Summer Internship Project report on

Security Analysis and Online

Trading

SUBMITTED BY

Nitesh Patel
ROLL NO. 01-36-035

Submitted in partial fulfilment of the requirements for the award of

degree of
Masters in Management Studies (MMS)

K.J. Somaiya Institute of Management Studies and

Research

Corporate Guide Faculty Guide

Mr. Yash Jethva Prof. Harnesh Makhija
RAL – IIFL K.J. SIMSR

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 DECLARATION

I hereby declare, to the best of my knowledge and ability that my work on the
Summer Internship Project is a genuine research work undertaken by me. It has
not been published anywhere earlier and is prepared after completion of the
Summer Internship Program with IIFL Securities Limited.

Nitesh Patel
01-36-035
MMS
2018-2020

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 CERTIFICATE FROM SUMMER PROJECT GUIDES

THIS IS TO CERTIFY THAT NITESH PATEL, A STUDENT OF THE MMS AT

K.J. SOMAIYA INSTITUTE OF MANAGEMENT STUDIES AND
RESEARCH HAS WORKED UNDER OUR GUIDANCE AND SUPERVISION.
THIS SUMMER PROJECT REPORT TITLE “SECURITY ANALYSIS AND
ONLINE TRADING” HAS THE REQUISITE STANDANRD AND TO THE
BEST OF OUR KNOWLEDGE HAS NO PART OF IT BEEN REPRODUCED
FROM ANY OTHER SUMMER PROJECT, MONOGRAPH, REPORT OR
BOOK.

CORPORATE GUIDE FACULTY GUIDE

YASH JETHVA HARNESH MAKHIJA

RAL ASSISTANT PROFFESSOR

IIFL Securities Limited K.J. SIMSR

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 ACKNOWLEDGEMENT
I owe my performance acknowledgement to all those people who made this
project successful. I express my deep sense of sincere gratitude to the
management of IIFL Securities Limited for providing this opportunity to do
my summer internship program.

I would like to extend my heartfelt thanks to my project guide Mr. Yash

Jethva, for guiding me through this project. Despite a busy schedule, he has
always been in constant touch and helped me with the progress of the
project. His guidance at every stage of the project has provided new aspects
to think of and incorporate possibilities and work from there on.

I would also like to thank Gunjan Bhatia for her assistance and being very
kind in taking time to patiently reply to all my queries.

I am greatly indebted to express my profound gratitude to Prof. Harnesh

Makhija for his valuable inputs and for guiding me throughout this project.

I would also like to thank Ms. Neha Sharma (HR) and other members of HR
Team for facilitating my summer internship project.

Finally, my sincere regards to everyone who have directly or indirectly

helped me complete this project on time.

Regards

Nitesh Patel
MMS
2018 – 2020
KJ Somaiya Institute of Management Studies and Research
Mumbai
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 Executive Summary
The name “stock market” which when comes into the mind, everyone has a
different opinion. One feels it is risky to invest in the stock market, others may
perceive that it is a game of gambling. Many of the investors may feel its great
opportunity to make a profit in the stock market. The opinion differs from
person to person, investor to investors.

In IIFL I learned about the security analysis and stock trading to reduce the risk
associated with the investment in the stock market and to achieve the maximum
profit from it.

There are several tools available in the markets through which one can easily
predict the movement of the stocks as well as the future of the particular stock.

One of the tools may be a technical analysis which helps to study the market
action, primarily through the use of charts, for the purpose of forecasting future
price trends. The movement of the scrip price and its behavior can be explained
in a more illustrative form by using the technical analysis. It provides better
insight and also to take a decision on the investment. It considers only the actual
price behavior of the market or instrument.

The project deals with a brief introduction to Security Analysis & Online Trading,
how to invest in the stock market as the investors are more concerned of return
and they want to be far from risk, Security Analysis is very helpful in deciding as
to when to buy & sell a particular stock.

The core area of this project focuses on Technical analysis of equity scripts
which tells an investor when to buy & sell a share. This project contains a
secondary online trading part in which I have to analyze the stocks and trade on
these stocks. Online trading help to reduce the commission by the stockbrokers
and also made easy to place orders without calling the brokers.

