case study on Stock & Share market

Hey,

I am here again, with a new topic, That is "Stock market & Share market".

For this topic I got suggestion from my two friends, P. Lohkare and P. Kolhapure. 

This topic is though interesting one, but bit tricky as it depends on various factors which are not in anyone's control.

Actually the topic suggestion was for "Stock market"  but as we don't get much into the stocks and limit ourselves to shares only. I will define more about "Shares" than "Stock".

First of all,

Let's see what is the difference between, "Stock" & "Shares".

Stock: Stock is the Collection of the shares of fully paid member of a company. As I didn't ever tried to get into "Stock" I don't know more about it.

On the other hand, if we talk about "Shares", then I can share my knowledge about it with you.

Shares: A share is the minimum amount of a company's capital amout is divided into. Usually a company calculate it's capital amout based on the share price as well as the volume of shares.

Share price: Share price is the price of single share.

Volume: Volume is known as the quantity of shares a company is having in the market.

Capital amount: Capital amout = share price * volume.

So this are some terms related to share market and stock market. As stock is a bunch of shares, we will focus more on shares onwards.

Every person who try to get into share market, must know many things about it. The "Selling or buying" of a share is commonly termed as "Trading". 

There are usually two types of trading in Indian share market:

1) Intraday trading,

2) Delivery trading.

1) Intraday trading:

In Intraday trading, the share or number of shares are to be bought and sold on the same day. This kind of trading needs a market analysis and interpretation. In Intraday trading, some web app or android apps for "Share market trading" offers a logic board for you to put on the share on a buy price you think it can hit and a sell price which you think may hit the highmost or sometimes if it decreases from your buy amount, you can use stop loss facility too.

Though it have a good daily profit margins, but it's like a high risk gamble, as if you didn't analysed the market correctly, you may get loss many times than profits.

Some persons are used to this , but still prefer to try it on a low risk factor.

2) Delivery trading: 

In delivery trading, you can buy or sell one or more shares during market open hours after a day or month or year or 10 years.

The risk on this kind of trading is low, but profits can be less or more, depending on the company of which you bought the shares.

For an example, I have 1000 shares of ABC company in my holdings, which was bought at value of ₹10. And after 4 months it hits ₹18, So I sold all of them.

Now let's make the calculations:

Amount I invested: 1000 (shares)*₹10 (buy share price) = 10000

Amount I received: 1000 (shares)*₹18 (sell share price) = 18000

In above case I got 80% return in 4 months.

Now consider second case,

I bought 10 shares of XYZ at ₹1000 per shares on first Monday of a month.

In next week, I sold this at ₹1150.

Amount invested=10000

Amount received=11500

Profit= 1500

Profit %=15%.

Same week I bought 4 shares of LMN at ₹2500

On next week, sold same on 2600.

Amount invested=10000

Amount received=10400

Profit %=4%

In above two cases,

Which one got me good returns?

In case of money: The first case

In case of percentage: The first case 

But the way it looks it is not, though we got good returns in first case, but we still haven't utilised our remaining weeks of 4 months.

If I continue investing same for 4 months in second case, I may have an avg weekly profit percentage of 10%.

4months*5 weeks*10%=200%

So what matters the most in trading is the profit % within a timespan than only profit % or returns received.

From above example of this two cases, many of you must have noticed that, there are different ways we can trade the money.

From above cases, The first one is defensive player and other one is an aggressive player.

1) Defensive player: 

A defensive player usually focus on the companies which are in their loss phase and having a guarantee that they won't have more loss, then this player invest their money here and keep relaxed till it hits either maximum high the share price was gone into past or it gives a mental satisfaction to this player to stop thinking more about profit.

2) Aggressive player:

An aggressive player always pick the companies which are active by value in the market, and when this player notice a drop into the share price he/she buy the share and wait for 2-3days or a week, and see if it goes above 50-100₹ per share, then sell the share. Then again but new shares and do the same.

But in share market, you cannot predict easily, if you can be aggressive or defensive and sometimes, the companies with continuous ups and downs may go low or go high and stop there for much time .

So best way to invest in share market is to choose the Aggressive shares and Defensive share, and don't decide it as aggressive or defensive till it shows the returns on investment.

That's all for today,

If having more questions on it, you can comment.

If I have missed something please post it in comment, as it might be more useful for others too.

Thanks 🤗

--ShubhAM More