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Financial markets- An introduction1 Section

There are several definitions of financial markets that are used in the financial services industry which

describe the concept of buying or selling any financial instrument. It is important to know them but moreimportant to understand them as they imply the same meaning.

Some of the definitions of financial markets that are used are as follows:

It is a broad term describing any marketplace where buyers and sellers participate in the trade of

assets such as equities, bonds, currencies and derivatives.

Financial markets are typically defined by having transparent pricing, basic regulations on trading,

costs and fees and market forces determining the prices of securities that trade.

A financial market is a mechanism that allows people to easily buy and sell (trade) financial securities

(such as stocks and bonds), commodities (such as precious metals or agricultural goods.

Instruments in financial markets2 Section

This chapter will brief you on the most common types of financial markets and the functions of each of them:

Financial market Function Regulatory authority

Capital market To raise medium and long term funds Securities Exchange Board of India

Money market To raise short and medium term funds Reserve Bank of India

Commodity market Facilitate the trading of commodities. Forward Market Commission

Insurance marketFacilitate the redistribution of variousrisks

Insurance Regulatory and DevelopmentAuthority

Foreign ExchangeMarket

Facilitate the trading of foreignexchange

Foreign Exchange DealersAssociation of India

Capital markets form an important source of liquidity in the financial markets. Capital markets generate thehighest liquidity among all financial markets. Capital market is a market for securities which can either bethrough Equity or Debt and hence the two types of Capital markets are Securities market(Equity) and Bondmarket(Debt). The focus of this chapter will be on equity component of the Capital markets.

The securities market can be further sub divided into two types namely the Primary marketand Secondary market.

Primary market

A company can raise funds through 2 modes namely Equity and Debt.

Hence, when one studies the balance sheet of any company, the capital structure will have two

components namely Equity and Debt.

The market in which the company can raise funds is the primary market.

In the primary market the transaction of securities is unidirectional i.e. Company sells and the

investor buys.

Suppose the company wants to raise funds through the equity mode, It is usually done through a

public issue or an IPO(initial Public offer).

The companies have to follow a well-established legal procedure and involve a number of


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intermediaries such as underwriters, brokers, etc. who form an integral part of the primary market.

The process of an IPO is not important in this training program but it is important to know that the

IPO of a company is done through a collaboration with an underwriter(investment banker) andthrough this collaboration, the company releases a prospectus known as the DRHP(Draft Red herringprospectus).

In brief the DRHP states all important details of the company like the future prospects, financial

valuation, inherent risks, capital structure, future revenue sources, etc. These details are extremely important to be disclosed to the public prior to raising funds as mandated

by SEBI. This is lieu with the complete disclosure norms set by SEBI to protect investors fromfraudulent companies.

Secondary market

Once the company lists in the primary market, the buying and selling of securities takes place

between investors, traders and speculators.

In the secondary market, the market action i.e. supply and demand leads to price discovery of the

financial security.

A flow chart to explain the Capital market is as below:

(A) Capital Market : It have 2 types,

(1) Equity (2) Debt

In Equity there are 2 types, (a) Primary Market & (b) Secondary Market.

In Debt There are 2 types, (a) Bonds (b) Debentures.

Financial instruments are traded under 2 main categories namely the Spot market and thefutures market.

Below are the few features of these 2 types of markets

Spot market

A market in which goods are sold for cash and delivered immediately. Contracts bought and sold on

these markets are immediately effective.

Any stock trading only in the spot market has a circuit limit of either 5,10 or 20%. For example

Indiabulls finance has a circuit limit of 20% which means that the price of the stock will not go aboveor below the 20% limit for that day.

Any stock trading in the spot market does not have a lot size. For example one can buy or sell any

number of shares of Reliance Industries in the spot market.

Any stock trading in the spot market does not have a contract expiry.

Short selling in the spot market is allowed only for intraday. No positions can be carried forward for

the next day.

Futures market

A futures transaction for which instruments can be reasonably expected to be delivered in one month

or less. Though these goods may be bought and sold at spot prices, the goods in question are tradedon a forward physical market.

Any stock trading in the futures market does not have a circuit limit. For example since Reliance

Industries trades in both the spot and futures market, it does not have a circuit limit in the both themarkets.

Any stock trading in the futures market has a definite lot size that is set by the exchange. For

example Reliance Industries has a lot size of 250 shares. Hence if one wants to buy 1 lot of Reliance


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Industries, he/she has to buy a minimum of 250 shares in the futures segment. One can buy only inmultiples of this lot size i.e. 250,500,750 and so on.