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Contents
1. COMPANY OVERVIEW ........................................................................................................................ 7
1.1 Introduction to the company ........................................................................................................ 7
1.2 Vision............................................................................................................................................. 7
1.3 Values ............................................................................................................................................ 7
1.4 BUSINESS SEGMENTS .................................................................................................................... 8
1.4.1 Loans and Mortgage.............................................................................................................. 8
1.4.2 Wealth and Asset Management ........................................................................................... 8
1.4.3 Capital Market Related Activities ......................................................................................... 9
2. SWOT ANALYSIS ............................................................................................................................... 10
3. COMPETITORS .................................................................................................................................. 11
4. CORPORATE STRATEGY OF IIFL .......................................................................................................... 9
5. Stocks Exchanges .............................................................................................................................. 12
6. Introduction to security Analysis ..................................................................................................... 14
6.1 Fundamental Analysis ................................................................................................................. 15
6.1.1 Gross Domestic Product ...................................................................................................... 16
6.1.2 Industrial Growth Rate ........................................................................................................ 16
6.1.3 Government Budget and Deficit ......................................................................................... 16
6.1.4 Sector Analysis .................................................................................................................... 17
6.1.5 Company Analysis ............................................................................................................... 17
6.1.6 RATIO ANALYSIS: ................................................................................................................. 18
6.2 Technical Analysis ....................................................................................................................... 20
Types of Candlestick Patterns ...................................................................................................... 20
6.2.1 Single Candlestick Pattern .................................................................................................. 20
6.2.2 Dual Candlestick Pattern ..................................................................................................... 21
6.2.3 Triple Candlestick Pattern: .................................................................................................. 24
6.2.4 General Candlestick Patter ................................................................................................. 26
7. ONLINE TRADING.............................................................................................................................. 27
7.1 Meaning of Online Trading ......................................................................................................... 27
7.2 ONLINE TRADING BY NSE & BSE ................................................................................................. 28
7.3 PROCESS OF ONLINE TRADING ................................................................................................... 28
7.4 DEFINITIONS AND EXPLANATIONS.............................................................................................. 30
7.5 BUYING AND SELLING ................................................................................................................. 31

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 1. COMPANY OVERVIEW

1.1 Introduction to the company

IIFL was founded in 1995 by two professionally qualified, driven entrepreneurs,
Nirmal Jain and R Venkataraman, with the vision of becoming the most
respected company in the financial services space. IIFL is mainly engaged in the
business of loans and mortgages, wealth and asset management, and capital
market related activities. The loans and mortgages business comprises the non-
banking finance, housing finance and micro finance verticals. The wealth
management business includes wealth and asset management. The capital
market business consists of retail and institutional broking and investment
banking. IIFL brings deep industry expertise, innovative solutions, ability to
reinvent and a differentiated digital experience to the table, which has led to the
Company’s phenomenal success across business segments.

Net Worth - ₹50,661 million

Stocks Under Research - 500+
Workforce - 15,000+
Customers – 5 million+

1.2 Vision
“To be the most respected financial services company in India.”

1.3 Values

Fairness
Fairness in our transactions with all stakeholders including employees,
customers and vendors, bereft of fear or favour.

Integrity
Integrity and honesty of the utmost nature, in letter, in spirit, and in all our
dealings with people, internal or external.

Transparency
Transparency in all our dealings with stakeholders, media, investors and the
public at large.

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1.4 BUSINESS SEGMENTS
1.4.1 Loans and Mortgage
Business
Diversified non-banking finance company offering comprehensive credit
solutions to all classes of customers to all classes of customers – salaried, self-
employed, informal sector, HNIs and corporates.

Customer Segment
Retail and Corporate

Products
Home, Gold, Commercial Vehicles and SME Loans, Digital Finance, Micro
Finance, Loan Against Property, Construction Finance and Real Estate Loans

Distribution Channels
Agents, Banks, Brokers, Direct channels and other distribution agreements

1.4.2 Wealth and Asset Management

Business
One of the largest and fastest growing wealth management companies in India
offering a holistic approach towards managing clients’ portfolio with a broad
range of innovative products and services

Customer Segment
High Net-Worth Individuals

Products
Asset management, Advisory, Financial Products Distribution, Brokerage and
Credit Solutions

Distribution Locations
Direct channels and other distribution agreements

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1.4.3 Capital Market Related Activities
One of India’s leading broking houses with extensive presence all over the
country, providing financial planning, investment banking and broking services
in mutual funds, equity, commodities and currency trading

Customer Segment
Institutional and retail

Products
Investment Banking. Institutional Broking, Research, Retail Broking and Financial
Products Distribution

Distribution Channels
Agents, Banks, Brokers, Direct channels, other distributors and independent
financial advisors.

2. CORPORATE STRATEGY OF IIFL

The corporate strategy has been to let customers make informed decisions and
to simplify the process of investing in stocks. To know the brokerage system of
the share market. to know the various exchanges of share markets all over the
world. Provide best product and services to the customer. To know the rules and
regulation of SEBI.s

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 3. SWOT ANALYSIS
STRENGHTS:
 Low brokerage system
 Effective after sales services system
 Advisory desk operations provided by fuller ton
 Well established brand equity
 Tele trade also possible
 Freedom account with different facilities
 Personalize alerts
 Consolidated statements-a unique service offering

WEAKNESSES:

 Lack of Aggressive advertisements and sales promotion

programmed.
 The working of the sales force is traditional.
 Inventory investments should be more.
 Miscommunication and ineffective co-ordination at various level of
hierarchy.

