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  • An All-Inclusive Guide on Intraday Trading 

    Deepak Sharma 1 May 2021

     

    As trading seems a complex thing for a beginner, we are here to make it easy and help you become a professional in the same domain. Whenever you try to invest some amount in securities, you will see different options like delivery trading, intraday trading, etc. For short-term investment, people usually prefer this trading. Let's understand all the aspects of intraday trading for beginners.

     

    What does Intraday trading mean?

     

    The literal meaning of intraday means 'within a day,' and thus, we can derive from this meaning that it relates to buying and selling securities within the same day, and one cannot retain it in their portfolio for the next day. The transactions are performed during business hours, and these securities include stocks and exchange-traded funds (ETFs). The highs & lows that occurred during the entire day are applied to the asset to evaluate its real-time value and hold high risk. Thus it's an excellent option for day traders who don't want to invest the funds in the long-term option (more than a day). The settlement of the positions can be done as soon as the market closes for the day.

     

    Any trader who invests in such options analyzes real-time charts for 1-60 minutes. They even use Volume Weighted Average Price (VWAP), an average price of the day, to make the right decision before buying any security.

     

    Strategies for Intraday Trading for beginners

     

    Below is the list of the intraday trading beginners may start with:

    • Scalping: It works on grabbing small profits multiple times in a day on small investments.

     

    • High-frequency: It needs analysis of the efficiencies and shortfalls of the security by using some complex predefined algorithms.

     

    • Range trading: The trader makes his investment decision after evaluating the support & resistance levels, and such an approach is known as range trading

     

    • News-based trading: As many news headlines and events can influence the stock's value; this strategy tries to determine and grab such opportunities.

     

     

     

    Reasons behind the Popularity of Intraday Trading

     

    The best part about intraday trading is that the position or net value of the asset is not influenced due to fluctuation that happens at night. Moreover, day traders get hiked leverage by increasing their investment ability with a higher margin. One can also protect positions by availing the benefit of a tight stop-loss order, which is a provision that enables to set off a stop price. Also, a majority of trading platforms offer extra privileges to their day traders like low brokerage charges.

     

    Who should opt for intraday trading?

     

    People who have the courage and time to take high risks and monitor the market fluctuations to make trading decisions every minute can choose intraday trading. The returns of this trading approach are lucrative and need expertise and a good understanding of the market. If you have time to indulge in trading for the entire day and have a good knowledge of the same, you should opt for this option.

     

    What do we mean by 'value area'?

     

    It is a significant parameter to analyze the market and refers to a price range in which 70% of the trade took place previously (yesterday or the day before yesterday). People use it to target the stocks and implement a rule like 'the 80% rule' to yield better profits. If the price of the stocks in the value area is lower and remains the same for the first hour of the day, there is an 80% chance that it will rise and vice-versa.

     

    Conclusion

     

    Although markets are always uncertain, the right strategy can help in reducing the risk. You can learn the techniques in-depth to become an expert in this domain with us. Try our courses for a better understanding of the security market.

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    • intraday trading, 
    • intraday trading for beginners, 
    • intraday trading mean
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  • The Big Bull ' Harshad Mehta'

    Deepak Sharma 10 Apr 2021

    After the release of the ‘Scam 1992- The Harshad Mehta Story’ web series, the one name which is trending in India is Harshad Mehta. 

    Now, Who was Harshad Mehta? What exactly did he do ?  

     

    Harshad Mehta, aka "Big Bull" of India, aided and abetted one of the largest scams in India in 1992. He is well-known in the ‘Indian Stock Exchange Circuit’ for his wealth and lavish lifestyle. In the 1992 securities market scam, he was charged with several financial offenses, including using the money to manipulate the stock market by rigging the price of shares.

    Mr. Harshad Mehta was accused of instigating a major stock market manipulation funded by worthless bank receipts that his company, Grow More Research and Asset Management, arranged for ready-forward transactions between banks.

    Early Days

     

    Harshad Mehta was born in 1954 in Gujrat to a middle-class Jain family and spent his childhood in Mumbai. He received his Bachelor of Commerce degree from Lajpatrai College in Mumbai. Harshad tried his hand at a variety of jobs, including diamond cutting and accounting, but he made his biggest fortune in the Indian stock market. Mr. Mehta began his career as a salesman with the New India Assurance Company after graduation (NIACL).

    After a few years of hustling and struggling to get the geek, he decided to try a career in the stock market and joined B.Ambalal & Sons, where he worked as a jobber for broker P. D. Shukla. People begin to recognize him as the ‘Stock Market's Amitabh Bachchan’ as time goes on. Harshad Mehta founded his brokerage company, Growmore Research, and Asset Management, in 1984.