Any stock trading in the futures market has a contract expiry which is the last Thursday of everymonth.

In the futures market at any given point of time 3 contracts will be available to trade i.e. current

month, next month and the month after next.

Short selling position is allowed to be carried forward till the contract expiry in the futures segment.

Market Exchanges3 Sections

This chapter will introduce the various exchanges that regulate the various asset classes like Equity,Commodity, Currency, etc.

Equity markets in India come under the purview of nationalized exchanges namelya) BSE- Bombay stock exchangeb) NSE- National stock exchange

The BSE was incorporated in July 1875 thereby making it the oldest exchange in India. It has over 8000 scrips listed on the exchange making it the largest exchange in the world.

The benchmark index for the BSE is the SENSEX which comprises of 30 stocks with the

highest market capitalization.

Market capitalization is calculated as the price of the share multiplied by the number of outstanding

shares in the market. Hence the 30 stocks in the SENSEX are large cap companies with the largest

weightage given to those stocks with the highest market capitalization.

The NSE was incorporated in November 1992 as a alternate exchange to the BSE but has since

overtaken the BSE in terms of volumes traded.

The Benchmark index for the NSE is the NIFTY which has 50 stocks with the highest market

capitalization.

Under the equity segment of the market exchange there are several types of products that are traded.Below are some of the details of the products that are currently being traded in the 2 exchanges.

There are 2 types of Exchange : (A) Spot & (B) Derivatives.

In Spot , there are 2 types : (a) Stock (b) Index.

Derivatives also have 2 Parts : (a) Futures & (b) Options. (They are stock & Index Only)

In the 2 exchanges one cannot trade in index spot i.e. Nifty or the SENSEX but the same can be traded

in futures i.e. Nifty futures and SENSEX futures.NSE- Futures and Options of stocks and indices can be traded along with individual stocks.BSE- SENSEX futures can be traded along with individual stocks. Options trading and Stock futurestrading is not present in BSE.

There are 2 exchages where commodity trading happens in India namely MCX(Multi Commodity exchange)and NCDEX(National Commodity and derivative exchange).

Commodity markets are quite like equity markets. The commodity market also has two constituentsSpot market and derivative market.

In case of a spot market, the commodities are bought and sold for immediate delivery.


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In case of a commodities derivative market, various financial instruments having commodities as

underlying are traded on the exchanges.

Commodity future is a derivative instrument for the future delivery of a commodity on a fixed date at

a particular price. The underlying in this case is a particular commodity.

If an investor purchases an oil future, he is entering into a contract to buy a fixed quantity of oil at a

future date. The future date is called the contract expiry date. The fixed quantity is called thecontract size. These futures can be bought and sold on the commodity exchanges.

The commodities include agricultural commodities like wheat, rice, tea, jute, spices soya, groundnut,coffee, rubber, cotton, etc, precious metals - gold and silver, base metals - iron ore, lead, aluminum,nickel, zinc etc, and energy commodities -crude oil and coal.

Like mentioned above there are 2 major exchanges that allow trading in commodities i.e. MCX and NCDEX.

Below is the list of commodities traded in MCX.

MCX have 3 parts (A) Bullions (B) Base Metals (c) Energy

In Bullions, it have 2 parts : (a) Gold (b) Silver

In Base Metals, it has 5 Parts : (a) Copper (b) Zinc ( c) Lead (d) Aluminium (e) Nickel

In Energy, it has 2 parts : (a) Crued Oil (b) Natural Gas

The Options market is a new financial instrument which is currently being traded only in NSE.

Options can be of 2 types namely- Index and Stock options

Options have similar features to futures segment where in the lot size and the contract expiry is the

same as that of the stock/index future. For example Reliance Industries has a lot size of 250 in bothfutures and options.

The expiry for an options contract is also the last Thursday of every month.

Currently the index options that are being traded are Nifty and Bank Nifty options.

All stocks that are traded in futures are also traded in options.

The options market will be explained in detail in the further courses.

Important data impacting Financial markets1 Section

This chapter will throw light on some of the major micro and macro economic variables that impact theIndian financial markets.

GDP- Gross Domestic Product Gross domestic product (GDP) refers to the market value of all final goods and services

produced within a country in a given period.

The GDP data is released every quarter

The GDP data is released by the Ministry of Finance

GDP is a very important data which shows the financial market activity for that quarter

A growth in GDP number indicates a growing economy and hence is a positive sign for theStock markets

A fall in GDP growth indicates negative sentiment in the market and invariably leads to a fall in


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the Stock market

IIP- Index of Industrial Production

IIP (Index of Industrial Production) denotes the total production activity that happens in thecountry during a particular period as compared to a reference period.

