends. Equity investments do call for patience. In case the mar
ket goes through a rough phase, keep your calm. Fundamentally sound stocks will
deliver handsome returns over a longer time horizon. Don't worry about the jerks
that market gives if the stocks in your kitty are fundamentally rock solid.
They will bounce back for sure. Investing in stock market does have the potentia
l to deliver better return vis a vis any other financial instruments. Keep holdi
ng fundamentally sound jewels; they will definitely bring you fortune.
6. Priorities
Investing in stocks is all about priorities. I guess we all have seen the catchy
line after every equity market investment ad that says, 'subject to market risk
'. Equity as an avenue of investment can give handsome returns. Ensure your inve
stments are made out of your opportunity money.
The real question is what is opportunity money. Simple: the answer to the same i
s money that is left over after fulfilling personal commitment and basic savings
.
7. Power to you
The Securities and Exchange Board of India, SEBI, have taken up various initiati
ves for investor right protection. Have an idea about dos and don'ts; it will he
lp you protect yourself in case of any fraudulent practice by your broker.
Always ensure that you keep your stock in your own account, rather than keeping
the same in the broker's pool account.
I hope these 7 Ps of investing in stocks prove informative to you and offer a so
lid pathway to follow in equity market.
-----------------------------------------------------------COC
WHAT IS COST OF CARRY?
In derivates market, the cost of carry (CoC) of a futures contract is the cost i
ncurred on holding positions in the underlying security until the expiry of the
futures. The cost includes the risk free interest rate and excludes any dividend
payouts from the underlying. CoC is the difference between the futures and spo

t prices of a stock or index. It is commonly used to interpret market sentiment

for the stock or index, as higher values of CoC indicate traders are willing to
pay more for holding futures. In the case of commodity futures, CoC also include
s other expenses like storage.

HOW IS IT CALCULATED?
Theoretically, Future price fair value=Spot Price+Cost of Carry-Dividend Payout.
In practical terms, CoC of equity derivatives is simply calculated as the differ
ence between the futures and spot price at any point of time. The difference is
then annualized and expressed as a percentage. Stock exchange website also prov
ide real time CoC values at the best buy,best sell and for the latest trade.

HOW IS IT INTERPRETED?
Traders often refer to CoC to guage market sentiment. Analysts interpret a signi
ficant fall inCoC as an indicator of an impending fall in the underlying. For ex
ample, CoC of benchmark index Nifty futures dropped by nearly half a fortnight a
go,and served as an indicator of the consequent correction in the index.
Conversely, when the CoC for a stock future rises, it means that traders are wil
ling to incur higher costs for holding the position and,thus,expect a rise in th
e underlying. CoC is expressed as an annualized figure in percentage. Average Co
C of all futures contract is around 0.7-0.9%.

CAN COST OF CARRY BE NEGATIVE?

Yes. When futures trade at a discount to the underlying,the resultant cost of ca
rry is negative. This usually happens for two reasons: when the stock is expecte
d to pay a dividend,or when traders are aggressively executing a reverse arbitrag
e strategy,which involves buying spot and selling futures. Negative cost of carry
points to bearish sentiment.

HOW DOES COST OF CARRY REPRESENT BULLISHNESS OR BEARISHNESS?

Change in CoC seen along with open interest shape a clear picture of broader sen
timent for the stock or index. Open interest is the total number of open positio
ns in a contract. For a rising OI,an increase in CoC indicates accumulation of l
ong(or bullish) positions, while an accompanied fall in the CoC indicates additi
on of short positions and bearishness. Likewise,a fall in OI,accompanied with a
rise in CoC,indicates closure of short positions. A falling both OI and CoC indi
cates that traders are closing long positions.
Analysts also observe changes in CoC at the expiry of derivatives contract. If a
significant number of positions are rolled over with a higher cost of carry,it
implies bullishness.

We do discussion is Live market to update Nifty levels If you are interested you
can LIKE the page to get Real Time Updates.