OPPORTUNITIES:

 Growing capital market in India & other country

 Political stability in India & other country
 Better governance by SEBI
 Decreasing interest rates in India, so people are motivated to earn
more returns through capital market.

THREATS:

 Demand & supply

 Increasing competition in security market
 Lost in faith in share market after big scams in the stock market
 Natural calamities
 Inability of customers to pay brokerage at the right time

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 4. COMPETITORS

Sharekhan India Infoline Limited

Incorporated in February 2000,

Incorporated in 1995, India Infoline
Sharekhan is India's 2nd largest
(IIFL) is the brokerage firm of India
stock broker providing brokerage
Infoline Group, a fastest growing
services through its online trading
About the Broker financial services solution provider
website Sharekhan.com and 1950
in India. India Infoline is listed on
Share shops which includes
BSE (532636) and NSE (INDIAINFO)
branches & Franchises in more than
for securities trading. IIFL off...
575 cities across India....
Type of Broker Full Service Broker Full Service Broker
Supported
BSE, NSE, MCX, NCDEX, NSEL NSE, BSE, MCX, NCDEX
Exchange
Account Type Classic Account Standard Account

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 5. Stocks Exchanges
Stock exchanges are secondary markets, where existing owners of shares can
transact with potential buyers. It is important to understand that the
corporations listed on stock markets do not buy and sell their own shares on a
regular basis. So when you buy a share of stock on the stock market, you are not
buying it from the company, you are buying it from some other existing
shareholder. Likewise, when you sell your shares, you do not sell them back to
the company – rather you sell them to some other investor.

The Bombay Stock Exchange

The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history
to the 1850s, when four Gujarati and one Parsi stockbroker would gather under
banyan trees in front of Mumbai's Town Hall. The location of these meetings
changed many times, as the number of brokers constantly increased. The group
eventually moved to Dalal Street in 1874 and in 1875 became an official
organization known as 'The Native Share & Stock Brokers Association'. In 1956,
the BSE became the first stock exchange to be recognized by the Indian
government under the Securities Contracts Regulation Act.
The Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE
a means to measure overall performance of the exchange. In 2000 the BSE used
this index to open its derivatives market, trading SENSEX futures contracts. The
development of SENSEX options along with equity derivatives followed in 2001
and 2002, expanding the BSE's trading platform. Historically an open outcry floor
trading exchange, the Bombay Stock Exchange switched to an electronic trading
system in 1995.
As of December 2011, there are over 5,112 listed Indian companies and over
8,196 scrips on the stock exchange, the Bombay Stock Exchange has a significant
trading volume. The BSE SENSEX, also called "BSE 30", is a widely used market
index in India and Asia. Though many other exchanges exist, BSE and the NSE
account for the majority of the equity trading in India. While both have similar
total market capitalization (about USD 1.6 trillion), share volume in NSE is
typically two times that of BSE.

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The National Stock Exchange

The National Stock Exchange of India was promoted by leading financial

institutions at the behest of the government of India, and was incorporated in
November 1992 as a tax-paying company. In April 1993, it was recognized as a
stock exchange under the securities contracts (regulation) Act, 1956. NSE
commenced operations in the Wholesale Debt market (WDM) segment in June
1994. The capital segment of the NSE commenced operations in November
1994, while operations in the derivatives commenced in June 2000.
NSE is a stock exchange located at Mumbai, Maharashtra, India. It is the 16th
largest stock exchange in the world by market capitalization and largest in India
by daily turnover and number of trades, for both equities and derivative trading.
NSE has a market capitalization of around US$985 billion and over 1,640 listings
as of December 2011. Though a number of other exchanges exist, NSE and the
Bombay stock exchange are the two most significant stock exchanges in India
and between them are responsible for the vast majority of share transactions.
The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National
Stock Exchange Fifty), an index of fifty major stocks weighted by market
capitalization.

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 6. Introduction to security Analysis
Security analysis is about valuing the assets, debt, warrants, and equity of
companies from the perspective of outside investors using publicly available
information. The security analyst must have a thorough understanding of
financial statements, which are an important source of this information. As such,
the ability to value equity securities requires cross-disciplinary knowledge in
both finance and financial accounting.
While there is much overlap between the analytical tools used in security
analysis and those used in corporate finance, security analysis tends to take the
perspective of potential investors, whereas corporate finance tends to take an
inside perspective such as that of a corporate financial manager.
For making proper investment involving both risk and return, the investor has
to make study of the alternative avenues of the investment-their risk and return
characteristics, and make a proper projection or expectation of the risk and
return of the alternative investments under consideration. He has to tune the
expectations to this preference of the risk and return for making a proper
investment choice. The process of analyzing the individual securities and the
market as a whole and estimating the risk and return expected from each of the
investments with a view to identify undervalues securities for buying and
overvalues securities for selling is both an art and a science that is what called
security analysis.