The IIP data is released every month

IIP is a very important data which shows the manufacturing activity in the economy

A low IIP data indicates a slowdown in demand and hence manufacturing implying a negativesentiment on the stock market

A high IIP number indicates a robust growth in the manufacturing sector indicating positivesentiment in the securities market.

Inflation

Inflation is a key data that shows the supply and demand activity in an economy.

Inflation data is released every month

The inflation is calculated through the Wholesale Price Index

A higher inflation implies a high demand for goods or low of supply of goods.

A lower inflation implies a low of demand for goods or a high supply of goods

Credit policy

The RBI credit policy is a monthly event where in the RBI regulates the liquidity in the marketwith the help of several tools

Some of these tools are CRR(cash reserve ratio), SLR(Statutory Liquidity ratio), Repo andreverse repo rate.

CRR(Cash Reserve Ratio) is the amount of Cash(liquid cash like gold) that the banks have tokeep with RBI. This Ratio is basically to secure solvency of the bank and to drain out theexcessive money from the banks. If RBI decides to increase the percent of this, the available

amount with the banks comes down and if RBI reduce the CRR then available amount withBanks increased and they are able to lend more.

SLR((Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain inthe form of cash, or gold or govt. approved securities (Bonds) before providing credit toits customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India)in order to control the expansion of bank credit.

A glossary of Financial terms1 Section

A glossary of Financial terms

Arbitrage The business of taking advantage of difference in price of a security traded on two or more stockexchanges, by buying in one and selling in the other (or vice versa).

Averaging The process of gradually buying more and more securities in a declining market (or selling in arising market) in order to level out the purchase (or sale) price

Basis Point (BP) The smallest measure used in quoting yields on fixed income securities. One basis point isone percent of one percent, or 0.01%.

Bonus A free allotment of shares made in proportion to existing shares out of accumulated reserves. A


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bonus share does not constitute additional wealth to shareholders. It merely signifies recapitalization ofreserves into equity capital. However, the expectation of bonus shares has a bullish impact on marketsentiment and causes share prices to go up.

Bid and offer Bid is the price at which the market maker buys from the investor and offer is the price atwhich he offers to sell the stock to the investor. The offer is higher than the bid.

Buy limit order An order of buying a security with a condition that order will not be executed above thespecific mentioned price.

Closing Price The trade price of a security at the end of a trading day. Based on the closing price of thesecurity, the base price at the beginning of the next trading day is calculated.

Call Option This is the right, but not the obligation, to purchase shares at a specified price at a specifieddate in the future. See Options.For this privilege, the buyer pays a premium which would be a fraction of theprice of the underlying security. You are gambling that the share price will rise above the option price. If thishappens you can buy the shares and sell them immediately for a profit.If the share price does not rise aboveyour option price, you do not exercise the option and it expires - all you have lost is the initial payment madeto purchase the option.

Circuit breaker When a stock price increases or decreases by a certain percentage in a single day it hitsthe circuit breaker. Once the stock hits the circuit breaker, trading in the stock above (or below) that price isnot allowed for that particular day.

Day Trading Day trading is the buying and selling of stocks during the trading day by individuals known asday traders on their own account. The aim is to make a profit on the day and have no open positions at theclose of the trading session, the day.

Disclosed Quantity (DQ) A dealer can enter such an order in the system wherein only a fraction of theorder quantity is disclosed to the market. If an order has an undisclosed quantity, then it trades in quantitiesof the disclosed quantity.

Earnings Per Share (EPS) It is the most important measure of how well (or otherwise) the board ofdirectors are doing for the shareholders. This measure expresses how much the company is earning for everyshare held. The calculation is 'pre-tax profit dividend by the number of shares in issue'. Earnings per share ismore important than the overall reported profit figure ! The reason is that EPS provides a more pure measureof profitability.

Futures A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price ata fixed date in the future. Futures contracts were originally invented to allow those who regularly buy and sellgoods to protect themselves against future changes in the price of those goods. In other words, the futuresmarkets evolved to allow producers or consumers to hedge their risk.

Hedging Offsetting or guarding against investment risk. A perfect hedge is a no-risk-no gain precaution.Aconservative strategy for reduction of risk through futures, options or some other derivative, by opening anopposite position to that already held in the underlying market. Taking positions in securities so that eachoffsets the other.