Follow on Facebook during Market Hours: http://www.facebook.com/pages/BrameshsTech/140117182685863

-----------------------------------------------------------------------------------------------------------------------Trade with STOCHASTICS

Developed by George C. Lane in the late 1950s, the Stochastic Oscillator is a mo

mentum indicator that shows the location of the close relative to the high-low r
ange over a set number of periods. According to an interview with Lane,
The Stochastic Oscillator doesn t follow price, it doesn t follow volume or anyth
ing like that. It follows the speed or the momentum of price.As a rule, the mome
ntum changes direction before price. As such, bullish and bearish divergences in
the Stochastic Oscillator can be used to foreshadow reversals. This was the firs
t, and most important, signal that Lane identifie dBecause the Stochastic Oscill
ator is range bound, is also useful for identifying overbought and oversold leve
ls.
CALCULATION
%K = (Current Close Lowest Low) / (Highest High
%D = 3-day Simple Moving Average (SMA) of %K

Lowest Low) * 100

Lowest Low = Lowest Low for the look-back period

Highest High = Highest High for the look-back period
Note: %K is multiplied by 100 to move the decimal point two places
The default setting for the Stochastic Oscillator is 14 periods, which can be da
ys, weeks, months or an intraday timeframe. A 14-period %K would use the most re
cent close, the highest high over the last 14 periods and the lowest low over th
e last 14 periods. %D is a 3-day simple moving average of %K. This line is plott
ed alongside %K to act as a signal or trigger line.
The Stochastic Oscillator generates signals in three main ways:
1. Extreme Values (Overbought Oversold)
2. Stochastic Crossovers
3. Stochastic Divergences
EXTREME VALUES OVERBOUGHT OVERSOLD
The Stochastic Oscillator ranges from zero to one hundred. No matter how fast a
security advances or declines, the Stochastic Oscillator will always fluctuate w
ithin this range. Traditional settings use 80 as the overbought threshold indica
ting that the underlying security was trading near the top of its range and 20 a
s the oversold threshold indicating that the underlying security was trading at
the low end of its range. These levels can be adjusted to suit analytical needs
and security characteristics.
As seen from the above Bank Nifty Charts Stocs showing Overbought/Oversold condi
tion and Bank Nifty Declining.But do read the Note below before intiating trade
on basis of Overbought and Oversold Condition.
Note:It is important to note that overbought readings are not necessarily bearis

h. Securities can become overbought and remain overbought during a strong uptren
d. Closing levels that are consistently near the top of the range indicate susta
ined buying pressure. In a similar vein, oversold readings are not necessarily b
ullish. Securities can also become oversold and remain oversold during a strong
downtrend. Closing levels consistently near the bottom of the range indicate sus
tained selling pressure.
STOCHASTIC CROSSOVERS
Buy when the %K line rises above the %D line.
Sell when the %K line falls below the %D line.
Beware of short-term crossovers that may generate false signals.
The preferred crossover is when the %K line intersects after the peak of the
%D line (known as a right-hand crossover).
STOCHASTIC DIVERGENCES
Divergence-convergence is an indication that the momentum in the market is wanin
g and a reversal may be in the making.
Divergences form when a new high or low in price is not confirmed by the Stochas
tic Oscillator.
A bullish divergence forms when price records a lower low, but the Stochastic Os
cillator forms a higher low. This shows less downside momentum that could foresh
adow a bullish reversal.
A bearish divergence forms when price records a higher high, but the Stochastic
Oscillator forms a lower high. This shows less upside momentum that could foresh
adow a bearish reversal.
Once a divergence takes hold, chartists should look for a confirmation to signal
an actual reversal. A bearish divergence can be confirmed with a support break
on the price chart or a Stochastic Oscillator break below 50, which is the cente
r line. A bullish divergence can be confirmed with a resistance break on the pri
ce chart or a Stochastic Oscillator break above 50.
The Stochastic Oscillator moves between zero and one hundred, which makes 50 the
center line. Think of it as the 50 yard line in football. The offense has a hig
her chance of scoring when it crosses the 50 yard line. The defense has an edge
as long as it prevents the offense from crossing the 50 yard line. A Stochastic
Oscillator cross above 50 signals that prices are trading in the upper half of t
heir high-low range for the given look-back period. This suggests that the cup i
s half full. Conversely, a cross below 50 means prices are trading in the bottom
half of the given look-back period. This suggests that the cup is half empty.
The signal to act is when you have a divergence-convergence, in an extreme area,
with a crossover on the right hand side, of a cycle bottom. As plain crossovers
can occur frequently, one typically waits for crossovers occurring together wit
h an extreme pullback, after a peak or trough in the %D line. If price volatilit
y is high, an exponential moving average of the %D indicator may be taken, which
tends to smooth out rapid fluctuations in price.
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-----------------------------------------------------------------------------------------------------------------------------------------------------------------------CHAIKIN MONEY fLOW