    He began actively trading in the market in 1986, and by 1990, others had joined him and were investing with his business. In the meantime, he attracted several high-profile clients, including then-Minister Mr. P. Chidambaram.

    After being an industry veteran, he began to manipulate the market, causing the share price of Associated Cement Company (ACC) to rise from Rs.200 to Rs.9000 in less than three months.

    How the Scam took place?

     

    Banks were not allowed to invest in the stock market until 1990. Yeah, they were required to make a profit and keep a certain percentage (threshold) of their assets in fixed-interest bonds issued by the government. Mr. Mehta wisely took the money out of the banking system and invested it in the stock market. He assured the banks of a higher interest rate than the current rate. He requested that the funds be transferred to his account, claiming that he would purchase securities for them from other banks. 

    To buy securities and forward bonds from other banks, a bank had to go through a broker at the time. Mehta got the idea from there to put the money into his account temporarily and buy shares. When the market was at its height, he began to raise the price of some shares of well-established companies such as (ACC, Sterlite Industries, and Videocon). When the shares are finally sold, he gives a portion of the funds to the bank and holds the rest in his pocket.

    To carry out the scam, the security and payment were only delivered with the help of the broker. For example, one seller handed over the security to the broker, who then passed them on to the buyer, who then gave the broker the cheque, who then paid the seller. The buyer and seller will have no idea who they were trading with because the broker would be the only one who can link them.

    The Bank Receipt was another widely used instrument (BR). The BR is the confirmation of a security sale, and it functions similarly to a receipt issued by the selling bank. I.e. the seller of securities sent a BR to the buyer of securities. A BR claims that the seller will deliver the securities to the buyer and that the seller will keep the securities in the buyer's trust in the meantime. 

    Mehta figured out how to find a bank that would offer him fake BRs or BRs that were not backed by any government securities. The Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB), both small and unknown banks, came in handy for this reason. He returned the money to the banks after the false BRs were released and the money was invested in the stock market and sold for a profit.

     

    Background of the 1992 Securities Scam

     

    • Government Securities paper scam

     

    In the early 1990s, Indian banks were prohibited from investing in the stock market. To retain their SLR ratio, they were required to hold a certain percentage of their total assets in government fixed interest bonds and shares (Statutory Liquidity ratio). 

     

    There was an additional provision specifying that the average percentage bond holding for the week must be greater than the SLR ratio, but the daily percentage need not be, meaning that banks will sell bonds earlier in the week and buy them back later in the week.

     

    The broker would act as a middleman for the banks. Harshad Mehta squeezed capital through banking system loopholes to meet banks' market maker requirements, then poured the money into the stock market and rigged the share prices. 

     

    Indian banks were inefficient in their securities operations in the early 1990s, and they relied on stockbrokers to find a deal as a market maker. Harshad Mehta was a shrewd broker who found the flaw in a short period. Furthermore, he guaranteed banks a higher rate of interest and occasionally requested money be transferred into his account under the pretext of purchasing securities for them from other banks.

     

    Mr. Harshad Mehta used this money from his account to purchase a large number of shares, causing the demand for those shares to spike and the price to skyrocket as well. Cipla, ACC, Hindalco, Sterlite, and Videocon Industries are some of the well-known firms. When the price of the stock skyrocketed, he sold. 

     

    Consider the euphoria he instilled in the Indian Stock Market as "The Big Bull." The BSE Sensex rose by 247 percent in a year, from April 1, 1991, to March 31, 1992, setting a new high for a financial year in the Indian equity market.

     

    The Big Bull V/S Scam 1992: Everything You Need To Know About Harshad Mehta  Stock Market Scam

     

    • Bank Receipt scam

     

    Harshad Mehta's most profitable tool for pumping capital into the stock market was the Bank Receipt. In most cases, a BR contract was a ready-forward agreement in which shares were not transferred back and forth. The borrower of capital, i.e. the seller of securities, instead of issues BR to the buyer of securities. The sale of securities has been confirmed by the BR. It also serves as a receipt for the funds earned by the selling bank and a guarantee that the securities will be sent to the buyer. The seller keeps the buyer's securities in trust (as a novation). He required banks that could issue fake BRs or BRs that were not backed by securities after finding out this way.

     

    Once the fake BRs were released, they were passed on to other banks, who then gave money to Mehta under the assumption that they were lending to other banks against government securities, which was not the case because the BRs were not backed by protection. The stock market had become overheated as a result of Mehta's buying spree, and the Sensex had risen 247 percent in a year.

     

    Observed a few inconsistencies in Harshad Mehta scam series : Chodi

     

    The 1992 Securities Fraud Outbreak

     

    Sucheta Dalal, a young financial journalist, received a tip about the bogus BRs scam. Sucheta continued her investigation into the number of bogus BRs used by Mehta to pump the stock market. In the Times of India on April 23, 1992, Sucheta Dalal revealed Harshad Mehta's fraud.