Insider trading Trading on information which is not really available to the general public. Trading in aCompany's shares by a connected person having non-public, price sensitive information, such as expansion

plans, financial results, takeover bids, etc., by virtue of his association with that Company, is called insidertrading.


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Stock Cash- Level 13 Chapters

This course will take you through the basics of the equity markets and how DreamGains advises itsclients to buy and sell and hence profit from the same. This course will also brief you on the importantdetails to know to effectively sell Stock cash as a product.

Stocks and Stock markets

3 Sections

This chapter will brief you on the general theory about stocks as a financial instrument and the Indianstock markets.

Plain and simple, stock is a share in the ownership of a company. Stock represents a claim on thecompany's assets and earnings.

As you acquire more stock, your ownership stake in the company becomes greater.

Whether you say shares, equity, or stock, it all means the same thing.

Owning a stock means that one has a stake in the company and therefore has voting rights

Owning a stock implies that the shareholder will receive the annual report of the company andhas the right to attend the annual general meeting held by the company.

A sample of the annual report is attached in the next page

Trading/investing in stocks can be done in two ways- Direct and indirect

Direct is when the individual buys/sells stocks on his own or through a broker on his/her behalf.A demat account is required to do direct trading.

Indirect trading/investing is when the individual buys through Mutual funds

Indian Stock Markets:

As discussed in the Financial markets module, there are two nationalized exchanges in India- NSE andBSE.

NSE has around 2000 stocks trading where as the BSE has over 8000 stocks trading.

The volumes traded in the NSE are substantially higher than in the BSE and hence DreamGainsgives advise only on the scrips trading in the National Stock exchange(NSE).

Sensex and Nifty: These two are the major indices of the Indian share market.

There are two main stock exchanges in India - BSE and NSE. BSE stands for Bombay StockExchange. This is the oldest exchange in India. Thirty shares are included in SENSEX. NSEstands for National Stock Exchange.Nifty has 50 shares included in it.

Stocks are sub divided into 3 main categories i.e. Small cap, Mid cap and Large cap

These stocks are divided into the 3 categories based on their market capitalization

Market capitalization is calculated as the price of the shares multiplied by the number of


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outstanding share. For example if the price of the share is Rs 100 and there are 1 lakhoutstanding shares then the market capitalization of that stock is 100*100000= 10,00,000,000i.e. 10 crore

Small cap stocks are those that have a market capitalization of less than 1000 cr

Mid cap stocks are those that have a market capitalization between 1000 and 5000 cr

Large cap stocks are those that have a market capitalization of more than 5000 cr

Stock Cash Product

9 Sections

This chapter will brief you on the Stock cash product that DreamGains advises its customers on.

TYPES OF CALLS:

Below are some of the features of the product that one has to keep in mind. Each one of these points will beexplained in detail in the further pages

All the calls provided will be for intraday

An average of 3-4 calls will be sent to customers on a daily basis Only 2 calls will be running simultaneously

The risk reward ratio of the call will be 1:1 i.e. 0.8% Stop loss and Tg1 of 0.8% and Tg2 of1.5%

Only scrips that have a volume value of a minimum of Rs.6 cr will be provided

Since the calls will be only intraday short selling calls also will be given

Only buy above and sell below calls will be provided i.e. If it is a buy call, Buy above call willbe sent and if it is a sell call then a Sell below call will be sent. An example of both these typesof calls is as mentioned below

Buy SESA GOA above 250

SL- 248TG-252/253.75

Sell INFOSYS bellow 2000SL-2016TG-1984/1970

All calls will have 1 stop loss and 2 targets

The calls will be sent to customers via SMS and Yahoo messenger

TYPES OF CALLS : INTRADAY

All the calls in the stock cash product will be on an intraday basis i.e. If the customer buys a stockrecommended by DreamGains today, he has to sell the stock the same day. The customer will beinformed to do so.

Stocks show an average fluctuation of 3-4% in intraday trade and we try to capture 2-3% of thismovement

The risk associated with intraday trading is much lower when compared to thepositional/delivery based trading. This is because the profit or loss is booked the same day andmajor fluctuations in the markets are avoided by squaring off the position the same day.

The primary focus of a trader must be to safeguard his capital and hence intraday trading is a


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safer avenue since the loss is limited to that day.

Since the calls will be valid only for intraday, short selling calls will also be sent to customers

Short selling is a concept where in the trader can profit from a stock which is depreciating invalue. Here the trader sells the stock at a higher price and buys the stock back at a lower pricethereby completing his transaction in the same day.

