Penny Stocks in India

One of the most consistent mistakes a significant number of inexperienced investors make is to be drawn to a type of common stock known as penny stocks. At first glance, the reasons for this (ultimately dangerous) appeal are legion but almost always come down to the fact that penny stocks appear to fluctuate tremendously in price, which appears to lead to an opportunity to generate a very high return quickly.

Unfortunately, as with all investments, appearances are quite deceiving. It often turns out to be precisely the opposite of a high return as penny stocks can wipe out your savings in the blink of an eye.

There is no theoretical definition for penny stocks in India. However, stocks that trade at single-digit prices with low market capitalisations are bracketed in this club. Some typical characteristics of these stocks tend to be low promoter holding, huge debt, accumulated losses, and poor dividend track record. However, stocks like Vodafone Idea and Suzlon Energy, which now trade at prices of less than Rs 10 with huge equity base and market capitalisation of nearly Rs 26,000 crore and Rs 3,232 crore, respectively, do not fall in this basket.

They are a form of market traded security that attracts minimal pricing. These securities are mostly offered by companies with lower market capitalisation rates. Therefore, these are also called nano-cap stocks, micro-cap stocks, and small-cap stocks, depending on the company’s market capitalisation.

A company’s market capitalisation rate is determined based on the product of the current price of its shares or stocks and the number of outstanding shares i.e. NAV of shares x number of outstanding stocks.

Based on this factor, companies are indexed in recognised stock exchanges such as the National Stock Exchange and Bombay Stock Exchange. Penny stock lists are often found in the lower sections of such stock exchanges or lesser-known stock exchanges.

Penny stocks in India are released by companies with market capitalisation lower than Rs. 5,000 Crore.

These are the small capital company stocks that have a very low price attached to them. This makes investors believe that they are buying some real cheap equities. Many investors, especially the less experienced ones, find the penny stocks attractive because of their low price. Several novice stock market investors tend to prefer buying 10,000 shares of a penny stock (priced at 1 rupee) instead of a stable company stock that is priced at INR 1000 or more.  

The thought process for them goes like this: With an investment amount of INR 10,000, one can purchase as many as 10,000 shares of the 1 rupee penny stock. On the other hand, one can purchase only 10 shares of the stable company stock with a market price of INR 1000. Such beginners to the stock markets fail to understand the difference between price and value. Just because you can buy more shares of a company doesn’t mean that you will earn more profits.

Given the scale at which the companies offering such stocks operate, they are prone to huge risks. These stocks heavily rely on the market conditions for growth in their value.

In general, a rise in stock prices tends to be backed by fundamental factors like good management, better financial performance, and business expansion. That's not the case in this space. Investors should be careful not to get trapped into buying low-valued shares since that can degrade the quality of investments. Market experts advise conservative investors to avoid penny stocks. Sometimes such stocks are driven by market operators. When they fall, these stocks at times tend to hit lower price circuits continuously, making it impossible for small investors to exit their positions.

From large ask/bid spreads (the difference in selling price and buying price) to illiquidity that can make it difficult to enter or exit a position, penny stocks are fraught with dangers that even the most experienced investors avoid. You must understand some of the biggest risks, should you be looking to venture into penny stock investing. 

At the very least you should work to understand that buying these securities has more in common with playing slot machines in Las Vegas than it does a disciplined investment program. On average, you are more likely to lose significant amounts of money than you are to make any.

Apart from the basic perils which come with any market-linked securities, there are other forms of risks associated with penny stocks. These are –

Limited information: 

Given the fact that companies issuing penny stocks are start-ups, there exists a dearth of information on their financial soundness, past performance, growth prospects, etc. Individuals might end up investing in them half-wittingly. Therefore, conduct thorough research into the list of penny stocks in India before investing.

Scams: 

Penny stock scams are commonplace in international financial history. One such popular method is “Pump and Dump”. Companies and scammers purchase a considerable amount of penny stocks resulting in value inflation which attracts other investors to follow the hype.

High Risk: 

Higher the Risk, Higher the Reward. This is a common notion passed around in the stock market. In the case of the risky penny stocks, the probability of getting the rewards will be too less. Maybe 1 out of 10 penny stocks could give you rewards.

There have been cases where people have waited for more price rise in penny stocks, and then got stuck because the price started falling continuously after reaching a certain high level. This is because it is not possible for any investor to judge the appropriate levels of exit from a penny stock, even when it turns profitable. Plus, there is no guarantee that a penny stock would remain profitable in the long run. There have been numerous examples of penny stocks that were profitable for investors at one point in time, but are now lurking around price levels below their purchase price. Before you even know it, many of the penny stock companies may turn bankrupt.

Manipulative Nature: 

Because of the low market capitalization of penny stock companies, it is extremely easy for any trader to manipulate the price of penny stocks. Someone can simply buy a huge quantity of these shares with an investment amount of 1-2 crores and cause the stock price to rise. This tends to create an illusion of heavy demand and amateur investors start pumping money in without knowing the facts. This allows the initial manipulator to exit the stock with heavy profits, leaving other investors stuck with the penny stock. Some of these instances have even been reported by SEBI.

These shares are less likely to attract trades on the exchanges, hence can easily become a target of manipulators. Even a small buying in these scrips can boost the market price of these shares to unimaginable highs for no ostensible reason. It is very easy to effect a change in these types of shares as they trade at very cheap prices. 

For example, a share with a market price of Re 1 can go to Rs 3 in no time, if even a small investment is done. A rise of 200 per cent would attract other investors to put their money to make a quick buck. However, these are the traps to manipulate and wash out the money invested by others. As a manipulator would sell at a hovering high price leaving all others at huge losses.

Low Liquidity: 

In the case of penny stocks, the number of shares available may appear to be quite high. In reality, the quantity is limited. You can also expect considerable price movements in terms of percentage. For example, a stock priced at 50 paise can easily by 5-10 paise in a day making it a 10-20% rally. Due to possibilities of such volatile price movement in any kind of stocks, exchanges generally limit how much a stock can rise or fall in a single day. The same holds true for penny stocks, on which there is a 5-10% limit beyond which price cannot rise or fall in a day for a particular stock.

You are likely to face difficulty in buying such penny stocks. Due to non-availability of shares in the market, there may be no sellers at times when there is a huge demand. A similar difficulty could arise when you try to sell the stock. There may be no buyers or the share price has reached its lower limit for the day. In penny stocks that deliver bad results or have some bad news floating around, it is normal for investors to wait for several days or even weeks before they could sell off the stock. But by then the price falls so much that it results in a huge loss.

These are the small companies which attract zero or low trade volumes. Even if an investor sets a bid for sell or buy, it takes time to settle due to low volumes. This is why penny stocks are illiquid, as they would not sell when required.

Lack of Consistency in Performance: 

Many investors go for penny stock companies, hoping that they would turnaround their business sooner or later, and become blue-chip of tomorrow. However, the turnaround for such companies is very difficult. Good performance in 2-3 quarterly results doesn’t make a turnaround case. For a real turnaround scenario, a small-cap company has to have a series of good annual results, after which the investors can start benefiting from a long-term perspective. Such turnarounds are very rare. Most of the times, such companies fade away after giving a couple of good quarterly results, leaving investors with nothing but hope and a junk stock.