    When the fraud was revealed, banks realized they were keeping useless Bank receipts, Vijaya Bank's chairman committed suicide after intentionally issuing fake BRs to Mehta in exchange for a commission. Mr. Mehta died of cardiac arrest on December 31, 2001, at the age of 47, leaving behind the largest stock market scam of all time and the most historic bull run of all time, earning him the title "The Great Bull of Indian Stock Market."

    The scam economy - Cover Story News - Issue Date: Dec 21, 2015

    Harshad Mehta Scam Inference: 

    According to some conclusions and facts, the activity was going on in the entire market and was used by all stockbrokers, and he was made a scapegoat because he believed in a bull run when the majority of the brokers were against it. They have to suffer substantial losses as a result of Harshad Mehta's actions. Without a doubt, the entire market's method was unethical, and after Sucheta Dalal revealed the fraud, regulators enacted strict rules and regulations to prevent the manipulation of shares to manipulate the stock market.

    18 years on, Harshad Mehta's kin, firms to face trial for not filing tax  returns | Mumbai News - Times of India

     

    How Harshad Mehta died?

     

    Mr. Harshad Mehta spent one late night in Thane jail. He was admitted to Thane Civil Hospital after complaining of chest pain. He died with the following pain on December 31, 2001, at the age of 47, leaving behind the biggest financial scam in Indian history.

    Closing Thoughts

     

    This was Harshad Mehta, a man from a simple middle-class family who dreamed of a big house and jumped into the financial market's ocean, bringing a tornado with him. People made their fortunes with Mr. Mehta, but in the end, he was the culprit.

    If you dream to become a Successful Investor or Stock Market broker and do not want to be a prey of such fraudsters, then we suggest you keep your expertise and knowledge up to date. NIWS (The Best Institute for Stock Market Training) has a couple of courses to help you trade stocks strategically, whether you need an introduction to stock trading and technical analysis or a guide on day trading stock options. With over 10-15 years of experienced professionals in domestic and international markets, we strive to help students to achieve their lifelong career goals and aspirations.

     

     

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  • Stock Market Wizards-Learn & Create Wealth

    Deepak Sharma 24 Mar 2021

    Stock Market Wizards-Learn & Create Wealth

     

    “A Successful Trader Studies Human Nature and Does the Opposite of What the General Public Does”   – William Delbert Gann

     

    From the days of Jesse Livermore (an American legendary trader, 1877-1940), market participants have tried to confront the question, "How to be a successful stock trader”? Certainly, it is not just about stock trading tips and tricks, but something more, in fact, a lot of good old virtues like patience, discipline, persistence, etc. 

    What are the basic things that we need to enroot to be a good trader? These are Mind, Money, and Method, in sync if we want to succeed. If you have the best strategy but don’t have the mental discipline then, nothing will work out.

    We first need to have a Method. A method can be Technical analysis, fundamental analysis, or your gut feeling. The key is you must have a workable plan to attain success.  Your method should be measurable, objective, and easy to verify. It should be so simple that if you teach them to ten other people they can easily understand. Our Brain likes clarity, not confusion and chaos. 

    Here are the 7 rules of highly successful traders:

    • Be optimistic and realistic

    • Persistence can be your friend

    • Target on how well you execute your trades

    • Costs matter a lot when you are a trader

    • Manage your risk every second of the day

    • Learn from the market rather than trying to outwit the market

    • Be an ardent reader, researcher, and a learner

    Now, let's find the recipe for successful trading from some of the new generation millionaires.

    Delhi based - Alok Jain, a multi-bagger, IIT graduate, who makes money from just 15 minutes of trade, has raked up to 86 percent return on his portfolio says his biggest learning is that exiting is the most difficult thing in the market for both, profit or loss. The strategy is only 20% of the game, 80% is staying the course. If you are confident of your strategy and are disciplined, then any day you can beat the market.

     

    Ashu Sehrawat - one of the youngest millionaires of India, connected through chat room with traders like Derrick, Eric, and Phil. He got curious about their short selling and sent questions via private message from time to time. He concluded that these successful short sell traders were short-selling the stocks that had no business going up in price.

     After learning short selling tactics for a short while, Ashu placed his first trade. From this, he learned that patience and selectiveness were key to maximizing profits as a short-biased trader. Till the age of 22 years, Ashu Sehrawat became a successful day trader and swing trader who continues to scale and evolve his strategy.