For example the trader short sells a stock at Rs.150 in expectation that the stock will fall to 145.

Suppose the stock falls to 145 he/she can buy back the stock thereby making a profit of Rs.5 pershare. This is exactly the inverse of buying the share at a lower price and sell it at higher pricethereby making a profit on the price difference.

What is important to note is that the the transaction has to be completed in the same day i.e. Ifone has bought the stock he/she has has to complete the transaction the same day by selling thestock. If one has sold the stock he/she has to complete the transaction the same day by buyingthe share.

NUMBER OF CALLS:

The customer will receive 3-4 buying or selling calls on an average in a day.

The customer is informed that he/she will receive on average 3-4 calls in a day for him/her toplan her investment accordingly.

At any given point of time 2 calls will be running simultaneously and hence the investment ofthe customer has to be divided into 2 components.

Lets take a scenario where the customer has an investment of Rs 4 lakhs. He has to divide thisinto 2 equal components i.e. Rs 2 lakhs has to be invested in each call. Suppose the first call isto buy Sesa Goa above 250, he has to buy Rs 2 lakh worth of shares in Sesa Goa. Hence thequantity that the customer has to buy is Rs 2 lakh/250= 800. Hence he has to buy 800 shares.

Suppose the second call is sent ot the customer to sell Infosys below 2000. Here he has to sellRs 2 lakh worth of Infosys stock i.e. Rs 2 lakh/2000= 100 shares of Infosys.

Suppose the customer puts unequal investment in the calls, the the customer is at risk becausethe call which he has invested more and hits the stop loss can superseed the profit made fromthe call in which he has invested less. This concept will be explained with different scenarios inthe further pages.

After one of the 2 calls given initially is closed, the 3rd call will be initiated and hence at anygiven point of time the customer will have to invest in only 2 calls.

RISK REWARD RATIO :

As mentioned before the risk reward of all the calls given will be 1:1 i.e. the target1 will be 0.8% andthe stop loss will also be 0.8%.

Lets take an example where in the the customer is told to Buy Reliance Industries above Rs 800.The stop loss will be worth Rs 6.4 and the Tg1 will be Rs.6.4 and Tg2 will be Rs.12. Hence theentire call will be as below

Buy Reliance Industries above 800SL- 793.6TG- 806.4/812


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In all the calls the risk reward ratio of 1:1 and 0.8% will be maintained.

This risk reward ratio of 1:1 is maintained in all the calls because the customer has to disctributehis risks among all the calls. An example of the same is as below.

If the customer has an investment of Rs 4 lakh, he has to divide his investment into 2 parts asmentioned in the above page i.e. Rs 2 lakh has to invested in both the calls.

Suppose 2 calls are sent to the customer as belowCall 1Buy Sesa Goa above 250SL-248TG- 252/253.75

Call 2Buy Reliance Industries above 800SL- 793.6TG- 806.4/812

In call 1 he has to buy 800 shares of Sesa GoaIn call 2 he has to buy 250 shares of Reliance Indsutries

Suppose a scenario arises where in Call 1 the 1st target is achieved he books a profit of Rs 2 * 800 = Rs1600Suppose the call 2 fails and hits the stop loss, then the customer makes a loss of Rs 6.4 * 250 = Rs 1600Hence the customer is neutral at the end of the day as he has lost Rs.1600 in one call and made a profitof Rs.1600 in the other.

Suppose the customer had invested Rs 1 lakh in the first call and Rs 3lakh in the second callProfit in Call 1 is Rs 2 * 400 shares = Rs 800(since he has bought share worth Rs 1 lakh is call 1)

Loss in Call 2 is Rs 6.4 * 375 shares= Rs 2400(since he has bought shares worth Rs 3 lakh in Call 2)Hence at the end of the day the customer will be in a net loss of Rs 1800.

Therefore, it is absolutely vital for the customer to invest equally in all the calls.

MAINTAINING THE STOP LOSS:

In every call that is sent to the customer a Stop loss(SL) is mentioned.

The concept of a stop loss is to limit the loss of the customer to 1%.

Suppose the analysis says that the stock price will rise, but due to some reason the analysis fails,

the customer has to book his loss to a limited extent. Since no analysis is 100% accurate, the Stop loss becomes an insurance against a failure of the

same.

Suppose the customer does not maintain a stop loss, the customer can lose more than 1% whereas he could have limited his loss at 1%

Failure to maintain a stop loss can substantially erode the traders capital and hence limit hisability to take positions in futures profitable calls.