A positive Chaikin Money Flow signals accumulation, while distribution is signal

ed by the indicator line below zero. The higher the reading (above or below zero
), the stronger the signal.
Go long if a breakout above resistance is supported by Chaikin Money Flow ab
ove zero.
Go short if a breakout below support is confirmed by negative Chaikin Money
Flow.
Divergences also provide good signals:
Go long on a bullish divergence.
Go short on a bearish divergence.
-----------------------------------------------------------------------------------------------------MFI
Ranging markets can be identified by Money Flow Index fluctuating close to the 5
0 level.
Trending Market
Market tops are likely when a medium term Money Flow Index is above 80.
Market bottoms are likely when a medium term Money Flow Index is below 20.
Go long on bullish divergence.
Go short on bearish divergence.
Only trade with the trend and exit using a trend indicator.
My personal preference is for the slow stochastic oscillator, along with the MAC
D, RSI, ROC and OBV. These, along with the volumes and 20/50/200 day EMAs are al
l the complications that I can fathom.
Investopedia explains 'Stochastic Oscillator'
The theory behind this indicator is that in an upward-trending market, prices te
nd to close near their high, and during a downward-trending market, prices tend
to close near their low. Transaction signals occur when the %K crosses through a
three-period moving average called the "%D".
Investopedia explains 'Moving Average Convergence Divergence - MACD'
There are three common methods used to interpret the MACD:
1. Crossovers - As shown in the chart above, when the MACD falls below the sign
al line, it is a bearish signal, which indicates that it may be time to sell. Co
nversely, when the MACD rises above the signal line, the indicator gives a bulli
sh signal, which suggests that the price of the asset is likely to experience up
ward momentum. Many traders wait for a confirmed cross above the signal line bef
ore entering into a position to avoid getting "faked out" or entering into a pos
ition too early, as shown by the first arrow.
2. Divergence - When the security price diverges from the MACD. It signals the
end of the current trend.

3. Dramatic rise - When the MACD rises dramatically - that is, the shorter movi
ng average pulls away from the longer-term moving average - it is a signal that
the security is overbought and will soon return to normal levels.
Traders also watch for a move above or below the zero line because this signals
the position of the short-term average relative to the long-term average. When
the MACD is above zero, the short-term average is above the long-term average, w
hich signals upward momentum. The opposite is true when the MACD is below zero.
As you can see from the chart above, the zero line often acts as an area of supp
ort and resistance for the indicator.
CCI:
CCI uses a +100 value to indicator overbought levels, while below -100 value re
presents an oversold value. When the CCI moves above +100, a security is conside
red to be entering into a strong uptrend and a buy signal is given. The position
should be closed when the CCI moves back below +100. When the CCI moves below 100, the security is considered to be in a strong downtrend and a sell signal is
given. The position should be closed when the CCI moves back above -100.
CCI can be used to identify overbought and oversold levels. A security would
be deemed oversold when the CCI dips below -100 and overbought when it exceeds
+100. From oversold levels, a buy signal might be given when the CCI moves back
above -100. From overbought levels, a sell signal might be given when the CCI mo
ved back below +100.
As with most oscillators, divergences can also be applied to increase the ro
bustness of signals. A positive divergence below -100 would increase the robustn
ess of a signal based on a move back above -100. A negative divergence above +10
0 would increase the robustness of a signal based on a move back below +100.
Trend line breaks can be used to generate signals. Trend lines can be drawn
connecting the peaks and troughs. From oversold levels, an advance above -100 an
d trend line breakout could be considered bullish. From overbought levels, a dec
line below +100 and a trend line break could be considered bearish.[3]
PSAR : to find out entry or exit prices
Basically, if the stock is trading below the parabolic SAR (PSAR) you should se
ll. If the stock price is above the SAR then you should buy (or stay long)
TRIX:
It is used as an oscillator, a positive value indicates an overbought market whi
le a negative value indicates an oversold market.
TRIX is used as a momentum indicator, a positive value suggests momentum is incr
easing while a negative value suggests momentum is decreasing. Many analysts bel
ieve that when the TRIX crosses above the zero line it gives a buy signal, and w
hen it closes below the zero line, it gives a sell signal.
TRIX is one of the best trend reversal and momentum indicators we have in our da
ily arsenal
ATR:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------The stock market is all gamble.
Making money in the stock market is all about luck.