     

    Suresh Gunda, a CA dropout to a successful trader in Hyderabad, says the amount of Patience, Risk & Stress management, years of effort, and hard work has made him a profitable Trader and established his Company. He says that “Trading in the stock market, is a battle within you and success comes from love and passion for the market”. 

    However, when asked to comment on why 90% of people lose in trading? He says, “Don’t be greedy, and it is the technical knowledge that decides your profit or loss, and make sure you always have a stop loss in place and your emotional stop loss won’t work here.” 

    He started at the age of 19, and at the age of 25 years, emerged as the youngest CEO with dedication, knowledge & persistence.

     

    India’s most successful investor Rakesh Jhunjhunwala says that one of his biggest successes was a pure luck investment. How can one think of a more reasonable rational style of investing?

    One of the best ways to find out if an investor is just lucky or genuinely successful is how they have performed in different environments. If they can succeed not just during the big bull market but can do well during the bear market in the same way, then they can be considered good investors.

     

    Most Successful Stock Traders in India

     

    image

    There are many big names like Rakesh Jhunjhunwala, Vijay Kedia, etc. who we misjudge as traders, but they are investors. Here are some of the most successful stock traders, their stories, strategies, and learning pieces of advice.

     

    1. Tasneem Mithaiwala

     

    A single mother, an Art student who doesn’t have any financial knowledge and financial background, started her trading journey with a capital of Rs. 5 lakh and by the end of 8 months, the capital came down to Rs. 1.75 lakh. At that time her cousin gave her leads and she placed orders as per his suggestions. 

    Mental strength and strong discipline make her the most successful stock trader over strategy.

    Learning Advice:

    What we learn from her story is that we should never depend blindly on someone else. Secondly, gain some financial and trading knowledge before you start trading in the stock market.

     

    2. Kirubakaran Rajendran

     

    Chennai based-Kirubakaran Rajendran, a Trading Bot developer (automated trading system based on a set of instructions) has achieved success after years of hard work and learning from every possible mistake one can do and probably more.

    He started his career in Infosys with a monthly salary of Rs 1500. He had built a position of Rs. 1.5 lakh, a day before Infosys' results. The next day, results were announced and the value of his strangles had come down to Rs 20,000. 

    This is the turning point of his life when he decided to move from news-based trade to rule-based trade. The other mistake he made in trading was, he borrowed money for trading. A changing shift came to his career when he started reading about the stock market.

    Learning Advice:

    His advice for an aspiring trader is to have a clear set of simple rules, and do not trade if you cannot explain your rules or strategy in two lines. You should not go for strategies that give higher returns without looking at the drawdowns. Choose the ones where risk is lower.

    For example, if a strategy gives a return of 40 % annually with a drawdown of 15 %, it is certainly better than a strategy giving 90 % returns annually and having drawdowns of 40-45 %. 

     

     3. Abhinand Basavaraj

     

    Abhinand, 29, hails from Mysore and is a hermit in the trading world. He suffered huge losses in the Satyam scam. After this, he turned stock to options for trading and later started about technical analysis and understand how trading works and financial knowledge. Presently, he trades in the Nifty options especially on the bull side, and uses many technical strategies like trend line or MACD, etc.

    Self-confidence, persistence, and family support all played an important part in his success. 

    Learning Advice:

    First, learn at least the fundamentals of the stock market then create your strategy. Secondly, never take any loan for trading plus always share your techniques with someone who knows you better.

     

    4. Naresh Nambisan

     

    Obsessed with charts, Naresh believes in the old school of trading where he prefers putting in manual efforts. During 2008, he also lost Rs.40000 like others and after failing once he didn't stop, rather initiated gathering more information about technical analysis from Google and YouTube. Later, he gained good knowledge in price chart strategy, and to date he uses the same strategy for trading. 

    Learning advice:

    Never depends on others and create your strategy. Keep your trading as simple as possible. Do not complicate the charts with too many indicators. Test the indicators yourself. 

     

    5. Madan Kumar

     

    A Full-time trader, Madan Kumar has rags to riches tale to tell. He credits all his success to his mother and wife for their support to make him what he is today. He gives credit to his mother, for motivating him to complete his education despite being very poor. And to his wife, for her financial support, after he returned to India from the US.

    Learning Advice:

    To have reading habits, as it is better to be prepared before you start your luck in trading.

     

    Closing Thoughts

    You believe it or not, trading is a game not just on the stock market but within individuals’ mind. You win or lose with the way your mind reacts to the price movement. So if you want to turn trends in your favors, you must affirm your brain the right way with the right hymns.

    Individuals with very limited knowledge and experience in trading are either afraid of losing a large amount of their portfolio value or are beguiled by hot tips that promise large rewards but seldom pay off. The pendulum of investment sentiment is said to swing between fear and greed.