It is very important to maintain a stop loss while trading. This will help in minimizing the lossin case the stock price is moving is the unfavorable direction. Assume that the share bought falls


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down drastically, in this case one may end up with huge loss. But stop loss will help restrict theloss to a certain limit.

VOLUME OF THE SCRIPS:

We give calls to our customers in scrips that are high volume.

There are over 2000 stocks trading in NSE and not all of them have a high volume.

Low volume stocks show extremely erratic movement and hence analysis on these stock is verydifficult and risky for customer.

Hence we give calls only on those stocks that have a volume value of more than Rs.6 cr.Volume value is calculated as the price of the stock multiplied by the number of shares traded.

Another reason for choosing high volume stocks is that the customers should get an opportunityto buy or sell the quantity that they want.

In low volume stocks, the customer may not get the complete quantity that he/she has bid for.

High volume stocks show a relatively stable movement and in most cases follow technicalanalysis.

BUY ABOVE AND SELL BELOW:

As mentioned before, the calls that we give our customers will be Buy above if it is a buy call and Sellbelow if it is sell call

There are several reasons for doing so. One of the reasons is that DreamGains follows technicalanalysis while giving calls. One of the indicators used in technical analysis is support andresistance level. The basics of technical analysis will be covered in the further modules.

What is important to understand now is that when a stock breaks a resistance level it is expectedto move further up and if it breaks a support level it is expected to fall down.

Suppose the resistance for a stock is at Rs150 and currently it is trading at 145, we will send outa call to buy the stock ABOVE Rs 150 as it is expected to move further up after it breaks the150 level

Suppose the resistance for a stock is at 200 and currently the stock is trading at 205 we will sendout a call to sell BELOW 200 as it is expected to fall further if it breaks the 200 level.

A price is chart is attached below to visually explain the same.

Another reason for giving buy above and sell below calls is that the customers must get

sufficient time to execute the trades advised by DreamGains and hence a message to buy abovea particular level will provide them sufficient time to enter the call.

TYPES OF ORDERS:

There are 3 main types of orders when a customer wants to buy a stock on the terminal he/she has.

Market Order: When a BUY market order is placed, the ask price is paid, kind of like the buy itnow. Chances are that the order will get filled immediately but often at a higher price than the last


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price. If a SELL market order is placed, the same happens except the shares are sold at the bid price.

Limit Order: A limit order is where the price is specified in which to buy/sell the stock to avoid anysurprises. The downside is waiting until a buyer/seller hits the limit price which may or may nothappen.

Stop: This is a little more advanced where the stop price is set for either buying or selling. Forexample, a stop loss sell order is set to minimize the loss that a trader is willing to take. When the stopprice is reached, a market order is sent out at that price.

We recommend the customer to buy/sell the stock through a limit order. This is done becausewe recommend the customer to buy above a particular level and he can do so by placing a limitorder.

For example suppose we have sent the customer to buy a stock above 200 and currently thestock is trading at 198, if he places a market order, his order will get executed at 198. However,this is not the price at which we have recommended the customer to buy. Hence he has to placea limt order above 200. The details of how to place the orders will be explained in the furtherpages.

USPs OF THE PRODUCT:

HIGH MOMENTUM STOCKS

HIGH VOLUME

ACCURACY OF 80-85%

INTRADAY CALLS

CAN BUY ANY NUMBER OF SHARES

RESEARCH SUPPORT

Trading strategy1 Section

This chapter will brief you on the trading strategy that the customer should follow in DreamGains calls

Stock Futures- Level 1

3 ChaptersThis course will take you through the basics of the stock futures markets and how DreamGains advisesits clients to buy and sell and hence profit from the same. This course will also brief you on theimportant details to know to effectively sell Stock futures as a product.

Stock futures and Stock futures markets2 Sections

This chapter will brief you on the general theory about stock futures as a financial instrument and the


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stock futures markets in India.

BASICS OF FUTURES:

In the simplest terms, a futures contract is an agreement in which a buyer and a seller agree to consummatea transaction at a predetermined time in the future at a price agreed upon today.

With a futures contract, the underlying merchandise is known. For example, you can buy a futures

contract on gold, stocks, Nifty, Silver, and many other items.

The underlying item is described specifically in the contract specifications which are determined by

the futures exchange on which it trades.

Below are some of the differences between the spot mraket and the futures market

Spot market

A market in which goods are sold for cash and delivered immediately. Contracts bought and sold on

these markets are immediately effective.