However, once enough buyers have invested in such stocks, such companies and scammers dump their shares. This results in an immediate lowering of value followed by losses on the scrupulous investors’ end as they try to sell it.

When you are browsing through the list of penny stocks in India, ensure to conduct thorough research on the respective companies. Gather information on their financial soundness, stability, growth prospects and any track record on their operations.

Companies with integrity and potential will offer the customers enough knowledge of the mentioned factors to make informed decisions.

What are the Alternative Options to Penny Stocks in India?

You can make use of the Best Bank Nifty Option tips or Day trading tips given by Top SEBI Registered investment advisory services and start with authenticated information.

Individuals can also decide to invest in other investment options that are better suited to their objectives and risk appetite. Mutual Funds are one such option that is increasingly gaining popularity in the market. MFs are investment pools that involve multiple individuals investing in a single fund which is then used to purchase securities.

A few Mutual Funds investment options are listed below –

Large and mid-cap equity funds: This kind of MFs is employed to purchase equity shares and stocks from large-cap and mid-cap enterprises. These funds have moderate return capacity and entail lower risk compared to penny stocks.

Debt Funds: These funds are used to purchase fixed income securities and come with a lower risk factor. However, the return potential on such funds is limited to 12%.

Hybrid Funds: These funds are employed to purchase a mixture of market-linked and fixed income securities. Depending on the constitution, the risk and return factor varies. Hybrid Funds are a great option to diversify your investment portfolio and balance the reward and peril elements of it.

These funds comprise of a massive volume of securities available in the market including large-cap stocks, mid-cap stocks, small-cap stocks, treasury bills, government bonds, debentures, etc. apart from penny stocks.

Remember to conduct diligence before selecting the right investment option according to your financial objectives. Research before the investment is very important. An investor should analyse all the parameters like fundamentals, technical, financial numbers, news, management details, etc. However, these are the micro capital limited companies with small businesses. The information available for investors can be manipulated or hidden. Therefore investing in these shares can be a risky option as there is no scope of research. 

The reality of the situation is that there is no intelligent reason an investor needs to trade penny stocks or hold them in any type of portfolio. The risks are simply too great to offset any perceived benefits. While it may seem boring, a diversified, low-cost index fund is a superior choice for many new investors.

For example, if the stock of Hindustan Unilever is quoting at Rs.1200, and if you are expecting a 5% increase in price, then you need to buy a HUVR call option with a strike price of 1220 or 1240. It is only in these strikes that you will get the best combination of intrinsic value and time value. On the contrary, if you choose to buy a 1340 call option just because the premium is negligible, then you are unlikely to make any money. Hence selection of the strike price is critical.

Picking the strike price is one of two key decisions (the other being time to expiration) an investor or trader must make when selecting a specific option. The strike price has an enormous bearing on how your option trade will play out.

The second choice is what should be the maximum premium you should be willing to pay for a particular strike. While these are important choices, there is another important consideration that traders focus on. It tells how the concentration of strikes is changing and what it means for the market.

Before diving into specifics, it’s important to note that all option strikes are made up of the extrinsic value, intrinsic value, or a mixture of both.

Extrinsic value is time & volatility value. This is affected by time until expiration and implied volatility. All options have some level of extrinsic value as long as there is time left until the expiration of the option. 

Intrinsic value is a real value at expiration. If the strike allows the option owner to buy shares at a discount (calls), or sell shares at a higher price than the market (puts), the option will have intrinsic value and be considered to be in the money. Calls that are below the stock price have intrinsic value. Puts that are above the stock price have intrinsic value.

Out of the Money

Out of the money options are made up of purely extrinsic value. This means at expiration; they have no real worth. For calls, this will be strikes that are above the stock price. For puts, this will be strikes that are below the stock price. Why would someone exercise an option to buy shares of stock above the market price? Why would someone exercise an option to sell shares of stock below the market price? They wouldn’t! Therefore, these options are out of the money and will be worthless at expiration.

As option sellers, this is fantastic. We would have sold an option prior to expiration for a certain value, and it is now expiring worthless. Remember that cash we collected upon trade entry? That can now be considered profit. The opposite is true for someone who bought this option.

In the Money 

In the money options are guaranteed to contain intrinsic value, but they usually have a degree of extrinsic value as well. For calls, this will be strikes that are below the stock price. For puts, this will be strikes that are above the stock price. ITM options that have the lowest extrinsic value can be found extremely deep ITM where the option trades more like long or short stock, or in options that are just about to expire.

As option sellers, this is less than ideal. We want our options to expire OTM and worthless. ITM options will be worth at least their intrinsic value, which means if we want to close the position we may have to buy back our position for a higher price than what we sold it for, which will result in a loss. The opposite is true for someone who bought this option.

A strike price in nifty option has much to do with the number of days left for expiry. If the expiry is near then you select in the money nifty option, if expiry is far away then you may choose out of money nifty option. 

Assume that you have identified the stock on which you want to make an options trade. Your next step is to choose an options strategy, such as buying a call or writing a put. Then, the two most important considerations in determining the strike price are your risk tolerance and your desired risk-reward payoff.

Let’s say you are considering buying a call option. Your risk tolerance should determine whether you chose an in-the-money (ITM) call option, an at-the-money (ATM) call, or an out-of-the-money (OTM) call. An ITM option has a higher sensitivity—also known as the option delta—to the price of the underlying stock. If the stock price increases by a given amount, the ITM call would gain more than an ATM or OTM call. But if the stock price declines, the higher delta of the ITM option also means it would decrease more than an ATM or OTM call if the price of the underlying stock falls.

However, an ITM call has a higher initial value, so it is less risky. OTM calls have the most risk, especially when they are near the expiration date. If OTM calls are held through the expiration date, they expire worthless.

Your desired risk-reward payoff simply means the amount of capital you want to risk on the trade and your projected profit target. An ITM call may be less risky than an OTM call, but it also costs more. If you only want to stake a small amount of capital on your call trade idea, the OTM call may be the best, pardon the pun, option.

An OTM call can have a much larger gain in percentage terms than an ITM call if the stock surges past the strike price, but it has a significantly smaller chance of success than an ITM call. That means although you plunk down a smaller amount of capital to buy an OTM call, the odds you might lose the full amount of your investment are higher than with an ITM call.

With these considerations in mind, a relatively conservative investor might opt for an ITM or ATM call. On the other hand, a trader with a high tolerance for risk may prefer an OTM call. The examples in the following section illustrate some of these concepts.

The strike price is a vital component of making a profitable options play. There are many things to consider as you calculate this price level.

Implied Volatility

Implied volatility is the level of volatility embedded in the option price. The bigger the stock gyrations, the higher the level of implied volatility. Most stocks have different levels of implied volatility for different strike prices. That can be seen in Tables 1 and 3. Experienced options traders use this volatility skew as a key input in their option trading decisions. New options investors should consider adhering to some basic principles. They should refrain from writing covered ITM or ATM calls on stocks with moderately high implied volatility and strong upward momentum. Unfortunately, the odds of such stocks being called away may be quite high. New options traders should also stay away from buying OTM puts or calls on stocks with very low implied volatility.