    Professional traders normally prefer to ride the momentum in the market and don’t bother about valuations. They focus working on which way the market wind is blowing, which is what drives them. A bit of key learning advice here is to have discipline and knowledge before trying your hands on stock trading and investment.

    101 Inspirational Trading Quotes And What They Mean | Trading Education

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  • Algo Trading – Understanding the Concept with Examples

    Deepak Sharma 17 Mar 2021

    What is Algo Trading?

    Algorithmic trading is a method that uses computer codes to develop a program that follows a defined set of instructions to place a trade. These sets of instructions are called algorithms which are based on timing, price, quantity, or any mathematical model. Algorithm trading is also known by other names like automated trading, black-box trading, or algo-trading.

    Apart from more profit opportunities for the trader, algo-trading also renders markets more liquid and makes trading more systematized by eliminating the impact of human emotions on trading activities. This can save you valuable time and you can execute the trade instantly instead of scanning the markets all time.

     

     

    A study in 2019 reveals that around 92% of trading in the Forex market was made by trading algorithms.

    It is widely used by investment banks, mutual funds, hedge funds, and pension funds that may need to circulate execution of a larger order or perform trades too quickly for human traders to react to. 

    Note: For becoming a successful Algo trader, one should have a proper understanding of three domains namely – 

    • Statistics & Econometrics

    • Financial Computing and 

    • Quantitative Trading Strategies

     

    Difference between Automated Trading and Algorithmic Trading

     

    Though algo trading and automated trading systems are often used synonymously, there is a small difference between the two.

    Automated trading usually refers to the automation of manual trading through stops and limits, which will automatically close out your positions when they reach a certain level, regardless of whether you are at your trading platform or not.

    Algorithmic trading refers to the process in which a trader will develop and refine their codes, to scan the markets and enter/exit trades based on the on-going market conditions.

     

    5 strategies to buy and sell stocks using algo trading - The Economic Times

     

    Why use algorithmic trading?

     

    Algo-trading provides the following benefits:

    • Trades are executed at the best possible prices.

    • Trade order execution is instant and accurate 

    • Simultaneous automated checks on multiple market conditions.

    • Using available historical and real-time data algo-trading can be backtested for viability.

    • fewer chances of human errors based on emotional and psychological factors.

    • Reduced transaction costs.

    • Minimize market impact  

     

    How Algo Trading Minimizes Market Impact

    Algorithmic Trading Market

     

    A massive trade can potentially shift the market price, also known as a distortionary trade as it distorts the usual market price. To escape falling in such a situation, traders generally open large positions that may move the market in steps.

    For example, an investor wanting to buy one million shares in ‘ABC’ company might buy the shares in batches of 1,000 shares. The investor might buy 1,000 shares every ten minutes for an hour and then evaluate the impact of the trade on the market price of the company stocks. If the price remains constant, the investor will go on with his purchase. Such a strategy allows the investor to buy company shares without increasing the price. 

    However, the strategy comes with two main drawbacks:

    • If the investor needs to pay a fixed fee for every transaction he makes, the strategy might incur significant transaction costs.

    • The strategy takes a good amount of time to complete. In this case, if the investor buys 1,000 shares every ten minutes, it would take him just over 166 hours (more than six days) to complete the trade.

    Algorithm trading can solve the problem, by buying shares and instantly verifying if the purchase has had any impact on the market price. It can significantly reduce both the number of transactions and the time to complete the trade.

     The Growth And Future Of Algorithmic Trading

     

    How Algo Trading helps different investors

    Algo-trading is used by different types of investors for many forms of trading and investment activities including:

    1. Short-term traders and sell-side participants which include market makers, arbitrageurs, and speculators benefit from fast and automated trade execution. Also, algo-trading helps in creating sufficient liquidity for sellers in the market.

    2. Mid- to long-term investors or buy-side firms includes mutual funds, pension funds, insurance companies—use algo-trading to purchase stocks in large quantities when they do not want to influence stock prices with discrete, large-volume investments.

    3. Systematic traders include trend followers, hedge funds, or pairs traders find it much more efficient to program their trading rules and let the program trade automatically.

     

    WHAT ARE THE ALGORITHMIC TRADING STRATEGIES?

    HR Strategies For Dummies: 4 Elements That Better Be Part of It – TLNT

    • Trend-following Strategies 

            Trades are executed based on the desirable trends, which are easy and straightforward to implement through algorithms without touching predictive analysis. Using 50-day and 200-day moving averages are common trend-following strategies.

    • Arbitrage Opportunities

    Buying a dual-listed stock at a lower price in one market and at the same time, selling it at a higher price in another market bids the price differential as risk-free profit or arbitrage. Implementing an algorithm to identify such price differentials, efficiently allows profitable opportunities.