Any stock trading only in the spot market has a circuit limit of either 5,10 or 20%. For example

Indiabulls finance has a circuit limit of 20% which means that the price of the stock will not go above

or below the 20% limit for that day. Any stock trading in the spot market does not have a lot size. For example one can buy or sell any

number of shares of Reliance Industries in the spot market.

Any stock trading in the spot market does not have a contract expiry.

Short selling in the spot market is allowed only for intraday. No positions can be carried forward for

the next day.

Futures market

A futures transaction for which instruments can be reasonably expected to be delivered in one month

or less. Though these goods may be bought and sold at spot prices, the goods in question are tradedon a forward physical market.

Any stock trading in the futures market does not have a circuit limit. For example since Reliance

Industries trades in both the spot and futures market, it does not have a circuit limit in the both themarkets.

Any stock trading in the futures market has a definite lot size that is set by the exchange. For

example Reliance Industries has a lot size of 250 shares. Hence if one wants to buy 1 lot of RelianceIndustries, he/she has to buy a minimum of 250 shares in the futures segment. One can buy only in

multiples of this lot size i.e. 250,500,750 and so on. Any stock trading in the futures market has a contract expiry which is the last Thursday of every

month.

In the futures market at any given point of time 3 contracts will be available to trade i.e. current

month, next month and the month after next.

Short selling position is allowed to be carried forward till the contract expiry in the futures segment.

INDIAN STOCK FUTURES MARKET:

As mentioned in the previous modules, there are 2 exchanges in India namely NSE and BSE.

Stock futures are only traded in NSE.

Not all scrips that are there in spot market are traded in the futures market

Out of the 2000 scrips there are around 200-250 stocks that are traded in the futures segment

A list of these stocks is updated on the NSE website

It is at the discretion of NSE to add and remove stocks from the futures segment. However, this


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information of any addition or deletion will be intimated to the traders through circularsreleased by NSE.

Usually those stocks are allowed to trade in futures that have high volumes and a relativelystable movement

Each stock future with its lot size will be mentioned by the NSE in the circular. The lot size ofthese stocks can be changed according to how much it has appreciated or depreciated in value.

Any change in the lot size will also be intimated by NSE through a circular.

Stock Futures Product8 Sections

This chapter will brief you on the Stock futures product that DreamGains advises its customers on.

TYPES OF CALLS:

Below are some of the features of the product that one has to keep in mind. Each one of these points will be

explained in detail in the further pages


An average of 2-3 calls will be sent to customers on a daily basis

Only 2 calls will be running simultaneously

The risk reward ratio of the call will be 1:1 i.e. The stop loss and target will be worth Rs 4000each. This will be explained in detail in the further pages

Short selling calls also will be given


Buy SESA GOA futures above 250(lot size- 2000)SL- 248TG-252/254

Sell INFOSYS futures below 2000(lot size-250)SL-2016TG-1984/1968



TYPES OF CALLS-INTRADAY:

All the calls in the stock futures product will be on an intraday basis i.e. If the customer buys a stock futurerecommended by DreamGains today, he has to sell it the same day. The customer will be informed to do so.

Stocks show an average fluctuation of 3-4% in intraday trade and we try to capture 2-3% of thismovement

The risk associated with intraday trading is much lower when compared to thepositional/delivery based trading. This is because the profit or loss is booked the same day and


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major fluctuations in the markets are avoided by squaring off the position the same day.

The primary focus of a trader must be to safeguard his capital and hence intraday trading is asafer avenue since the loss is limited for that day.


Short selling is a concept where in the trader can profit from from a stock which is depreciatingin value. Here the trader sells the stock future at a higher price and buys the stock future back at

a lower price thereby completing his transaction in the same day. For example the trader short sells a stock at Rs.150 in expectation that the stock will fall to 145.

Suppose the stock falls to 145 he/she can buy back the stock thereby making a profit of Rs.5 pershare. This is the exactly the inverse of buying the share at a lower price and sell it at higherprice thereby making a profit on the price difference.

NUMBER OF CALLS:


The customer is informed that he/she will receive on average 2-3 calls in a day for him/her to

plan her investment accordingly. At any given point of time 2 calls will be running simultaneously and hence the investment of

the customer has to be divided into 2 components.

Lets take a scenario where the customer has an investment to buy 4 lots. He has to divide thisinto 2 equal components i.e. 2 lots to be invested in each call. Suppose the first call is to buySesa Goa futures above 250, he has to buy 2 lots of Sesa Goa futures.