If the security analysis based on fundamental factors of the company, then the
forecast of the share price has to take into account inevitably the trends and the
scenario in the economy, in the industry to which the company belongs and
finally the strengths and weaknesses of the company itself. Its management,
promoters backward, financial results, projection of expansion, term planning
etc.

Approaches to Security Analysis:

 Fundamental Analysis
 Technical Analysis

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 6.1 Fundamental Analysis
Fundamental analysis of a business involves analysing its financial statements
and health, its management and competitive advantages, and its competitors
and markets. When applied to futures and forex, it focuses on the overall state
of the economy, interest rates, production, earnings, and management. When
analysing a stock, futures contract, or currency using fundamental analysis there
are two basic approaches one can use; bottom up analysis and top down
analysis. The term is used to distinguish such analysis from other types of
investment analysis, such as quantitative analysis and technical analysis.
Fundamental analysis is performed on historical and present data, but with the
goal of making financial forecasts. There are several possible objectives:
1. to conduct a company stock valuation and predict its probable price
evolution,
2. to make a projection on its business performance,
3. to evaluate its management and make internal business decisions,
4. To calculate its credit risk.

Objectives of Fundamental Analysis

When the objective of the analysis is to determine what stock to buy and at what
price, there are two basic methodologies

1. Fundamental analysis maintains that markets may misprice a security in the

short run but that the "correct" price will eventually be reached. Profits can
be made by trading the mispriced security and then waiting for the market to
recognize its "mistake" and reprice the security.
2. Technical analysis maintains that all information is reflected already in the
stock price. Trends 'are your friend' and sentiment changes predate and
predict trend changes. Investors' emotional responses to price movements
lead to recognizable price chart patterns. Technical analysis does not care
what the 'value' of a stock is. Their price predictions are only extrapolations
from historical price patterns.
Investors can use any or all of these different but somewhat complementary
methods for stock picking. For example many fundamental investors use
technical for deciding entry and exit points. Many technical investors use
fundamentals to limit their universe of possible stock to 'good' companies.

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 The choice of stock analysis is determined by the investor's belief in the different
paradigms for "how the stock market works". Fundamental analysis includes:
1. Economic analysis
2. Industry analysis
3. Company analysis
On the basis of these three analyses the intrinsic value of the shares are
determined. This is considered as the true value of the share. If the intrinsic
value is higher than the market price it is recommended to buy the share. If it is
equal to market price hold the share and if it is less than the market price sell
the shares.
6.1.1 Gross Domestic Product
The Gross Domestic Product is measure of the total production of final goods
and services in the economy during a specified period usually a year. The growth
rate of GDP is the most important indicator of the performance of the economy.
The higher the growth rate of GDP, other things being equal, the more favorable
it is for the stock market.

6.1.2 Industrial Growth Rate

The stock market analysts focus more on the industrial sector. They look at the
overall industrial growth rate as well as the growth rates of different industries.
The higher the growth rate of the industrial sector, other things being equal, the
more favorable it is for the stock market.

6.1.3 Government Budget and Deficit

Government plays an important role in most economies. The excess of
government expenditures over governmental revenues represents the deficit.
While there are several measures for deficit, the most popular measure is the
fiscal deficit. The fiscal deficit has to be financed with government borrowings,
which is done in three ways:
1. The government can borrow from the reserve bank of India.
2. The government can resort to borrowing in domestic capital market.
3. The government may borrow from abroad.
Investment analysts examine the government budget to assess how it is likely to
impact on the stock market.

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6.1.4 Sector Analysis
The objective of this analysis is to assess the prospects of various industrial
groupings. Admittedly, it is almost impossible to forecast exactly which sectorial
groupings will appreciate the most. Yet careful analysis can suggest which
industries have a brighter future than others and which sector are plagued with
problems that are likely to persist for a while.

Let’s see an example of FMCG sector analysis:

 The most important factor in sector analysis is Growth Rate. The growth
rate of FMCG sector of last 5 years is approximately 27.9% CAGR and the
range is 31.6% to 52.8%. the Growth rate of Urban Segment is almost 8%
and the Rural Segment is 15% - 16%.
 The Revenue is almost Rs. 3.4 trillion which is a good number respected
to other sectors.
 The contribution to GDP by FMCG sector is more than 2.2%.
 The FDI inflows are US$ 13.6 billion from 2000 to 2018.
 The Household & Personal care is consisting of 50% of total FMCG sector
then Healthcare consist of 31% and Food & Beverages is almost 19% of
total FMCG sector.

