Financial Markets 101

The fanciest vegetable market we’ll ever see.

How to connect with me

● LinkedIn: https://www.linkedin.com/in/krunalrindani/
● Twitter: https://twitter.com/MarketsWithKR
● Instagram: https://www.instagram.com/stockmarketswithkr/
● Email: [email protected]
● WhatsApp number (pls don’t call here thx):
https://wa.me/+917977368824
Some good resources

● Stock Markets with KR: daily 5-minute analyses + other info content.
● Rayner Teo: tons of free material on the basics of price action and
technicals.
● Vishal Malkan: good info on technical indicators.
● Babypips: website for free edu of FX markets + free course.
● Adam Grimes: free comprehensive stock market course.
● Investopedia: perfect for understanding complex terms and jargon.
● Free trade log + position sizing calculator:
https://docs.google.com/spreadsheets/d/1fyBuK0Eqc-yuzPdDXlsj7W
IXyUIJn23ofZBSCi7UwjE/edit?usp=sharing
#1

Stock market is not gambling.

The fanciest
vegetable market
you’ll come across.
Wait...what?

Vegetable Market Financial Markets

● People buy and sell relatively ● People buy and sell relatively
standardized items. standardized items, but they can be
● There are a LOT of options for buyers customized!
and sellers. ● There are even more options for buyers
● Prices are determined by a combination and sellers.
of demand, supply, news-based events ● Prices are determined by a combination
and fundamental factors. of demand, supply, news-based events
and fundamental factors.

Don’t get intimidated by some of the things I’ll be talking about. It’s not difficult, it’s just new.
The Power of Compounding

www.compoundaily.com

If you begin now, you will make it. That isn’t

optimism, that’s statistics and math.

The table to the right assumes 8% p.a. And you can do much
better ;)

Dollar cost averaging

How is it not gambling though?

Indicators Fundamentals

They give you hints of where the market Include the financials of a company. Sort of
could potentially be headed. like a health report, but for a company.

Psychology News

Market psychology is insanely effective. This Some of the biggest moves can be
is where you try to understand how market motivated by important news events. For eg,
participants may react to price, news and RBI announcement, FM speech, etc.
more.
The Basics (don’t get intimidated)

● Security: Any asset. Whether it’s a stock, commodity, or other assets.

● IPO: Initial Public Offering, when the shares are first listed.
● FPO: Follow-on Public Offer, when more shares are floated.
● Corporate Actions: Any splits, mergers, bonuses, rights issues, etc.
● Bid: An offer made by an investor, trader, or dealer in an effort to buy a security, commodity, or currency.
● Ask: The price a seller is willing to accept for a security, which is often referred to as the offer price.
● Tick size: Minimum gap between two consecutive prices.
● Lot size: Minimum number of shares that must be bought in one transaction.
● Volume: Number of contracts traded during any given period of time.
● Long: Buying a certain contract or security.
● Short: Selling a security first with the intention of buying it back later.
● Square off: Enter into opposite position.
● Forwards: A customized contract to buy or sell an asset at a specified price on a future date.
● Futures: Forwards that are traded on an exchange.
● Options: The right to buy or the right to sell an underlying security..
#2

How analysing the stock market works.

Basis for Trading or Investing

Technical Analysis Fundamental Analysis

● Charts ● Company’s financial info

● Indicators ● Ratio analysis
● Tools ● Industry analysis
● Retracements ● Global markets
● Patterns ● News
● Math ● Company/industry moats
Basis for Trading or Investing
Different time horizons of trading

1. Scalping: few seconds to minutes.

2. Day trading or intraday: during the day. There is no “one best” method.
It depends on your risk
3. Swing trading: typically for a few days/weeks or BTST. appetite, goals, etc. But
4. Positional trading: for as long as the trend lasts (weeks, months) investing is always important.
5. Investing: for a longer term (several years)
Types of Trends (and what they look like)
Technical Analysis

Pure technical analysis has little to do with what company you choose, what its
financials are, which industry it is in. Only a few things matter:

● Chart patterns.
● Indicators.

(and sometimes more information depending on the type of market you are in)
Technical Analysis - Charts

● Line chart
● Bar chart (OHLC)
● Candlestick*
● Point & Figure charts
● Renko charts
● Kagi charts
● Heikin Ashi
● And many more...
Examples of Charts

Kagi Chart
 Examples of Charts (contd)

Renko Charts
How are Charts Used - Line Chart
How are Charts Used - Candlestick
Candlestick Charts (contd)
Technical Analysis - Indicators

Technical indicators are tools which show whether the price of the security is likely to
increase or decrease. This is done using:

● Moving averages (simple, exponential, etc.)