Have a Backup Plan

Options trading necessitates a much more hands-on approach than typical buy-and-hold investing. Have a backup plan ready for your option trades in case there is a sudden swing in sentiment for a specific stock or in the broad market. Time decay can rapidly erode the value of your long option positions. Consider cutting your losses and conserving investment capital if things are not going your way.

Evaluate Different Payoff Scenarios

You should have a game plan for different scenarios if you intend to trade options actively. For example, if you regularly write covered calls, what are the likely payoffs if the stocks are called away, versus not called? Suppose that you are very bullish on a stock. Would it be more profitable to buy short-dated options at a lower strike price, or longer-dated options at a higher strike price?

While choosing the right strike price does not ensure that you will make a profit, it may increase your chances of success. One tool that can help you get set up in the right lane with the optimal strike price is the option’s Greeks.

Greeks are mathematical calculations designed to measure the impact of various factors—such as volatility and the time to expiration, on the price behaviour of options. One Greek in particular that can help you pick the strike price is delta, which measures an option’s sensitivity to the underlying stock price.

Options Premiums, options Greeks, and the natural demand-supply situation of the markets influence each other. Though all these factors work as independent agents, yet they are all intervened with one another. The outcome of this mixture can be assessed in the option’s premium. For an options trader, assessing the variation in premium is most important. He needs to develop a sense for how these factors play out before setting up an options trade.

Delta can be used in several ways when constructing your options strategy. When it comes to selecting the strike price, here’s how you might use Delta.

Delta ranges from -1 to +1. 

Are we seeing signs of range-bound strangles built up...?

This is a classic give away of a range-bound trade. A short strangle is normally a range-bound trade where you sell higher calls and sell lower puts. This is an indication that the stock price is likely to remain in a range. Large traders and institutions have the confidence to write strangles only when they believe that the stock is unlikely to cross a particular range.

Is the strangle range shifting gradually?

This is another important trend that is underlying each stock. Some stocks are in an uptrend and some stocks are in a downtrend. What underscores this trend is the moving of the strangle range. If you see stock prices moving up but you also find the strangle range moving up it is a clear sign that the uptrend is being confirmed by the strangle traders. The reverse holds in the case of down-trending markets when the strangle range gradually moves downward. 

Is there any action in deep OTM option strikes?

This is normally a very major give away for a stock which is about to see sharp price movements. Normally, before a major positive announcement you can see some gradual accumulation happening in deep out of the money calls. On the other hand, when a stock is about to crash, you see accumulation in deep OTM puts. Normally, in most cases, the action is visible ahead of key events in deep OTM calls and puts.

How is the OI changing?

This is a key indicator. It is not just the overall OI but how much the OI is changing and how rapidly. After the sharp up move in PSU banks, SBI has seen aggressive accumulation in deep OTM call options in the November contract with most of the OI accretion happening in a single day. Normally, more aggressive the accumulation in OTM calls, the more likely that the rally could sustain for some more time. 

Total daily volumes and total OI of calls and puts

This is another important indicator of which way the market is trending. Normally, when the market is trending upwards for a stock, you find the volumes in calls substantially higher than the puts and the OI accumulation of calls more aggressive compared to puts.

The Bottom Line

Picking the strike price is a key decision for an options investor or trader since it has a very significant impact on the profitability of an option position. Doing your homework to select the optimum strike price is a necessary step to improve your chances of success in options trading.

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Can we as Indians support our homegrown mobile phone instead of Chinese phones? 

Time to teach these Chinis a tough lesson as what they are doing at our border is not acceptable. 

Micromax is largely credited for revolutionizing the budget-friendly smartphone ecosystem in the country.

Wind back the clock and you’ll see there was a period when touch screen phones and wireless internet were all the rage. At the time these new “smartphones” were considered premium handsets and most Indians couldn’t afford them.

But then… Micromax changed it all. It started selling budget smartphones with some really cool features going head to head against its foreign counterparts like Samsung, Sony, LG. And it found its niche within the value-oriented Indian consumer base. In fact, within a few years, the Gurgaon-based company quickly built a reputation of being a reliable homegrown smartphone brand and grew rapidly on the back of economical smartphones.

Unfortunately, however, the company’s cost advantage was a by-product of Chinese intervention.

At the time, Micromax’s phones were all manufactured and designed in China. And Micromax bought very little to the table. Except for the brand value of course. However, once Micromax found success, a whole host of “Indian smartphone brands” including Intex and Lava started replicating this strategy.

And soon, the company realised the lower-end smartphone market had already been commoditized. It was a price contest considering everyone was producing phones with similar specs. The only way to get ahead in the segment then was through branding. So, they spent tonnes of money on marketing. They roped in Akshay Kumar as a brand ambassador. They sponsored cricket tournaments and music concerts. And Micromax became the largest smartphone seller in 2014. The company was even wealthy enough to hire Hollywood star Hugh Jackman to endorse the brand.

Micromax co-founder Rahul Sharma famously said — “They have full HD, I have full HD… But, I have Hugh Jackman, they don’t have Hugh Jackman,” referring to how the only differentiation now was… well… Hugh Jackman.

But the smartphone landscape was quickly changing.

By the mid-2010s, Chinese companies like Oppo, Vivo, and Xiaomi had realised the potential of the Indian market and decided to cut the middlemen and introduce their products directly. The Chinese controlled all aspects of manufacturing allowing them to offer better after service. Micromax on the other hand was always found lacking in the customer service department. So that was a bit of a bummer. But Micromax had a large offline network to sell its phones. However, companies like Xiaomi took advantage of the e-commerce boom and sold directly to customers through online flash sales, saving on distribution costs. And “value-oriented customers” showed no loyalty and switched to Chinese companies almost immediately.

Hugh Jackman was…

Well… A passing thought at best.

Also, Micromax and its ilk never anticipated that 4G would take off so soon in India and stuck to selling 2G and 3G phones. But then…Jio started handing out free internet (4G). Almost overnight India made the transition and 3G phones became obsolete. Micromax incidentally also had a large outdated 3G inventory, but no buyers. They were desperately losing the plot. In November 2016, the company was slated to launch some 4G phones, but demonetization dashed those hopes as well since the company relied a lot on its offline distributors.

And before Micromax could regroup, the Chinese had overrun the market. By Q2 2018, the company had lost most of its market share. It even drifted away from its core expertise of selling phones and ventured into other territories trying to sell TVs and air conditioners. And all of this culminated rather spectacularly in eroding the company’s value.

In 2015, Micromax was valued at around Rs 21,000 crore.

In August 2019, its value had plummeted to Rs 1,500 crore.

But then the Chinese were in for a rude shock as Indians threw ‘Made in China’ TVs off balconies and smashed Chinese phones in protest. All in the wake of growing anti-China sentiment attributable to the conflict between the two countries in the Himalayas. For Micromax, this was another opportunity. Earlier this month, the company’s co-founder Rahul Sharma sounded the war bugle against the Chinese smartphone companies in India. In a video message, he announced the company’s plans for a comeback, launching the patriotic sounding ‘in’ brand.