6.1.5 Company Analysis

Company analysis is the final stage of the fundamental analysis, which is to be
done to decide the company in which the investor should invest. Company
Analysis deals with estimation of the Risks and Returns associated with
individual shares.
The stock price has been found on depend on the intrinsic value of the
company's share to the extent of about 50% as per many research studies. The
analyst has to project the expected future earnings per share and discount them
to the present time, which gives the intrinsic value of share. Another method to
use is taking the expected earnings per share and multiplying it by the industry
average price earning multiple.
By this method, the analyst estimates the intrinsic value or fair value of share
and compares it with the market price to know whether the stock is overvalued
or undervalued. The investment decision is to buy undervalued stock and sell
overvalued stock.

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6.1.6 RATIO ANALYSIS:

 Profitability Ratio: Profitability ratio evaluates the company’s ability to

generate income against expenses and other cost associated with the
generation of income.
There are five types of profitability ratio are as follows:

 EBITDA Margin: It helps us to reflect the performance of company related

to direct core i.e. Income and Expenditure related to day to day activities.
 Profit after Tax (PAT) Margin: This ratio could help us to judge the entire
company’s performance of that particular year which is to be compared
income through all sources.
 Return on Equity (ROE): This is one of the most important ratio for an
investor to judge the company whether the profit generated is worth
against investment done through equity.
 Return on Capital Employed (ROCE): It compares profit to the entire
capital Employee. Higher the ROCE will be better.
 Return on Assets (ROA): It compares the Return or Profit generated
against the investment done into the assets.

 Leverage Ratio: A leverage ratio is a ratio of any one of the financial

measures that look at how this capital comes in the form of debt to meet
its financial obligation.
Debt is a sign of reputation (goodwill).
There are three types are as follows:
 Interest Coverage Ratio: This ratio helps to interpret how the company
can easily pay the interest which is due on the loan is taken. Higher the
ICR better will be preference given to the company.
 Debt to Equity Ratio: The debt to equity ratio indicates the relative
proportion of shareholder equity & debt used to finance the company.
Lower the debt to equity ratio will be preferable.
 Debt to Assets: This ratio indicates & relates the investment done into the
assets which are financed by creditors & debt holders.

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 Assets Management Ratio: These ratios are utilized to compare the
returns gain against the assets used in the business.
 Fixed Assets Turnover Ratio: Within this ratio, the sale of the company
which is generated is compared to the investment done in fixed assets.
Higher the Fixed Assets Turnover Ratio more will be preferable.
 Working Capital Turnover Ratio: Within this ratio, we are comparing the
revenue generated against the capital utilized in day to day basis. Higher
the Working Capital Turnover Ratio more will be preferable.
 Total Assets Turnover Ratio: Each and every asset own and its utilization
are compared against revenue generated.
 Inventory Turnover Ratio: By Inventory Turnover Ratio we will know how
the stocks get repeated in the time period or what is the demand for my
product.

Inventory turnover means that the cycle of the Finished Goods consumed
and sold to complete the entire stock and generate the new unit of stock.

 Valuation Ratio: These ratios are used so that the peer companies are
compared on the basis of how undervalued each company is.
 Price to Sales Ratio: Within these ratios, we directly compared the
relevant effect in the change of the price/share.
 Price to book Ratio: In this ratio, the evaluate how costly or cheap is the
share. By comparing the value judged from the financial statement to the
actual current market price. Lower the ratio betters the preference.
 Price to Equity Ratio: These ratios commence the effect on the price by
the change in the profit. Idle P/E Ratio should be 18-20. Company P/E
should be less than Industry P/E ratio. Between 20-25 you should book
your profit. Above 25 you should capitalize the money.
In 2008, the P/E ratio of Nifty had reached 28 then financial Crises
happened.

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6.2 Technical Analysis
Technical analysis involves a study of market-generated data like prices and
volumes to determine the future direction of price movement. Technical
analysis analyses internal market data with the help of charts and graphs.
Subscribing to the 'castles in the air' approach, they view the investment game
as an exercise in anticipating the behavior of market participants. They look at
charts to understand what the market participants have been doing and believe
that this provides a basis for predicting future behavior.

Types of Candlestick Patterns

6.2.1 Single Candlestick Pattern

a. DOJI: This pattern can be found anywhere in the chart but whenever it is
found & whenever it is formed do not enter the market. This pattern has
only stuck and very minimal body. It could have any color, red or green,
basically, you cannot judge the direction in which price is going to go.
b. Spinning Top: This pattern can be found anywhere in the chart. This
pattern is formed in such a way that the distance between high and
open/close should be equal to the distance between low and close/open.
Color of the body part doesn’t matter. Wherever it is found, you should
not enter the stock because it would indicate confusion.
c. Marubozu: there are two types of marubozu. One is Bullish, other is
Bearish. Within a marubozu, there is no stick and an elongated body. This
pattern should be found at the end or between the trend. It is found at
end of the trend. You can expect a reversal and if found at between you
can expect a continuous trend.
d. Hammer: This pattern is found at the end of the bearish trend. After the
pattern found we can expect a reversal of the bearish trend and the prices
will move at the upward direction will look like a hammer. The stick would
be at downward side which is starting at a opening price.

