FUTURE AND OPTION TRADING IN STOCK MARKET

What is Derivative (Futures and Options) Trading?Stock market

Like share trading in the cash segment (buy & sell shares), derivative is another kind of trading instrument. They are special contracts whose value derives from an underlying security.

Futures and Options (F&O) are two types of derivatives available for the trading in India stock markets.

In futures trading, trader takes the buy/sell positions in an index (i.e. NIFTY) or a stock (i.e. Reliance) contract. If, during the course of the contract life, the price moves in traders favor (rises in case you have a buy position or falls in case you have a sell position), trader makes profit. In case the price movement is adverse, trader incurs losses

NORMAL MISTAKE DONE BY OPTION TRADERS

LIST OF SOME OF THE MISTAKES WHICH ARE DONE BY THE OPTION BUYERS.THEY ARE :

1. BUYING DEEP OTM OPTIONS NEAR EXPIRY: SUCH OPTIONS HAVE LOW AND DECREASING DELTA WHICH DO NOT TEND TO APPRECIATE PREMIUM IN SPITE OF THE SPOT MOVEMENT. ALSO INCREASING THETA TENDS TO ERODE THE PREMIUM.

2. USING LONG STRANGLE EVERY MONTH : NOT EVERY MONTH FAVOURS A LONG STRANGLE.U NEED TO IDENTIFY TRENDING AND TRADING MKTS. AVOIDING DOING LONG STRANGLE IN TRADING MKTS.

3. HOLDING LOSS MAKING OPTIONS FOR MORE THAN REQUIRED TIME : HAVE A PROPER EXIT POINT. IN CASE UR TRADE IS WRONG IMMEDIATELY EXIT AND WAIT TO ENTER AGAIN IN PROPER TREND.

4. MAKING EARLY ENTRIES ON HOPE :  THIS IS ONE OF THE MAJOR MISTAKES MADE . OPTIONS ARE MOSTLY BOUGHT ON HOPE. I DON’T KNOW WHY PEOPLE JUDGE NIFTY RATHER THAN JUDGING ITS TREND AND TRADING ACCORDINGLY.

5. BUYING CALLS AT RESISTANCE AND PUTS AT SUPPORT .

6. BULL TRAP : MANY TRADERS BUY CALL OPTIONS WHEN RESISTANCE IS BROKEN. HERE RRR IS NOT FAVOURABLE BUT STILL THEY TRADE. IT WORKS IN TRENDING MKT FOR SOME PROFIT. BUT IN SIDEWAYS MKT , PRICE COMES DOWN IMMEDIATELY TRAPPING CALL BUYERS.

7. BEAR TRAP: SAME AS BULL TRAP. HERE PUT BUYERS ARE STUCKED AT FALSE SUPPORT BREAK.

8. NOT COMBINING INTRADAY TREND WITH MAJOR TREND IN TRENDING MKTS.

9. TAKING WRONG INTRADAY TRADES .

10. TRADING IN SIDEWAYS MKT WITHOUT WAITING FOR PROPER BREAKOUTS.

11. COMPULSIVE TRADING: OPTIONS ARE NOT EVERYDAY TRADING ASSETS. THERE ARE CERTAIN TIMES WHEN U JUST NEED TO STAY OUT OF THE MARKET.

Rules for TRADING in stock market

RULES OF TRADING !!

1. Always use stop loss …never exceed that loss level. If you will avoid stop loss, next day market will avoid you. Never risk more than 10 per cent of your trading capital in a single trade.
2. Always try to build a portfolio.
3. Remember not all shares will be in profit.
4. Intraday investment is like full time job….it can’t be done on part time basis…
5. It is very important to set your target. Booking profits is very important and booking loss at the right time is even more important.
6. For intraday trading Choose highly liquid (high volume) shares.
7. Only invest what you can afford to lose. Never borrow.
8. Don't fight the market Trend. Always follow market trend.
9. Small is beautiful. Remember 1% per day ends up approximately 300% pa.
10. Trade with a calm mind. Use discipline and patience versus emotion and panic. When you lose don't blame it on luck. Emotion is the enemy when trading. If you don’t change your attitude towards market, you will get the same results what you are getting now.
11. Never let a profit turn into a loss.
12. Avoid trading during the first 15 minutes of the market open.[it is my personal opinion].
13. Practice paper-trading before actual trading. Study well about the markets, don’t stop studying else you will lag behind others.
14. Be willing to lose before you can win. Every Loss is markets new lesson to improve your knowledge of market action
15. Find out which events move Markets. The reaction to news is more important than the news itself. 
16. Never buy or sell just because the price is low or high.
17. Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.

Trading calculator apps for trading and investment

This android app consists of below trading calculators.

1. Pivot Point Calculator
2. Breakout Calculator
3. Advanced Camarilla Calculator
4. Gann Square of 9
5. Advanced Gann Square of 9
6. Fibonacci Retracement/Extension
7. Simple Fibonacci

1. Pivot Point Calculator

This calculator is mostly used for intraday trading and is based on traditional pivot based calculation. You need ot enter previous day high, low and close for a any underlying and the calculator would provide you with the pivot, 4 resistance and 4 support levels for that underlying.

2. Breakout Calculator

This calculator is mostly used in intraday to identify where the scrip is going to do a breakout. The calculator takes previous day and current day's high-low range and evaluates whether the underlying has done the breakout. The calculator is designed to be used in 1:1 risk reward ratio.

3. Advanced Camarilla Calculator

This calculator is based on camarilla equation for intraday trading. You can even use this calculator for weekly, monthly, quarterly and yearly trading. The calculator is different from other camarilla calculators in terms of providing additional L5, L6, H5, H6 levels. This calculators is one of the most successful calculator used in intraday trading.

4. Gann Square of Nine Calculator

This calculator is based on W. D, Gann's Sqaure of Nine. We are the original first maker of this calculator and now we have come with a mobile version of the calculator. The calculator has a success rate of more than 70% and is suitable for intraday trading in most of the instruments. The calculator just takes current market price as the input to evaluate the gann levels.

5. Advanced Gann Square of Nine Calculator

This calculator is based on W. D  Gann's Square of Nine. We are the only one who is providing advanced version of Gann Square of Nine and which is more successful and accurate than the standard Gann Square of Nine. This calculator takes previous day closing and current market price as the input values to find the levels for intraday trading. The calculator has a success rate of 70-90% depending on the instrument selected to trade.

6. Fibonacci Retracement/Extension Calculator

This calculator is based on famous Fibonaci Retracement and Extension formulas. The calculator will provide you with various levels that would act as retracement and extension for a instrument. The calculator would provide you with the levels on both the uptrend and downtrend. This calculator provides you with just the levels of retracement and extension and you need to use your understanding on how to trade based on these levels.

7. Simple Retracement Calculator

This calculator is based on simple formulae of Retracement. It provides you with various retracement levels based on the high and low of the underlying. The calculator in turn provides you with a set of 12 fibonacci retracement levels.