But perhaps the biggest question still remains? What’s the difference this time around?

Micromax will tell you they are in line to receive benefits under the Production Linked Incentive (PLI) scheme. Meaning, the government will incentivize the company so long as they are making new phones and investing in manufacturing facilities. They will also tell you they are making in India this time around. And obviously, this will get some people excited. But what exactly are they making in India? That we don’t know yet. Are they still shipping most parts from China? That we don’t know either. Will they work on the after-sales support ecosystem and make better products this time around?

Don’t know. Is this another marketing stunt? Hopefully not.

But what we do know is that they are making a comeback. And although there’s a lot to consider here — longevity, product portfolio, Chinese competition, non-Chinese competition. We still hope that Micromax has a more long-lasting impact this time around.

You can get accurate intraday tips or Bank Nifty option tip here on a daily basis and activate your second stream of income in your life.

Medium Term Stock/Share Recommendations

Analysis of Q2 results shows that Bharti Airtel has rebounded from lows of Rs,395 against all bearish consensus. This bearish consensus is exactly opposite to the bullish consensus in the stock which was there around Rs590 levels. Buying can be done at CMP for a target of Rs. 442 and Rs 452. A higher target of Rs 465-500 is also possible. Stop Loss of Rs 399 is recommended. Personal due diligence is advised while undertaking investment in above stock as this can even get classified under long term investment.

Fundamentals: Q1 was excellent with strong commentary. The stock fell due to institutions selling      (Rights issue at 220)

We have recommended this stock as a medium-term stock recommendation for our clients and none can beat our Best Bank Nifty Option tips which gets you daily profit.

Short term stock/share Recommendation

We are optimistic about the prospects of the NCL Industries as Q2 cement Despatch numbers are quite encouraging in the COVID19 scenario.

Prior to the results just have a look at the background of the company.

NCL Industries Limited is engaged in manufacturing cement. The Company offers ordinary Portland cement (OPC), Portland Pozzolana cement (PPC), OPC 53 S cement, and Plain and laminated Cement Bonded Particle Boards. The Company's segments are Cement, Boards, Prefab structures, Hydel Power, and Ready-Mix Concrete (RMC).

NCL Industries Q2 Results

Q2FY21 cement Despatch is 6.17 lakh tons Vs 3.68 lakh tons in Q2FY20. 68% rise YoY

The Bison board is becoming very very popular. it is possible that Bison will be money-spinner like cement division. Demerger and IPO are possible.

We had recommended this stock to our short term stock recommendation since the time it has started moving from 32 levels. Do remember to check our Best Bank Nifty tips which get you daily profit.

FPSB

FPSB is the owner of the CFPCM, CERTIFIED FINANCIAL PLANNER CM, and certification marks outside the US (collectively the “CFP Marks”) and therefore the marks licensing authority for the CFPCM marks in India.

Financial Planning Standards Board As of 1 April 2019, the CFPCM Certification program in India is now directly administered by U.S.-based Financial Planning Standards Board Ltd., owner of the international CERTIFIED FINANCIAL PLANNER certification program outside the United States.

Get personalized training from the best CFP Trainer in Chandigarh here. Feel free to speak to us to know more about our methodology of teaching.

Career Opportunities after CFP

CFPCM  Professionals earn 26% more in compensation than other financial advisors

Some of the roles that a CFPCM  Certificant can aspire for include:

1. Relationship Manager
2. Financial Planning Manager
3. Data Source Specialist
4. Portfolio Manager
5. Wealth Manager
6. Equity Advisor
7. Client Acquisition Manager
8. Derivative Strategist
9. Plan Source Executive
10. Entrepreneurial  Opportunities

PROGRAM CURRICULUM

Module 1: Introduction to Financial Planning

Module 2: Risk Analysis and Insurance Planning

Module 3: Retirement Planning and Employee Benefits

Module 4: Investment Planning

Module 5: Tax and Estate Planning

Module 6: Advanced Financial Planning

Well, these are old curriculum which has changed now and now it has been converted into a three exam paper system. We will cover it as a separate article. You can know more about the Best CFP trainer in India by speaking to us.

CMP: 882 

Total revenue from operations 2,113 Cr 

2,241 Cr (-5.71%) YoY | 976.5 Cr (116.42%) QoQ 

Six months ended revenue: 3,090 Cr Vs. 4,193 Cr (-26.32%) 

Net Profit of 221.5 Cr 

193.7 Cr (14.51%) YoY 117.5 Cr (88.83%) QoQ 

Six months ended Net profit: 339.1 Cr Vs. 329 Cr (3.01%) 

EPS (in Rs.) 14.75 

12.90 YoY | 7.87 QoQ 

Six months ending EPS: 22.62 Vs. 22.02 

View: Result is overall good. YoY revenue declined marginally but profit up and margin also improved in this quarter.

Business Updates & Highlights 

EBITDA in Q2FY21 was around INR 312 Cr Vs. 270 Cr Vs. 56 Cr in Q1FY21 therefore up by 15.5% in YoY and up by 457% in QoQ. EBITDA margin in Q2FY21 was around 14.8% Vs. 12.1% therefore improved in YoY with good margin. 

Material cost also significantly improved in this quarter (Q2FY21) and it was around INR 1512 Cr on the revenue of INR 2,113 Cr and it was around 71.5%. Material cost for Q2FY20 was around INR 1645 Cr on the revenue of INR 2,241 Cr and it was around 73.4%. Therefore it was improved by 200 bps in YoY. 

Company is primarily operating into two main segment Wires & Cables which cover topline around 80% and FMEG – 10.8%. 

Wires and cables business declined 7% YoY to Rs. 1,741 Cr in Q2FY21 from Rs. 1,881 Cr in Q2FY20. The business saw improving momentum with resumption of economic activities. B2C wires and exports sustained the strong traction. Wires & Cables business bottom line in Q2FY21 was around INR 254.1 Cr Vs. 201.1 Cr in Q2FY20 and it was up by 26.3% in YoY. 

FMEG business grew 25% YoY to Rs. 244 Cr in Q2FY21 from Rs. 195 Cr in Q2FY20. Growth was resilient across most categories and regions. FMEG bottom line in Q2FY21 was around INR 19.6 Cr Vs. 6.5 Cr in Q2FY20 therefore also up by 201.5% in YoY.

Financial

ROE and ROCE is around 22.6% and 29.3% respectively and book value per share is around INR 257 and share is currently trading at 3.4x of its book value. Company is currently trading at annualized PE of around 20 which is average as per industry benchmark. Promoter holding is around 68.5% in the company which is very strong and stable. FIIs, Mutual fund hold and IFC hold around 6.1, 13.1% and 9.5% in the company. Cash and cash equivalent from operating activities as of Sep 2020 Vs. around INR 774 Cr Vs. 238.5 Cr as of Sep 2019 Vs. 245 Cr in March 2020 (**Very strong**). Debt equity ratio is 0.04X as of Sep 2020 Vs. 0.10x of March 2020 (stable & positive).