    The same arbitrage opportunity can be replicated for stocks versus futures instruments as price differentials do exist very often. 

    • Mathematical Model-based Strategies

    Valid mathematical models, such as the delta-neutral trading strategy, allow trading on a combination of options and the underlying security.

    • Index Fund Rebalancing Strategy

    Index funds have defined intervals of rebalancing to bring their holdings equivalent to their respective benchmark indices. This creates profitable opportunities for algo traders, who make capital on expected trades that offer 20 to 80 basis points profits depending on the number of stocks in the index fund, before rebalancing. 

    • Volume-weighted Average Price (VWAP) Strategy

    The target here is to execute the order close to the volume-weighted average price (VWAP). This strategy breaks up a large order and releases dynamically identified smaller chunks of the order to the market using stock-specific historical volume profiles.

    • Trading Range (Mean Reversion) Strategy

    The trading range or mean reversion strategy is based on the concept that the high and low price of assets is a temporary event that reverts to their mean value/average value periodically. Identifying and defining a price range as well as implementing an algorithm based on it allows trades to be placed automatically when the price of an asset breaks in and out of its defined range.

    • Time Weighted Average Price (TWAP) Strategy

    Here, the purpose is to execute the order close to the average price between the start and end times thereby minimizing market impact. This strategy breaks up a large order and releases dynamically identified smaller chunks of the order to the market using evenly divided time slots between a start and end time. 

    • Implementation Shortfall Strategies 

    This strategy targets minimizing the execution cost of an order by trading off the real-time market, thereby saving on the cost of the order and benefiting from the opportunity cost of delayed execution. 

    • Percentage of Volume (POV) Strategy

    Until the trade order is filled, this algorithm continues sending partial orders according to the defined participation ratio and according to the volume traded in the markets.

     

    • Price Action Strategy versus Technical Analysis Strategy

    There are some more algorithmic trading strategies broadly divided as Price Action Strategy, Technical Analysis Strategy, and a combination of both. However, most traders choose the price action strategy or the technical analysis strategy, only a few of the traders use a combination of them.

     

    • A Price Action Strategy applies price data from previous open/close or high/low levels of a candlestick chart and the algorithm would trigger a buy or sell order if similar levels were achieved in the future 

     

    For example, You can create an algorithm to enter buy or sell orders if the price rises above point A, or if the price falls below point B. This is a commonly used algorithm by scalpers who want to make a series of small and instant profits throughout the day on highly volatile markets, a process known as high-frequency trading (HFT).

     

    • A Technical Analysis Algo Trading Strategy is concerned with technical indicators such as Bollinger bands, stochastic oscillators, MACD, the relative strength index, and many more. 

     

    For example,  You can create algorithms based on Bollinger bands to open or close trades in highly volatile markets. With this strategy, you can create an algorithm to act on the parameters of these indicators, such as closing a position when the market is spiking high fluctuation.


     

    • A combination algorithmic trading strategy uses both price action, and technical analysis, to confirm suspicions about price action by analyzing charts with indicators. You can configure your combination strategy as per the market trend, the size of the trade, the time frame, and the different indicators that the algorithm is designed to use.  ​​​​​​​

     

    Technical Requirements for Algorithmic Trading

    The following are technical requirement required for trading an algorithm:

    • First and foremost, having full-fledged computer programming knowledge or hired programmers, or pre-made trading software.

    • The ability and infrastructure to backtest the system once it is built before it goes live on real markets.

    • Access to market data feeds that will be monitored by the algorithm for opportunities to place orders.

    • Historical data should be available for backtesting, based on the complexity of rules implemented in the algorithm.

    • Network connectivity and access to trading platforms to place orders.

     

    Bottom Line

    Now that you have gained a basic understanding of algorithm trading, and its strategies, and how it is used by algo traders, you are all set to go ahead and start investing wisely. 

    Learn in detail about Algorithm Trading, in our Artificial Intelligence Automated Algorithm Trading Course provided by NIWS, the best all-in-one training platform of the Stock Market. At NIWS, we have our expert faculty from mathematics and computer science backgrounds who share their experiences and strategy ideas/tactics with you during the course.


     

    Get Placed, Learn More and Implement On the Job

    Become A Pro Algo Trader | Start Your Own Algo Trading Desk Today

    Learning in the algorithmic world never stops!!

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  • ketan parekh scam 2001

    Deepak Sharma 13 Mar 2021

    All you should know about Ketan Parekh - The Infamous Stock Market Fraud!

     

    Banned from trading for 15 years till 2017, Ketan Parekh continued working from the shadows. Let’s know the man who's heard more than he's seen.

