What is the difference between stock and equity?

Stocks and equity are used interchangeably in the trading area jargon. Equity is the ownership of the assets that may have some sort of liabilities attached to them. It can be the capital invested by the owners in a company. Whereas the term stock refers to the traded equity, it is the ownership share in a company. Investors invest in stocks of companies, which they think might get a hike in the near future.

The stock market, also known as the equity market is a trading platform where company shares are traded. Buyers and sellers meet at the platform to buy and sell shares of the listed companies. This transaction of equities for investment is called equity trading. The Indian stock market features available equities for trading at the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). features

Derivatives are financial instruments with no independent value of its own. The value of such securities is derived from the underlying assets like stocks, bonds, commodities, currencies, etc. They were initially developed for hedging but now account for two-thirds of total transactions globally. The two popular derivatives products traded in India are futures and options.

Yes, a company can buy and sell derivatives securities without registering itself as an NBFC. The NBFC (Non-banking Financial Cooperation) is an entity involved under the principal business of acquisition of shares/bonds, advancing loans, insurance business, trading in marketable securities, etc. If any company is not registered as NBFC under Companies Act, 2013, that means their principal business involves agriculture, industrial activity, trading of products (other than securities), providing services, or property dealing.

No, stocks and derivatives are different securities while highly allied. The stock prices are derived from the supply and demand of the particular share, while the derivative prices are derived from that of the underlying. While the stocks are independently priced, the derivative is dependent. Basically, derivatives are the contracts between two parties whose price is determined by the underlying asset (like stocks, bonds, interest rates, etc).

With over 10 products that are offered in the country, it can be difficult to choose the most appropriate commodities for trading. For this purpose, the parameters like liquidity and volatility are considered. Crude Oil is the best commodity for trading in India followed by Gold. Such products boast diversity and growth along with rising demand over the years. The trading can be facilitated by the futures as well as spot contracts.

The MCX or Multi Commodity Exchange provides the option to trade in the array of products namely: Metal - Aluminium, Copper, Lead, Nickel, Zinc, Brass Bullion - Gold, Gold Mini, Gold Guinea, Gold Petal, Gold Petal, Gold Global, Silver, Silver Mini, Silver Micro, Silver 1000. Agro Commodities - Cardamom, Cotton, Crude Palm Oil, Kapas, Mentha Oil, Castor seed, RBD Palmolien, Black Pepper. Energy - Crude Oil, Natural Gas.

Trading or investing in commodities can be challenging as compared to the stock of a company. This is because commodity trading involves products that are physical in nature. There are four major ways to include commodity in your portfolio. One is buying the commodity in the spot market with cash, two is trading via a commodity futures contract, three buying ETF units of the commodity funds, and fourth investing in the shares of those companies that produce the commodity.

Currency trading includes trading in pairs. For example - the English pound against the US dollar. It’s all about relative value and whether one currency is stronger than the other. Unlike the stock market, in the foreign exchange market, you have to sell one currency and buy the other. It includes taking stances while trying to extract profits.

Yes. One can start trading with small balances. It gives you an idea of how the market works—most people who are new to forex try to start with small numbers so risks can be minimized. No matter the amount of money, since forex features trading using leverage, a small sum of money can control a much bigger financial position.

You can start by picking any currency pair you wish to trade-in. Beginners usually pick the English pound and the US dollar pair, since they are the major currency pairs and there is always a lot going on in those markets. If you trade in 25,000 units or less, you can trade them in zero spreads.

c. The importance of algo trading software lies in the fact that you put your hard-earned money in that. It becomes extremely critical for you to select a good fit. A few of the important factors to consider while selecting the software are the availability of market data, latency issues, configurability, customization, and ease of writing programs. With the ever-increasing market of algo trading, the options have no limit. Still, a few of the top software that you can select from are, NEST, Greek Soft, uTrade, Trade Lab API, Amibrokers, MT4, Interactive Brokers, and E-options for options trading.

a. In simple terms, algo trading is making use of algorithms to structure as well as execute your trading strategies. To answer whether this works or not, put some highlights on the trading logoc. Algo Trading is responsible for about 60-75% of global trades while 40-50% turnover of Indian cash and derivatives market which is magnificent. If you are well equipped with notable coding skills (you may also outsource this to your broker) and your strategies are rewarding, you won’t find algo trading counterproductive. Since algo trading is free of human interventions, it can turn out to be even more beneficial as compared to manual trading.

a. Algo trading can be immensely profitable due to several factors attached to it. Primarily, since this is technology-based trading the chances of any opportunity getting missed are almost zilch. Secondly, the speed of order execution is unparalleled as compared to manual ones which can altogether turn the deal from losing to winning in a jiffy. Next comes the ease with which the algo trading explore prices and provide liquidity. Finally, it comes with an advantage of no human intervention and hence no emotional conflicts whatsoever. Beyond the shadow of a doubt, algo trading can be conducive enough to be profitable in the market.

Depositories are institutions which hold financial securities such as shares, bonds, mutual fund units, equities in dematerialised form. They track and maintain the ownership records of these securities and also facilitate the trading of depository securities in electronic form. Two main depositories in India include: National Securities Depository Ltd. (NSDL) Central Depository Services Ltd. (CDSL)

Depositories are responsible for safe-keeping your securities and keeping a record of all your trades. The Depository System involves an electronic system that facilitates easy, paperless trading and faster settlement cycles.

A depository agent is also known as a Depository Participant (DP) and is responsible to coordinate between the depository and the investors. The relationship between the two is governed by an agreement made under the Depositories Act. A depository agent offers depository-related services to investors after obtaining a certificate of registration from SEBI.

The hedging can be divided into three types which will help investors protect their portfolio from unwarranted risks of currency, commodities, etc. i. Forward Contract: Over-the-counter contracts to buy or sell a commodity on the future date at a specified price. ii. Futures Contract: This is a standardized contract which works on the similar grounds as the forward contract. iii. Money Markets: Hedging can also be done with the money market instrument which have a maturity of one year or less.

The currency hedge ETFs are the funds that remove the currency risk of price fluctuations. ETFs are available for a number of underlying assets in the most major markets. This provides you with an opportunity to invest in the funds which were primarily accessed to only institutional investors. It provides you an opportunity to globally diversify your portfolio. The benefit of hedge ETFs is the cost-effectiveness, larger ETFs can hedge risk at fraction of hedging cost than cost incurred by an individual investor.

In order to mitigate the exchange rate risks and to know the certainty of payments. The hedging helps you in taking timely decisions as your business is immune to the currency’s fluctuation. There can be a time lag between your purchase and payment which can give rise to currency appreciation or depreciation. Such hedging will help your business to relieve from the constant process of tracking currency movements.