Share View: Share price high 1,182 (52 week) and now 882. PIL is a leading Electricals brand with over Rs 88 billion revenue. PIL is the largest manufacturer of Wires and Cables in India and a fast-growing player in the FMEG space. PIL manufactures and sells various types of cables, wires, electric fans, LED lighting and luminaires, switches and switchgears, solar products, pumps and conduits and accessories. 

Position: Share strong support price is INR 750. Mid / Long-term investor should continue with the company and any correction will give the opportunity to add and long-term target can be 1,250/1500. 

Opportunities: The organized home wires and cables industry in India has a market size of around Rs 54,000 crore, of which PIL is the market leader with approximately 15% market share. PIL's market position is facilitated from its strong distribution network with 6 warehouses and a dealer-distributor network of over 5,000 entities. PIL has significant market share in West and South India, which contributes around 70% to its revenue share. Strong client base includes Reliance, JSW, Asian paints, Siemens Nifty 50 companies clientele. Indian Electrical Equipment Industry plans to make India the “country of choice” for production of electrical equipment. Government announced expenditure of  INR 111 lakh crore in infrastructure sector over next 5 years, as a part of National Infrastructure Pipeline (NIP). Increase in Consumer Spending, Infrastructure Growth and Industrial Investments to Drive Electricals Industry.  Strong operating cash flow which was more than double in this quarter as compare

to March 2020. Due to healthy financial profile company has sufficient accruals and cash and cash equivalents to meet its capex and long term debt requirements. 

Risk: The house wires and electrical cables segment is highly fragmented with a large number of unorganised players constraining the pricing power of organised sector players. Apart from unorganised sector, PIL also faces competition from organised sector players such as Havells India Ltd, Finolex Cables Ltd, and KEI Industries Ltd. Due to cost cutting measure and operation efficiency company has been able to manage their bottom line but topline corrected and also increasing topline with more than double digit with this competition will be challengeable in future. Electrical cables and wire contributed more than 80% of PIL business and any slow down in Real estate, power and slowing economic environment can impact the performance of the company since company mainly dependent on this segment. 

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Way to start intraday trading with best stock market strategies for beginners in India

Day trading was viewed as the domain of highly efficient professional traders and financial firms. But this is changing now, due to a rise in the popularity of the share market as a way to make money. If done correctly, intraday trading can be a very financially sound career option, even though you can hit a rough patch from time to time. However, intraday trading is a bit more challenging for beginners, and you need thorough research and a good strategy before you begin.

To begin trading in the stock market, you need to create a trading account and a DEMAT account. If you are a trader who is familiar with the stock market and would like to try intraday trading, you could open a new account to keep your intraday trading separate. Keeping a separate account makes it easier to keep track of things. Intraday traders are taxed differently, so keeping a separate account makes takes tax calculations hassle-free.

You can then sign up for the right tools that help with intraday trading. After you have created an account, you can get some tools to assist you with intraday trading. Before you begin trading, you should spend some time examining daily charts so that you can familiarise yourself with the patterns of price movement. Various tools provide technical analysis, and these might prove to be useful too.

Primarily, there are two types of intraday traders- independent traders, and traders working for an institution. The majority of the day traders who make a living from intraday trading are tied to larger institutions. This provides them with certain benefits the institute offers, like a direct line, trading desk, good capital, and analytic software. They target opportunities that provide them with easy profits, and the resources they have also help them utilize safer trading opportunities.

Individual traders have two options- helping other people manage their money or using their capital for trade. They often have connections with a brokerage and can access other resources.

But they are at a disadvantage when compared to institutional intraday traders since their resources are limited. This leads them to take more risks. Individual traders rely more on swing trade and technical analysis to harness small price movements in stocks that are highly liquid.

Intraday traders need access to some high-end instruments and financial services. These are-

Access to a trading desk

This is usually limited to the traders who work for big institutions, managing large bulks of money.  A dealing desk helps intraday traders to execute orders instantaneously, which is a necessity during times of rapid price movements.

Numerous news sources

The news is a vital tool for intraday traders and provides most of the opportunities for capitalization. So, when something significant happens, you have more opportunities to utilize it if you get to know about it quickly. A typical trading room will receive constant coverage of various news channels and might have software that analyses the news to detect important stories.

Analytical software

The trading software will also give you an edge over the others. Some traders rely more on technical indicators than on news. Automatic pattern recognition, genetic and neural applications and backtesting are some of the software traders use to analyse data.

Starting day trade is not a decision that should be taken lightly. While the dream of earning well by working just a few hours a day can be turned into reality, the path to it requires hard work.  Intraday trade is tricky to muster, and the terrain will be rocky initially. But these are some characteristics that successful intraday traders share.

Knowledge and experience

Professional day traders have a vast wealth of knowledge of the marketplace. If you try to day trade without understanding the fundamentals first, you risk losing money. While skills of technical analysis and the ability to read charts are handy skills to have, but you need to understand the market to make sense of the data you retrieve through analysis. Take the time to diligently understand the nature of the product you are trading in.

Sufficient capital

As a day trader, you should only invest the amount that you can bear to lose, which is called the risk capital. Restricting yourself in such a manner helps shield you from a financial crisis and prevents you from making emotionally charged decisions.

If you want to harness the price movements in intraday trading effectively, sufficiently large capital is often required. Since unexpected swings can result in margin calls without sufficient warning, if you have the means to access a margin account, it can prove to be beneficial.

Strategy

As a trader, you need to have something that gives you an advantage over the market. There are different kinds of strategies you can use, some of which are described in the next section. You should work on these strategies and hone them until you find a way that works for you.

Regardless of the strategy an intraday trader uses, they will usually target a stock that fluctuates a lot.

Discipline

A sturdy strategy needs to be backed up by good discipline. Many traders lose money because they do not stick to their own criteria while choosing trades. Success in any field requires discipline. Intraday trading depends heavily on the volatile nature of the market. A stock might catch the eye of a trader if its price fluctuates a lot during the day. This fluctuation might happen due to many reasons.

Day traders also prefer stocks that are highly liquid since they can change their positions freely, without affecting the price of the stock. When the price of a stock soars, traders tend to adopt a buying position. If the price goes down, you may opt to short sell it so that you can profit from its fall.

Discipline can’t be taught in a seminar or found in expensive trading software. Traders spend thousands of dollars trying to compensate for their lack of self-control, but few realize that a long look in the mirror accomplishes the same task at a much lower price. The important lesson is that, once a trader has confidence in their trading plan, they must have the discipline to stay the course, even when there are the inevitable losing streaks.

Which stocks to choose?

Intraday trading requires the squaring off-trade positions before the closing of the market. So, you should always make sure that the stocks you choose have enough liquidity to allow you to do this. It is for this reason that large-cap stocks are highly favoured. This also reduces the likelihood of your trade affecting the share price of the stock you selected.

Timing

As an intraday trader, timing is the most crucial factor.  If you do not manage to take up a position at the right time, sometimes that is all that it takes to turn a profit into a loss.

According to experts, you should refrain from taking a position right at the beginning of trading. The market during the first hour is especially volatile, and it is best to wait it out.