For this pattern to be found,

(Opening-Low)>= 2 (Closing-Low)
e. Inverted Hammer: This pattern found at the end of bearish trend. We will
expecting a buying pressure. So, the price is moving up.

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6.2.2 Dual Candlestick Pattern
a) Bullish Engulfing: This pattern made at the end of bearish trend. The first
candle will be bearish and second will be strong bullish marubozu- A
candle without any sticks. After the pattern is completed we expect a
reversal of the previous bearish trend. The body of the first candle should
be within the range of open and of the second candle.

b) Bearish Engulfing: This pattern made at the end of the bullish trend. The
first candle will be bullish and second will be strong bearish marubozu- A
candle without any sticks. After the pattern is completed we expect
reversal of previous bullish trend. The body of the first candle should be
within the range of open and of the second candle.

c) Bullish Harami: This pattern is found at the end of the bearish trend. The
first candle will be a strong bearish marubozu. The second candle will be

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 strong doji (The coloum of the body of the 2nd candle of the doji should be
green). The body of the 2nd candle should be within the range of the 1st
candle of opening and closing. After the pattern is completed we expect
a reversal of a previous bearish trend.

d) Bearish Harami: This pattern is found at the end of bullish trend. The first
candle will be strong bullish marubozu. The second candle will be strong
doji (The column of the body of 2nd candle of the doji should be red). The
body of the 2nd candle should be within the range of the 1st candle of
opening and closing. After the pattern is completed we expect reversal of
previous bullish trend.

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e) Piercing Pattern: This pattern made at the end of bearish trend. The First
candle will be strong bearish marubozu. The second candle will be strong
bullish marubozu, such that the opening price of 2nd candle should be gap
down to the 1st candle and that particular candle after completion should
be made such a way that 1st candle body should at least be covered by
50%. After the pattern is completed we expect reversal of previous bullish
trend.

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 f) Dark Cloud Cover: This pattern made at the end of bullish trend. The First
candle will be strong bullish marubozu. The second candle will be strong
bearish marubozu, such that the opening price of 2nd candle should be
gap down to the 1st candle and that particular candle after completion
should be made such a way that 1st candle body should at least be
covered by 50%. After the pattern is completed we expect reversal of
previous bullish trend.

6.2.3 Triple Candlestick Pattern:

1) 3 White Soldiers: This pattern is found at the end of bearish trend and
could be found in between bullish end. Each candle is the perfect strong
bullish marubozu. The opening of 2nd candle should be near to close of
first candle. The opening of the 3rd candle should be near or close of 2nd
candle. The body of 2nd candle should be bigger than 1st candle and body
of 3rd candle should be bigger or equal than 2nd candle such that form a
step formation. If the pattern is found between bullish trends then you
can expect a continuous trend and at the bearish end then expect a
reversal trend.
2) 3 Black Soldiers: This pattern is found at the end of bullish trend and could
be found in between bearish end. Each candle is the perfect strong
bearish marubozu. The opening of 2nd candle should be near to close of
the first candle. The opening of the 3rd candle should be near or close of

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 2nd candle. The body of the 2nd candle should be bigger than 1st candle
and body of the 3rd candle should be bigger or equal than 2nd candle such
that form a step formation. If the pattern is found between bullish trends
then you can expect a continuous trend and at the bullish end then expect
a reversal trend.
3) Morning Star: This pattern is found at the end of bearish trend. The first
candle will be strong marubozu and the 2nd candle strong Doji or Spinning
top and can be green or red. The 2nd candle should be found gap down at
the 1st candle, such that either his opening or closing should not cross the
first candle. 3rd candle will be a gap up to 2nd candle and it should be
parallel to the first candle. The 2nd candle should not cross the closing of
the 1st one.
4) Evening Star: This pattern is found at the end of bullish trend. The 1st
candle will be strong marubozu and the 2nd candle strong Doji or Spinning
top and can be green or red. The 2nd candle should be found gap up at the
1st candle, such that either his opening or closing should not cross the first
candle. 3rd candle will be gap down to 2nd candle and it should be parallel
to first candle. 2nd candle should not cross the closing of the 1st one.
5) 3 Inside Up: This pattern is found at the end of bearish trend. The first
candle will be strong bearish marubozu and the 2nd candle will be bullish.
The 3rd candle will be strong bullish marubozu. The 2nd candle should be
found gap up or gap down at the 1st candle, such that either his opening
or closing should stock 50% of the first candle and opening should be near
or closing of 2nd candle and closing of 3rd candle should cross opening of
1st candle and 2nd candle closing should beyond opening of 1st candle.
6) 3 Inside Down: This pattern is found at the end of bullish trend. The first
candle will be strong bullish marubozu and the 2nd candle will be bearish.
The 3rd candle will be strong bearish marubozu. The 2nd candle should
be found gap up or gap down at the 1st candle, such that either his
opening or closing should stock 50% of the first candle and opening should
be near or closing of 2nd candle and closing of 3rd candle should cross
opening of 1st candle and 2nd candle closing should beyond opening of
1st candle.