    On one hand, we have big names of successful traders in the stock market like Warren Buffet, Carl Icahn, George Soros, etc. who became millionaires by investing in the stock markets. And on the other hand, we have scamsters like Harshad Mehta and Ketan Parekh, who not only ruled the stock market but also were found guilty of economic crimes.

     

    The gigantic Ketan Parekh scam, unearthed in March 2001, swallowed the top institutions including the Unit Trust of India (UTI), the Bank of India (BoI), the Madhavpura Mercantile Cooperative Bank (MMCB). This was the second most important scam after the Harshad Mehta scam, which shocked the Bombay Stock Exchange.

    The SFIO (Serious Fraud Investigation Office) has estimated that the extent of the fraud could touch Rs. 30,000-40,000 crores. The investigations indicate that he managed the scam by synchronized trading & circular trading, effecting cross deals, generating high volumes and prices by acting in concert with other brokerage firms across the stock exchanges.

    Charges against Parekh to be framed include manipulation of shares with the intent of benefiting himself and others, falsifying accounts, cheating banks, giving loans without following norms, paying huge commissions to some company directors, and mishandling public money.

     

    Who is Ketan Parekh?

     

    Ketan Parekh, a former stockbroker from Mumbai, acknowledged as 'Bombay Bull’ and the ‘Pied Piper of Dalal Street’.

     

                                                                             

    Ketan Parekh was a CA (chartered accountant) by profession. For him, the stock market was a family business, which was passed to him by his father. All this conditioned him to get familiarized with a trade circle of his own and this way gradually, he became the big bull of the stock market. Harshad Mehta himself mentored him and walked him through the nooks and corners of the stock exchange.

     

    He was a soft-spoken, unpretentious guy that you would mistake for being an ordinary person on the street. However, in reality, his associates describe him as being shrewd and ruthless.

     

    Ketan Parekh was like the God for many investors as he created a deception that whatever he wished the market seemed to grant him and whatever he touched turned into Gold. His portfolio comprised of 10 preferred stocks, which can be best described as the K-10 stocks and the market always forecasted these stocks as bullish. 

    On top of all this, he also had good connections with international celebrities like Kerry Packer and others. They together started a venture capital firm, KPV venture with $250 million and funded some more start-ups in India. 

     

                                                                               Ketan Parekh – Biography of the Man Behind the Ketan Parekh Scam – WikiBio

     

    How Ketan Parekh Scam was executed?

     

    Ketan Parekh always believed and invested in the ICE sector Information, Communication, and Entertainment and that was the time during 1999 and 2000 when the dotcom boom had just started. During this time, he ruled the stock market.

     

    He traded in the Kolkata stock exchange which proved to be beneficial for him due to the lack of regulations. Many investment firms, banks, overseas corporations, businessmen from listed companies invested their money to be managed by him.

     

    The Ketan Parekh scam case mainly involved two key strategies, namely circular trading and pump and dump scheme.

     

    Pump and dump Scheme

     

    Here, he would purchase 20-30% of the share of a company to cause a price rise. The price increase will subsequently tempt other investors to invest. Once the prices shoot up, he would simply dump the shares and exit by liquidating his holdings. 

     

     

    Circular trading 

     

    In this strategy, KP made a few amateur traders buy and sell frequently certain shares throughout the day on his call. As a result, the "traded volumes" went up drastically. The investors who based their decisions on the volume traded, considered such stocks to be good for investment. 

    Once the price rises, KP made a profit out of it and also paid the traders a small remuneration amount. This type of trading is popularly known as the Badla system. 

    However, trading at such magnitude, demands a huge amount of money.

     

    Circular Trading in Stock Market - Sana Securities Blog

     

    Playing with a pack of 10 stocks

    Ketan Parekh – Biography of the Man Behind the Ketan Parekh Scam – WikiBio

    Factors That Helped Ketan Parekh

     

    A small Ahmedabad-based bank, Madhavapura Mercantile Cooperative Bank (MMCB) was Ketan’s main partner in the scam. KP and his associate started knocking the MMCB for funds in early 2000. 

    In December 2000, when KP faced liquidity problem in the settlement he used MMCB in two different ways-

    • First was the pay order route, where KP issued cheques drawn on BoI to MMCB, again which MMCB issued pay orders, the pay order discounted at BoI. 

     

    • The second route was borrowing from the MMCB branch at Mandvi (Mumbai) where several companies owned by Ketan and his associates had accounts. Ketan used 16 accounts, either directly or through other broker firms, to collect funds. 

    Funding Mechanism  

    • Simple borrowing mechanism 

    • Badla System-Primitive carry forward system fabricated on the Bombay Stock Exchange

    • Badla trading involved buying stocks with borrowed money. The stock exchange acts as a mediator, and the interest rate is determined on the demand for the underlying stock maturity (less than 70 days).