Choosing a broker 

You should choose a broker who offers you support with both research and technical analysis. Access to the right tools is necessary to maximize your intraday benefits. Since intraday trading involves a high number of transactions, you should always target brokers who charge low brokerage.

A discount broker is a stockbroker who carries out buy and sell orders at a reduced commission rate. However, a discount broker does not provide investment advice or perform analysis on a client's behalf, unlike a full-service broker. Before the emergence of better communications technology, only the wealthy could afford a broker and get access to the stock market. However, the internet has now brought an explosion of discount brokers that allow individuals with smaller capital to trade, at a smaller fee. In terms of the stock market, most discount brokers operate through online platforms. As a result, the discount broker is nearly synonymous with online brokerages.

Discount brokers carry out orders at cheaper costs, but they typically just execute orders for their clients. They do not offer personal consultations, advice, research, tax planning, and estate planning services for customers. Aside from not providing extra wealth management services, discount brokers can offer lower fees because they do not spend money closing deals with high-net-worth individuals. Plus, most of them today operate their businesses online, resulting in low overhead.

Whether one opts for a discount broker or a full-service broker depends on their investing knowledge, market experience, financial goals, and current financial status. Since commissions typically take a healthy chunk out of investment and trading returns, some individuals opt to go for products offered by discount brokers instead.

Full-service brokers are a better option for investors who need professional investment advice or require support to stay on top of their financial planning outside of investing. Discount brokers are particularly useful to investors and traders who actively buy and sell securities frequently. Investors who frequently trade benefit from the lower commissions discount brokers charge. Investors who don't need advice, have small portfolios, or just want their trades executed are also usually better off using discount brokers.

Intraday trading can prove to be extremely challenging and difficult. You need to take time and learn how the market functions. You should also clearly define the risks you are willing to take, the capital you can afford to invest and your goals. Intraday trading is suitable for you if you can take risks and have the patience to watch the market closely. Intraday trading offers promises of high returns and sounds attractive. But the risks involved are also higher than delivery trading. So, if you are planning to balance day trading along with another job that requires your attention for a major part of the day, intraday trading might prove to be difficult.

To succeed as an intraday trader, you need to watch the market movements closely and be quick to grab opportunities. You also need to invest the time to hone your skills of technical analysis to become more efficient as a day trader.

Intraday trading requires time. You need time to practice different strategies and perfect them since your profits depend on it. Because of its speed, there is no half-hearted effort in intraday trading. You need to be alert and vigilant always.

After you have decided that the thrill of intraday trading excites you, you need to begin by taking small steps. Do your research and select a few stocks which will be easy for you to monitor. Do not try to take a bite of everything you see.

Stay calm and keep your emotions aside while making trade decisions. If you can keep a level head, you will find it easier to focus and execute your plans.

Many skills are required for trading successfully in the financial markets. They include the abilities to evaluate a company's fundamentals and to determine the direction of a stock's trend. But neither of these technical skills is as important as the trader's mindset.

Traders often must think fast and make quick decisions, darting in and out of stocks on short notice. To accomplish this, they need a certain presence of mind. They also need the discipline to stick with their own trading plans and know when to book profits and losses. Emotions simply can't get in the way.

Intraday trading offers traders numerous benefits, so it is no wonder that so many people are tempted to try it. Intraday traders are important in keeping the market liquid and efficient. If you have the resources and are willing to work on the skills, you could become a successful intraday trader too.

You can get benefitted from the top 10 advisory firms in India and none can beat the daily intraday tips or Bank Nifty Options tip as the aim is to trade less but trade accurately. You do not have to follow these steps if you are following our advice as an app on mobile is more than sufficient to get you started making money in the market.

The support for bank Nifty exists at 24000, 23000 levels, and crossing above 24800 level means we are heading for 25200, 25400, 26000 levels. Crossing above the 25200 level means that bulls will have an upper hand. Remember closing below 23800 means that bears will start gaining control.

You can know more about our intraday Bank Nifty option tips here and can start making money on a daily basis.

How to Make Money in Intraday trading stocks in Indian Share Market

This statement loosely translates to – can no one earn in the stock market? In this article, we will be finding out just that.

Established in 1875, BSE Ltd., is Asia's first Stock Exchange and one of India's leading exchange groups and has played a prominent role in developing the Indian capital market. Countless fortunes have been made and lost since that time, while shareholders fuelled an industrial age that is now spawned a landscape of too-big-to-fail corporations. Insiders and executives have profited handsomely during this mega-boom, but how have smaller shareholders fared, buffeted by the twin engines of greed and fear?

There is no limit to the amount of money you can make by trading stocks.

We are talking about the Indian stock market. It is one of the highest liquidity markets where people can earn any amount of money but remember that people can lose too.

It all depends on who is trading. If you have no stock trading experience, it is highly likely that you will lose money – if you are not careful.

When it comes to trading, research is essential. It takes time to understand how the market works, what currencies to trade and which setups to rely on. While it can be tempting to jump into trends in the hope of making quick gains, hasty decisions could result in unnecessary losses.

Researching the markets before entering positions will help you make well-informed decisions. Technical analysis and fundamental analysis are two approaches used by traders to make sense of all the market information. While the former focuses on information provided by charts to predict market movements, the latter deals with external factors that impact the market, such as economic data releases or geopolitical developments.

A significant part of trading is coming up with a trading plan and sticking to it – rather than being impatient and making spontaneous decisions. Panicking during an unexpected price movement, for instance, could result in pulling out of positions early and missing out on a potential gain. Market fluctuations are common, so it is much better to make a plan, see it through and learn from it in the future.

FOMO or the Fear of Missing Out is an emotion experienced by many traders who want to follow in the footsteps of other traders or make moves for a potential gain. While it is natural to want to capitalise on price movements and volatility, keeping calm and evaluating various trading opportunities is key. So, if the urge to overtrade hits refers to your plan to stay composed and in control.

Losses are all part of the trading world. While a string of losses can hamper confidence, it is important to learn from your mistakes and not simply sweep them under the rug. So, rather than stopping trades altogether, use the losses to evaluate what worked and what did not. It could take a while to get back into the game and regain your confidence, but perseverance is the key to surviving the markets.

Leveraged trading is risky in volatile markets. The first thing to consider is the amount of money you can afford to lose on a single trade. This is the risk-reward ratio, which needs to stay constant across every trade. Also, following through with your plan is critical. Backing out or changing strategies with each trade is a sign of both impatience and indiscipline.

A disciplined trader considers several aspects, such as the risk-reward ratio, profit goals, account capital, market fundamentals, to make a sound plan. After that, a demo account could be used to test out strategies, without risking actual money. Having a realistic goal is also an important part of ensuring good trading discipline.

Risk management should be at the forefront of every trader’s mind. Before entering a position, consider where you would set the stop-loss and take-profit. Be disciplined with this based on your attitude to risk. Discipline is essential to stay away from emotions like greed. When stop-loss levels are set, manipulating them according to your whims and impulses could be a recipe for disaster.