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6.2.4 General Candlestick Patter
1) Double Top: This pattern is found at the end of the bullish trend. With the
help of 3 support point and two resistance point. It would create one
support level and one resistance level respectively. For this pattern there
has to be support level should be bridged.
2) Double Bottom: This pattern is found at the end of the bearish trend.
With the help of 3 resistance point and two support point. It would create
one resistance level and one support level respectively. For this pattern
there has to be resistance level should be bridged.
3) Head & Shoulders: This trend is found at the end of the bullish trend. With
the help of 2 resistance point and 4 support point. We create 1 resistance
level & 1 support level respectively. Within this pattern, we will have three
huge volatility. After that, it will bridge the resistance level and drop back
at the end of the support level. After the pattern is completed we
expected Support Level Bridge and complete reversal towards bearish
trend against the bullish trend.
4) Inverse Head & Shoulders: This trend is found at the end of the bearish
trend. With the help of 2 support point and 4 resistance point. We create
1 support level & 1 resistance level respectively. Within this pattern, we
will have 3 high volatility. After that, it will bridge the support level and
drop back at the end of the resistance level. After the pattern is completed
we expected Resistance Level Bridge and complete reversal towards
bullish trend against the bearish trend.
5) Rising Wedge: This trend is found at the end of the bullish trend. Within
this pattern, there are “n” number of volatility (minimum 4) but each new
volatility created will decrease the distance between support and
resistance i.e. ideally the support level increasing at a faster rate
compares to the resistance level, such that eventually, both level will
intersect. After this, we can expect a reversal pattern.
6) Falling Wedge: This trend is found at the end of the bearish trend. Within
this pattern, there are “n” number of volatility (minimum 4) but each new
volatility created will increase the distance between support and
resistance i.e. ideally the resistance level increasing at a faster rate
compares to support level, such that eventually both level will intersect.
After this, we can expect a reversal pattern.

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 7. ONLINE TRADING
7.1 Meaning of Online Trading
The growth of information technology has affected almost all sectors of life. The
Internet has enabled us to get every information at our doorstep. When the
Internet has affected all sectors he could “stock markets” the most important
player of the economy, has remained far behind? Like all other sectors, the
Internet has set its feet in the stock markets also.
Internet trading commissions are clearly posted on the websites of the various
services, and are typically a fixed rate charge, depending upon the type of
security being traded and the size of a trade. In theory, therefore, an Interest
investor always knows what commission he is being charged on each trade.
Internet investor can take as much time as they would like to take prior to
placing a trade order. Similarly, the online investor likely does not have to worry
that his broker is making a commission, the only person who is authorized to
trace in an account is the actual investor. Furthermore, the internet investor can
never become a victim of excessive trading since the investor maintains total
control over the number of transactions which take place in the account.
All of these positive features of internet trading may lead the unwary investor
to believe that Internet trading is a way to take control of their finance and save
more money in the process. Unfortunately, this is not always the case. The
advantages of Internet stock trading have also its weaknesses and these
weaknesses present significant drawbacks for the average investor.
First and foremost, the average investor is not an expert in the financial markets.
There is a danger for allowing the autonomy of online trading to hull you into
the belief that you are an expert investor. An online investor sitting at home at
a personal computer also foregoes proper investment advice and financial
planning, perhaps among the most valuable services provided by traditional
brokers.
There are, of course, additional risks relative to performing transactions over the
Internet especially on a shared computer. Those people whom investors have
provided their account number and password can freely trade that account
while the investor will have little, if any, resource against the brokerage firm for
the breach of security.

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7.2 ONLINE TRADING BY NSE & BSE
The central computer located at the Exchange is connected to the workstations
of the brokers through satellite using Very Small Aperture Terminals (VSATs).
Orders placed at the Broker’s workstations reach the central computer and are
matched by the computer based on price and time priority.
Both the exchanges have switched over from the open outcry trading systems
to a fully automated computerized mode of trading known as BOLT (BSE On-Line
Trading) and NEAT ( National Exchange Automated Trading) System. It facilitates
more efficient processing, automatic order matching, faster execution of trades
and transparency.

7.3 PROCESS OF ONLINE TRADING

An investor interesting in trading through the Internet shall have to, firstly
register himself with an Internet brokerage firm. Some formalities such as filling
the account opening form of the e-broker, copies of identity proof, copy of
residence proof are made to register himself with the e-trade. Secondly, bank
and sufficient balance should be kept in the account. Thirdly he would be
required to open an account with a depository participant because only
dematerialized shares can be traded on the internet.