● Statistical models
● Historic price data
● Historic volume data
● Can be separate indicators, overlays, etc.
● Series (Fibonacci numbers)

They all essentially use some or the other form of math. BUT you don’t need to know math to
use them!
Technical Indicators - Examples
Technical Indicators - Examples
Algorithms & Quant
Fundamental Analysis

Fundamental analysis has less to do with the historical prices and more to do with the company or
security’s inherent properties. Some important aspects of fundamental analysis are:

● Financial reports
● Financial ratios
● Industry analysis
● Global outlook
Fundamental Analysis
Fundamental Analysis - Company Data

An analyst would look at the company’s ratios including:

● EPS: How much did the company earn per one equity share.
● P/E: Comparing stock price to company’s earnings.
● PEG: uses price, EPS and growth rate of the company.
● ROE: How much did the company earn compared to total equity.
● Dividend Payout & Yield: Measure how much dividends are paid.
● Multiples: Compare the stock price to finances -
○ Revenue multiple: How many times is the stock price compared to
per dollar of revenue.
○ EV multiple: Measures a company’s return on investment.
Fundamental Analysis - Industry Analysis

The analyst would:

● Compare the results of the industry as a whole.

○ Financial information.
● Understand where the industry is right now.
○ Sales growth, new launches, etc.
● Try to estimate where the industry could be headed.
○ Macroeconomic indicators, government policies, political environment, legal aspects, etc.
● Identify chief competitors and their financial positions.
○ Performance and growth trajectory of main competitors in the industry.
Fundamental Analysis & Value Investing

Value investing involves picking stocks that are trading for less than their intrinsic value.

In other words, going for stocks that you feel are underestimated, aka, the underdogs.

The aim here is to get multi-baggers.

Some use complex financial models for this. Some examples (for your reference):

● FCFF
These are based on cash flows
● FCFE
● Monte Carlo Simulation
● EV Multiples
Fundamental Analysis - Global Environment

Two years ago, yield curves inverting was in the news. This is an oncoming recession indicator, but
no one believed it at the time. A few months later, we saw the COVID crash.

When COVID initially came, Bill Ackman’s $27 million trade turned into $2.6 billion because he
foresaw how the global environment would change with the virus.
Fundamental Analysis - Macroeconomics

Some major economic indicators are:

● Gross Domestic Product (GDP)

● Industrial Production
● Purchase Managers Index (PMI)
● Producer Price Index (PPI)
● Durable Goods
● Housing Starts

Bloomberg Market Concepts

To summarize

Technical analysis: Fundamental analysis:

● Used by traders ● Used by investors

● Meant for shorter trades ● Long holding periods
● Price charts in focus ● Financial and economical
● No need to learn much about the information in focus along with news
company & sector, etc. reports, research reports, etc.
● The entire premise is to learn
everything about a company.
#3

Actionable steps to get started

What do we need to trade/invest

Bank account (duh)

Account with a broker

Let’s not bother with the specific details of

how accounts and other backend stuff
works for now.
Some info on brokers

Choose a broker based on:

● Brokerage cost.
● Reliability.
● Platform.
● Service.
● Reporting (for tax purposes).
● Margin
Brokerage & Reliability

Transaction costs can kill your gains.

If you are earning ₹500 on a trade, but your broker charges you a flat ₹300
then you are barely getting 40% in hand.

Some brokers face issues on high-volume trading days.

Reporting & Taxation

You need to file tax returns. Reporting is important for that.

Some brokers don’t give decent reports.

Also, check with your CA.

What’s Margin?

It is essentially leverage.

If you’ve put in ₹5,000 in your account then some brokers give 10x intraday margin.

This means for intraday trades you can purchase up to ₹50,000

BUT

If your day’s loss is 80% of your deposit, your position will be squared off.

Avoid margin trading all together when you are starting out!
How to place trades

● Marketwatch/Watchlist: List of securities you’ve selected to keep an eye on.

● Holdings: List of securities you already own.
● Positions: List of open positions of the day.
● Market depth: Information on volume, buyers, sellers, order details, etc.
● Charts: Choosing the types of charts you want to use.
● Indicators: Overlays, oscillators, and other indicators.
● Tools: Retracements, trend lines, drawing tools, etc.
● Orders
○ Stop-Loss
■ Limit: When you want to square off your position to limit a loss.
■ Market: When you want to enter a position above or below a certain price.
○ Limit: Enter into a position at a certain price only.
○ Market: Enter into a position at the prevailing price.
Risk Management

The best way to manage risk is to decide on a system, test it, and then follow it.

The best ways to manage risk after we’ve entered into a trade:

● Stop loss: cap your losses.

● Position sizing: do not enter into a position which has a very high risk for you.
● RR: only pick up trades which have a favourable risk-reward ratio.
● Be vigilant on news-based events: your system might not work sometimes in
this scenario.
● RR depends on your hit rate
A video where I place a trade live

Link: https://youtu.be/UBnzsyhmgTk
How can one avoid that?

● Follow a disciplined approach.

● Do our research and be confident.

● We won’t have a success percentage of a 100%. Focus on being net positive.

● Have realistic expectations.

● Start very small.

● Take calculated risks.

● Accept losses gracefully.

● Don’t be blindfolded by greed.

That’s all for now, folks :D

Thanks a TON for your time!

And just remember - “Anything worth doing is worth doing poorly.”

Take action now.

P.S. you can check out my YouTube channel, podcast and follow me on social media and I’ll
always be happy to help you :)

Disclaimer: I’m not SEBI registered. This is purely for edu & info purposes only. None of this is investment or financial
advice or a recommendation. Please consider the risks carefully.