There will be times when decisions backfire in the markets. The market is sensitive to geopolitical developments, which can cause sudden trend reversals. At other times, trades fail due to other factors, such as lower leverage, poor trading strategy, shorter stop-loss distances, or latency in the trading terminal. At such times, it could be useful to evaluate the reasons for the failure, to not repeat them in the future. Trade journals are useful for just this. They allow traders to keep track of and learn from past trades, which could be helpful to improve strategies.

A focused mind is a key to success in any endeavour and the forex market is no different. There are many participants, trying to hedge exposure in the markets. By having a robust plan in place, traders can refrain from emotional swings that can lead to impulsive trading decisions. But there also are times when mental exhaustion can arise from long-term trading. This is when it is a good time to take a break from the live markets and instead focus on improving your strategy and enhancing trading knowledge.

Trading in the financial markets is a highly technical activity. To become successful as a trader, you need a good understanding of the financial markets and how they work, you need a good understanding of the companies you trade-in, you need the technical expertise to analyse market trends, as well as a great understanding of the factors that move the market.

Still, even with all these technical skills, it is impossible to become a successful trader if you lack one key attribute – trading psychology.

Trading psychology is basically the right mindset and the ability to think on your feet, remain disciplined, and exercise control over your emotions even when the market is going against your expectations.

Every successful trader knows that the markets are constantly testing traders, and anyone without the right psychological mindset and the ability to control his emotions will have a hard time making the right decisions.

Aside from having the right mindset, traders also need the discipline to stick to their trading plans and strategies regardless of what the market throws at them like I mentioned above.

Fear is a natural human reaction to anything perceived as a threat – in the case of trading, the threat is the possibility of losing money.

The larger the potential loss, the bigger the amount of fear experienced. Fear during trading manifests itself in several ways. The most common manifestation of fear is being too afraid to get involved.

Like our trader from the example up above, your fear of losing money makes you too cautious, and as a result, you end up missing all your entries.

While being cautious is an important trait, being overly cautious to the extent of missing all your entries turns into a disadvantage, because you are not going to make any money in the market unless you actually get into trades.

Sometimes, the fear might come when you have already entered a position. Some breaking news about the stock you are trading, or the general market might cause a temporary movement in the market. In such situations, a fearful trader might be compelled to exit the position before their pre-planned exit to avoid losing money. While such a fear-driven exit will help you avoid certain loss, it also prevents you from making gains once the market recovers from the temporary volatility caused by the news.

Alternatively, someone might exit a position early because they are afraid of holding a position for more than a day. The first key to overcoming fear as a trader is to understand that losing is a natural part of trading. It is impossible to trade without losing. Even the most successful traders experience losses from time to time.

You can think of loss as the cost of doing the trading business. Once you understand that losing is a natural part of trading, your perspective changes from being afraid of losing to trying to manage your losses.

One of the best ways to overcome fear by managing loss is to have a trading strategy. If you trade without a strategy, you are more likely to be swayed by your emotions. Having a strategy, on the other hand, keeps you grounded even when the markets seem to be going against you.

For instance, if your strategy wins 70% of the time, you will be expecting a few losses here and there. Therefore, having one or two losing trades will not cripple you with fear, because you will be comfortable with such losses.

Another way to overcome your fear is to start slowly and gradually build your trading experience. Instead of leaping into the waters hoping to make big bucks, start with stocks that have slow and small movements, and only trade small position sizes.

A lot of times the stock market movement is in response to speculation. It is being regulated by the financial news and sentiments present in the market. As we know, the financial market is volatile, and this reflects in the movement of the share prices. The economic activities of the world are driven by this volatility, and the stock market can be regarded as a snapshot of the health of these activities. The importance of global financial news for a stockbroker cannot be underestimated.

The stock market is also affected by other events and natural phenomena. Terrorist attacks, civil movements, socio-political events like elections, natural calamities like floods and famine, international diplomacy, and even oil prices. These events have a significant effect on the financial and economic conditions of a company, a country, and the world. It is hence, crucial to be in touch with the latest news so that one can be up to date with the expected outcome and speculate accurately.

Traders and investors should be aware of the speculations, and make trading decisions accordingly, to avoid losses. They should be able to guess the collective thinking and take immediate action to prevent losses from falling share prices. At the same time, they should make most of a bullish market due to positive sentiment and buy shares to book profits. The soundest way is to keep track of the news is by having constant access to it.

There are many sources from which financial news can be obtained. The most convenient and the best one is the internet.  The internet can be accessed from the convenience of your smartphone or your PC. There are many websites which update current news within seconds. These news-sites cover the news about the most active stocks. They provide information about the stock updates and market movement. Always follow the advice given by a SEBI regd investment advisory as they should act in the fiduciary capacity for the client.

There are several TV channels today that track the live movement of the stocks throughout the day. The channels also provide information about various stocks from a sector and their speculation. They correlate the performance with the current market conditions and business news. They also predict the performance of the stock market and advise on buying and selling of stocks, mutual funds, and other securities. Many market experts from major fund houses and financial institutions offer their opinions. However, you should not always blindly follow the channels as they have their hidden agenda.

The other source of financial news and information are newspapers like the Economic Times and Business Standard. These daily newspapers provide information about the performance of various stocks, news about businesses, analysis of the markets, political and social conditions that affect the economy, etc. There are business magazines that are published fortnightly or monthly. These magazines oversee the performance of listed companies and provide information useful for traders. They also cover other news which may have a direct or indirect effect on the market. They watch the performance of sectors and industries. This can help traders and investors make decisions about sector stocks and make the most of the information.

While patience and discipline in forex trading prove immensely helpful, there are no definite rules for successful trading. This is one area where you constantly learn and evolve over time, achieving greater knowledge and confidence with experience.

To sum it up one can state that it is always better to follow the Best SEBI Registered investment advisor which has large free content and who does not get after you by the constant phone ringing or lure you with a free trial as it is itself a scam by itself. Remember you always require a mentor in your life to walk you through.

You can check the Best Bank Nifty Option Tips here and start your journey of making money in the market and stop saying that none can make money in the market as you can check Indian Share Tips Review videos given by the actual clients.

Intraday Stop Loss Meaning, Trigger Price, Order, Definition & strategy with Example

Stop loss serves as a measure that tells you how much you stand to lose on a particular trade. It’s important to calculate stop loss beforehand so you can be prepared if a trade switches it’s direction. If the price of a stock goes in the wrong direction from the expected movement, making the trade unprofitable, a stop loss order helps minimize the loss.

A stop-loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. Stop-loss orders are designed to limit an investor’s loss on a position in a security and are different from stop-limit orders. When a stock falls below the stop price the order becomes a market order and it executes at the next available price. For instance, if you have bought a stock at Rs 100 and you want to limit the loss at 95, you can place an order in the system to sell the stock as soon as the stock comes to 95. Such an order is called 'Stop Loss', as you are placing it to stop a loss more than what you are ready to risk.

There are 2 types of Stop-Loss orders:

1. SL order (Stop-Loss Limit) = Price + Trigger Price

2. SL-M order (Stop-Loss Market) = Only Trigger Price

Another stop loss order type is the stop-loss limit order.