The easiest way to financial ruins passes through the stock market.
How often do you hear people say the above things or things similar to them? In
fact, if you check the average person's view of the stock market, you would be c
onvinced that the stock market is the earthly analogue of hell. However, once in
a while you also learn about some people who are making huge gains in the marke
t. You may have wondered how it is that these handful of people made gains in th
e market, when most lose. Is there some magic formula?
But first let us turn the matter around slightly. Which is responsible for losse
s in the stock market: the market or the investor? Contrary to the popular notio
n that the market is to be cursed, it is the investor who is to be blamed. Why?
Because the Indian stock market, like most other stock markets, has maintained a
n upward bias over the years. The Sensex had closed at 1,908 in 1991. The curren
t level of the Sensex is around 29,000. Do you still think the market is the pro
blem?
Why then most people fail in the stock market? Your quest for the holy grail end
s here. The answer had always been there, only it had to be put in the right con
text. It is there in the words of the gurus of stock investing. Here is a short
compilation of the wisdom of the gurus which will reveal to you the secret of wi
nning in the stock market.
Failing to appreciate what common stocks are
Although it's easy to forget sometimes, a share is not a lottery ticket... i
t's part-ownership of a business.
- Peter Lynch
Behind every stock is a company. Find out what it s doing.
- Peter Lynch
Not studying the business before investing in the stock
Know what you own, and know why you own it.
- Peter Lynch
If you don t study any companies, you have the same success buying stocks as y
ou do in a poker game if you bet without looking at your cards.
- Peter Lynch
Failing to invest or stay invested in a good stock during times of crisis
Unless you can watch your stock holding decline by 50 per cent without becom
ing panic-stricken, you should not be in the stock market.
- Warren Buffett
Cash combined with courage in a time of crisis is priceless.
- Warren Buffett
Not thinking long term and not being disciplined and patient
If you are not willing to own a stock for 10 years, do not even think about
owning it for 10 minutes.
- Warren Buffett
Successful Investing takes time, discipline and patience. No matter how grea
t the talent or effort, some things just take time: You can't produce a baby in
one month by getting nine women pregnant.
- Warren Buffett
Indulging in derivatives and stock trading
Deivatives are financial weapons of mass destruction.

- Warren Buffett
As in roulette, same is true of the stock trader, who will find that the exp
ense of trading weights the dice heavily against him.
- Benjamin Graham
Paying too much for the stock
If you are shopping for common stocks, choose them the way you would buy gro
ceries, not the way you would buy perfume.
- Benjamin Graham
Confronted with a challenge to distill the secret of sound investment into t
hree words, we venture the motto, Margin of Safety.
- Benjamin Graham
Blindly following the crowd
We simply attempt to be fearful when others are greedy and to be greedy only
when others are fearful.
- Warren Buffett
Wall Street is the only place that people ride to in a Rolls Royce to get ad
vice from those who take the subway.
- Warren Buffett
Making exceptions to sound investing principles as per the latest fad
The individual investor should act consistently as an investor and not as a
speculator.
- Benjamin Graham
With every new wave of optimism or pessimism, we are ready to abandon histor
y and time-tested principles; but we cling tenaciously and unquestioningly to ou
r prejudices.
- Benjamin Graham
Underestimating your potential as an investor
Twenty years in this business convince me that any normal person using the c
ustomary three percent of the brain can pick stocks just as well, if not better,
than the average Wall Street expert.
- Peter Lynch
If you have more than 120 or 130 I.Q. points, you can afford to give the res
t away. You don t need extraordinary intelligence to succeed as an investor.
- Warren Buffett
Last but not the least: Making costly mistakes
It is remarkable how much long-term advantage people like us have gotten by
trying to be consistently not stupid, instead of trying to be very intelligent.
- Charlie Munger
Rule #1: Never lose money; Rule #2: Never forget Rule #1.
- Warren Buffett