The client places an order via the net by logging on to his account

The broker accepts and executes the order and places it with the exchange

The exchanges accept the order after checking the share limit

The broker makes the payment either directly via the client bank account or
pays through its own account and recovers it later from the client

The exchange receives money and completes the settlement.

The client is intimated about the settlement

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So, generally following steps are followed while doing trading through Internet:
Step-1:
Those investors interested in doing the trading over Internet system, that is,
NEAT – ISX (NSE), should approach the brokers and register with the Stock
Broker.

Step-2:
After registration, the broker will provide them a login name, password and a
personal identification number (PIN).

Step-3:
The actual placement of an order, Using the place order window as under can
then place an order:
(a) First by entering the symbol and series of stock and other parameters such
as the quantity and price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.

Step-4:
It is the process of review. Thus, the investor has to review the order placed by
clicking the review option. He may also re-set to clear the values.

Step-5:
After the review has been satisfactory; the order has to be sent by clicking on
the send option.

Step-6
The investor will receive an “Order Confirmation” message along with the order
number and the value of the order.

Step-7:
In case the order is rejected by the broker or the Stock Exchange for certain
reasons such as invalid price limit, an appropriate message will appear at the
bottom of the screen. At present, a time lag of about ten seconds is there in
executing the trade.

Step-8:
It is regarding charging payment, for which there are different modes. Some
brokers will take some advance payment from the, investors and will fix their
trading limits. When the trade is executed, the broker will investor for transfer
of fund by the investor to his account.

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7.4 DEFINITIONS AND EXPLANATIONS

Shares:
Shares are units of ownership interest in a corporation or financial asset that
provide for an equal distribution in any profits, if any are declared, in the form
of dividends. The two main types of shares are common shares and preferred
shares. Physical paper stock certificates have been replaced with electronic
recording of stock shares, just as mutual fund shares are recorded electronically.

Investment:
Investment essentially refers to what you do with your savings in order to
preserve them and make them grow or yield an income. If you keep your savings
in the form of cash, they are certainly going to diminish in value because the
purchasing power of money is constantly going down as a result of inflation.
Therefore, if you want to maintain or increase the value of your savings, you
have to keep them in forms other than cash. This is what investment is all about,
deployment of your saving with the intentions of preserving or increasing their
value. This deployment can be done by using your savings to buy land,
residential properties, commercial properties, gold, jewelry, works of art, fixed
deposits in bank and companies, shares, bonds, in fact, anything whose Value is
likely to either remain constant or appreciate with time. Investment also refers
to using one’s savings with the intention of earning an income.

Demat Account:
Stocks in Demat account remain in dematerialized form. Dematerialization is the
process of converting physical shares into electronic format. A Demat account
number is required to enable electronic settlements of all the trades. Demat
account functions like a bank account, where you hold your money and
respective entries are done in bank passbook. In a similar form, securities too
are held in electronic form and are debited or credited accordingly. A Demat
account can be opened with no balance of shares. You can have a zero balance
in your account.

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Circuit Limit:
While issuing the shares to the public the company has to fix a particular limit of
the rate of the per share this limit is called a circuit limit. This circuit limit is
generally fixed on the percentage basis. This circuit limit is applied to both the
ends of the share. That is to the upper limit also and also to the lower limit.

Upper Limit:
While issuing the shares to the public the company has to fix the upper limit this
limit is also calculated in percentage. The rate of share cannot exceed nor the
customer can sell above this upper limit.

Lower Limit:
While issuing the shares to the public the company has to fix the lower limit also.
This lower limit is calculated on the basis of the rate of the shares. This limit
bears the same percentage, which is mentioned for the upper limit of the share.
Like upper limit in this limit also the share minimum rate of the share is fixed the
customer who wants to see the holding shares has to first consider the upper &
lower limit of the shares, he cannot sell the shares below or above these limits.

7.5 BUYING AND SELLING

The first step is to open a Demat account with your selected Depository
Participants (DP). All transactions on both the BSE and NSE are done in Demat
securities.
When you buy shares, you are required to pay money to your broker or sub-
broker immediately upon getting the contract note/confirmation memo for the
purchase of shares. The broker issue as contract note, whereas sub-broker
issues a confirmation memo. Similarly, when you sell shares you are required to
give delivery of your shares by transferring them to the Demat account of you’re
your broker/sub-broker immediately upon getting the contract note or
confirmation memo. When you buy the share then the share you have
purchased will come first to Demat account o your broker/sub-broker. Once this
happens, you can instruct your broker/sub-broker to transfer those shares to
your Demat account for receiving shares in your Demat account you will have to
give your broker or sub-broker the details regarding your Demat account.

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 REFERENCES
https://www.iifl.com/

https://in.investing.com/

https://www.investopedia.com/

https://en.wikipedia.org/wiki/Trade

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