When the price of an asset reaches your stop loss price, a limit order is automatically sent by your broker to close the position at the stop loss price or a better price. Unlike the stop loss market order, which will close the trade at any price, the stop loss limit order will close it only at the stop loss price or better. This eliminates the slippage problem (which, again, isn't really a problem most of the time) but creates a bigger one: It doesn't get you out of the trade when the price is moving aggressively against you.

Traders or investors may choose to use a stop-loss order to protect their profits. It removes the risk of an order not getting executed should the stock continue to fall since it becomes a market order. A stop-limit order triggers once the price falls below the stop price; however, the order may not be executed due to the value of the limit portion of the order.

The one negative aspect of stop-loss is if a stock suddenly gaps lower below the stop price. The order would trigger, and the stock would be sold at the next available price even if the stock is trading sharply below your stop loss level.

A sell stop order refers to when a customer requests that a broker sell a security if it moves below a specified stop price. In a buy stop order, the stop price is set above the current market price.

Investors may further enhance the efficacy of their stop-loss order by combining it with a trailing stop. A trailing stop is a trade order where the stop-loss price isn't fixed at a specific dollar amount, but it is instead set at a certain percentage or dollar amount below the market price. 

A stop-loss order shouldn't be placed at a random level. The ideal place for a stop-loss allows for some fluctuation but gets you out of your position if the price turns against you. 

One of the simplest methods for placing a stop-loss order when buying is to put it below a "swing low." A swing low occurs when the price falls and then bounces. It shows the price found support at that level. You want to trade in the direction of the trend. As you buy, the swing lows should be moving up.

Just like when you're buying a stock, a stop-loss order on a short sell shouldn't be placed at a random level. You want to give the market that same wiggle room for fluctuation, while still protecting yourself from loss. 

With short selling, as opposed to buying, a common stop-loss order falls just above a "swing high." Like a swing low finding support at a bottom price level, a swing high finds resistance at an upper price level. This occurs when the price rises and then falls. You want to trade in the direction of the trend. When looking for short trades, the swing highs should be moving down.

These aren't hard and fast rules—you don't have to place a stop-loss order above a swing high when shorting, nor do you have to place it below a swing low when buying. Depending on your entry price and strategy, you may opt to place your stop loss at an alternative spot on the price chart. 

If using technical indicators, the indicator itself can be used as a stop-loss level. If an indicator provided you with a buy signal (or a "go long" signal), a stop-loss order can be placed at a price level where the indicator will no longer ​signal it's wise to be long.

Volatility is another common tool for traders setting stop-loss levels. An indicator such as Average True Range gives traders an idea of how much the price typically moves over time. Traders can set a stop-loss based on volatility by attempting to place a stop-loss outside of the normal fluctuations. This can be done without an indicator by measuring the typical price movements on a given day yourself, and then setting stop-losses and profit targets based on your observations. 

Advantages of the Stop-Loss Order

The most important benefit of a stop-loss order is that it costs nothing to implement. Your regular commission is charged only once the stop-loss price has been reached and the stock must be sold. One way to think of a stop-loss order is as a free insurance policy.

An additional benefit of a stop-loss order is that it allows decision-making to be free from any emotional influences. People tend to "fall in love" with stocks. For example, they may maintain the false belief that if they give a stock another chance, it will come around. In actuality, this delay may only cause losses to mount.

No matter what type of investor you are, you should be able to easily identify why you own a stock. A value investor's criteria will be different from the criteria of a growth investor, which will be different from the criteria of an active trader. No matter what the strategy is, the strategy will only work if you stick to the strategy. So, if you are a hardcore buy-and-hold investor, your stop-loss orders are next to useless.

At the end of the day, if you are going to be a successful investor, you have to be confident in your strategy. This means carrying through with your plan. The advantage of stop-loss orders is that they can help you stay on track and prevent your judgment from getting clouded with emotion.

Finally, it's important to realize that stop-loss orders do not guarantee you'll make money in the stock market; you still have to make intelligent investment decisions. If you don't, you'll lose just as much money as you would without a stop-loss (only at a much slower rate).

Stop-loss orders are traditionally thought of as a way to prevent losses. However, another use of this tool is to lock in profits. In this case, sometimes stop-loss orders are referred to as a "trailing stop." Here, the stop-loss order is set at a percentage level below the current market price (not the price at which you bought it). The price of the stop-loss adjusts as the stock price fluctuates. It's important to keep in mind that if a stock goes up, you have an unrealized gain; you don't have the cash in hand until you sell. Using a trailing stop allows you to let profits run, while, at the same time, guaranteeing at least some realized capital gain.

Disadvantages of Stop-Loss Orders

One advantage of a stop-loss order is you don't have to monitor how a stock is performing daily. This convenience is especially handy when you are on vacation or in a situation that prevents you from watching your stocks for an extended period.

The main disadvantage is that a short-term fluctuation in a stock's price could activate the stop price. The key is picking a stop-loss percentage that allows a stock to fluctuate day-to-day, while also preventing as much downside risk as possible. Setting a 5% stop-loss order on a stock that has a history of fluctuating 10% or more in a week may not be the best strategy. You'll most likely just lose money on the commission generated from the execution of your stop-loss order.

There are no hard-and-fast rules for the level at which stops should be placed; it totally depends on your individual investing style. An active trader might use a 5% level, while a long-term investor might choose 15% or more.

Another thing to keep in mind is that, once you reach your stop price, your stop order becomes a market order. So, the price at which you sell may be much different from the stop price. This fact is especially true in a fast-moving market where stock prices can change rapidly. Another restriction with the stop-loss order is that many brokers do not allow you to place a stop order on certain securities like OTC Bulletin Board stocks or penny stocks.

Stop-limit orders have further potential risks. These orders can guarantee a price limit, but the trade may not be executed. This can harm investors during a fast market if the stop order triggers, but the limit order does not get filled before the market price blasts through the limit price. Both types of orders can be entered as either day or good-until-canceled (GTC) orders.

A stop-loss order is a simple tool, yet many investors fail to use it effectively. Whether to prevent excessive losses or to lock in profits, nearly all investing styles can benefit from this tool. Think of a stop-loss as an insurance policy: You hope you never have to use it, but it's good to know you have the protection should you need it.

Stop-loss levels shouldn't be placed at random locations. Where you place a stop-loss is a strategic choice that should be based on testing out and practicing multiple methods. Find out for yourself which strategy works best for you.

Establish a trading plan by defining how you will enter trades, how you will control risk, and how you will exit profitable trades. Isolating the trend direction and controlling risk on trades is of paramount concern when learning how to day trade. When starting, keep trading simple. Trade in the overall trending direction, and use a simple stop-loss strategy that allows for the price to move in your favour, but cuts your loss quickly if the price moves against you. The ultimate goal for online traders is to take advantage of price changes. By carefully using Stop Loss and Take Profit orders, you can gain better control over your deals and funds, and can both minimize risks and maximize your trading potential.

To avoid hitting stop loss multiple times, you can use our services as we have been referred as the best SEBI registered intraday tips provider in India and we also provide Bank Nifty Options tip which performs irrespective of the condition in the market. Our Mantra is trade less but trade accurately.