     

    How Whatever Ketan Parekh Touched Turned into Gold?

     

    The ICE sector was booming and KP invested largely in these sectors which backed him to gain the trust of the investors. The funding method of buying shares and getting pay orders and later getting them guaranteed when the prices rise, also helped him create a Bull Run in the stock market.

    Many investors believed that the negligent reactions and regulations of SEBI who could have noticed the abnormal price movements in the market helped the scam to accumulate more losses to them. His connections with big celebrities, political and religious leaders also aided him to get the majority of the fund from large corporate and businessmen.

     

     

    How was it detected? 

     

    Sucheta Dalal played a crucial role in exposing the Ketan Parekh scam as well, just like the Harshad Mehta scam.

    Due to MMCB’s actions, their depositors underwent huge losses. After being declared defaulter, they had not refunded the money of a majority of depositors. Ketan Parekh made a network of 20-25 companies for this manipulation of stocks.

    When Dot-com-Bubble started bursting, that time the entire world was noticing a slowdown in Technology stocks. In March 2001, some brokers and traders started selling K-10 stocks that were overvalued because of the shooting prices.

    Parekh failed to challenge the market for long. When the prices of the stocks started coming down, he faced difficulties in raising funds from the banks. Then Parekh's Pay order matter came to light, and the scam was exposed.

    Highlights:

    • The Stock market crash of 2000 

    • KP started borrowing heavily 

    • Attempted to set up the price rise and later sell

    • But failed to do so

    IT department detected errors in sources of funds of KP 

    • Routine market surveillance of 5 stocks

     

    Actions and Regulations - by SEBI

     

    RBI and SEBI were quick in detecting that there was something abnormal about the profits KP made and the loan he had received. Soon, he was arrested in March 2000 and was held in custody for more than 53 days. 

    He was prohibited from trading in the stock market till 2017 and was also sentenced to 1 year in jail. It became one of the biggest stock market fraud in stock market history.

    SEBI banned the Badla system and circular trading. SEBI also started inspecting all the accounts related to the stock exchange annually. They permitted collateralized loans only via BSE and NSE. 

    Though he was banned by SEBI, it was rumored that Ketan Parekh operated through puppets who executed his orders in the stock exchange. In 2008 many companies were questioned by SEBI and were barred from helping him.

     

    Another Scam by Ketan Parekh

    Do you know, Ketan Parekh’s name was also involved in the 1992 Cantina Mutual Fund, and was sentenced to a year of jail. During this scam, Parekh had sent around 2000-3000 crore rupees overseas with the help of the Overseas Corporate body. 

    Not only in Swiss Banks, but he also used to send money to different banks all around the world. CBI had seized his Swiss Banks accounts also. He still has got a lot of cases against him in court.

     

    Closing Thoughts

    This is how the Biggest Stock Market frauds in India came to light and rocked the entire nation. People choose short-cuts in life to gain fame and money easily. If you dream to become a successful Investor or Stock Market broker then we suggest you pick the right path. Remember, there is no ladder to success; you'll have to follow each step with Hard-work and dedication.

     

    John Andreas Widtsoe Quote: “Fraud and deceit are anxious for your money.  Be informed and prudent.” (7 wallpapers) - Quotefancy

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  • WHY ARE STOCK MARKET TRAINING COURSES IMPORTANT BEFORE YOU START INVESTING?

    Deepak Sharma 3 Mar 2021

    WHY ARE STOCK MARKET TRAINING COURSES IMPORTANT BEFORE YOU START INVESTING?

     

    “An Educated Trader is Never Greedy or Fearful of the Market…

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    Image result for stock trading institute training classroom usa

     

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    Image result for stock market classrooms

    Our Team of Experts

    Get your answers from our Certified & experienced Market experts to every single question you have related to the learning you do in these courses!

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    Head Faculty/Consultant 

    Masters in Economics with Certificate in Performance Measurement and Risk Analytics and Structured Derivatives Product. Having more than 15 years of experience in International and Domestic BFSI segment with experience in Dealing, Investment, Training, Wealth Management, Performance Measurement and Risk Analytics of Sovereign and Pension funds. 

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    Faculty/Trainer NISM/NCFM - Certification and Investment Advisory

    LLB Graduate with Certificate in Algorithm Trading, Import Export Management and Diploma in Financial Market Management having more than 5 years of experience in Algorithm Dealing/Investment Advisory, Wealth Management and Training. 

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    Reviews

    Let’s look at some of the reviews posted by our students on social media platforms – 

    Now, don’t wait any further, just go ahead and enrol yourself with NIWS and let the magic of the stock market unfold for you, yes you! 

    Check NIWS website for more details.

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