Suppose the second call is sent ot the customer to sell Infosys futures below 2000. Here he hasto sell 2 lots of Infosys futures below 2000.

Suppose the customer puts unequal investment in the calls, the the customer is at risk becausethe call which he has invested more and hits the stop loss can superseed the profit made fromthe call in which he has invested less. This concept will be explained with different scenarios in

the further pages. After one of the 2 calls given initially is closed, the 3rd call will be initiated and hence at any

given point of time the customer will have to invest in only 2 calls.

RISK REWARD RATIO:

As mentioned before the risk reward of all the calls given will be 1:1 i.e.the target and Stop loss will be worth Rs 4000 each.

Lets take an example where in the the customer is told to Buy Reliance Industries futures aboveRs 800. The lot size for Reliance Industries futures is 1000. Hence, if the customer wants to buy1 lot of Reliance Industries futures, he has to buy a minimum of 1000 shares. Since the riskreward ratio in Stock futures is Rs 4000, the stop loss and target is calculated as Rs 4000/lotsize. In this case the SLand Tgt will be Rs 4000/1000= Rs 4. Hence the complete call will be asfollows


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Buy Reliance Industries futures above 800(lot size-1000)SL- 796TG- 804/808

In simple terms it means that if a customer has bought 1 lot of stock futures, the maximum hewill lose if it hits the stop loss is Rs 4000 and the maximum he will gain if it hits the first target

is Rs 4000. In all the calls the risk reward ratio of 1:1 and Rs 4000 will be maintained.

This risk reward ratio of 1:1 is maintained in all the calls because the customer has to disctributehis risks among all the calls. An example of the same is as below.

If the customer has an investment of 4 lots, he has to divide his investment into 2 parts as mentioned inthe above page i.e. 2 lot to be invested in both the calls.

Suppose 2 calls are sent to the customer as belowCall 1Buy Sesa Goa futures above 250(lot size-2000)

SL-248TG- 252/254

Call 2Buy Reliance Industries futures above 800(lot size-1000)SL-796TG-804/808

In call 1 he has to buy 2 lots of Sesa Goa futuresIn call 2 he has to buy 2 lots of Reliance Indsutries futures

Suppose a scenario arises where in Call 1 the 1st target is achieved he books both lots and makes aprofit of Rs Rs 8000Suppose the call 2 fails and hits the stop loss, then the customer makes a loss of Rs 8000Hence the customer is neutral at the end of the day as he has lost Rs 8000 in one call and made a profitof Rs 8000 in the other.

Suppose the customer had traded in 1 lot in the first call and 3 lots in the second callProfit in Call 1 is Rs 4000(since he has bought 1 lot in call 1)Loss in Call 2 is Rs 12000 (since he has bought 3 lots in call 2)Hence at the end of the day the customer will be in a net loss of Rs 8000.

Therefore, it is absolutely vital for the customer to invest equally in all the calls.

Maintaining a stop loss:


The concept of a stop loss is to limit the loss of the customer to Rs 4000/lot

Suppose the analysis says that the stock price will rise, but due to some reason the analysis fails,the customer has to book his loss to a limited extent.


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Since no analysis is 100% accurate, the Stop loss becomes an insurance against a failure of thesame.

Suppose the customer does not maintain a stop loss, the customer can lose more thanRs.4000/lot where as he could have limited his loss at Rs 4000/lot


It is very important to maintain a stop loss while trading. This will help in minimizing the lossin case the stock price is moving is the unfavorable direction. Assume that the share bought fallsdown drastically, in this case one may end up with huge loss. But stop loss will help restrict theloss to a certain limit.

Buy above and sell below:

As mentioned before, the calls that we give our customers will be Buyabove if it is a buy call and Sell below if it is sell call

There are several reasons for doing so. One of the reasons is that DreamGains follows technical

analysis while giving calls. One of the indicators used in technical analysis is support andresistance level. The basics of technical analysis will be covered in the further modules.


Suppose the resistance for Reliance fturues is at 800 and currently it is trading at 796, we willsend out a call to buy Reliance futures ABOVE 800 as it is expected to move further up after itbreaks the 800 level

Suppose the support for Reliance futures is at 750 and currently it is trading at 755 we will sendout a call to sell BELOW 750 as it is expected to fall further if it breaks the 750 level.

Another reason for giving buy above and sell below calls is that the customers must getsufficient time to execute the trades advised by DreamGains and hence a message to buy abovea particular level will provide them sufficient time to enter the call.

TYPES OF ORDERS:

There are 3 main types of orders when a customer wants to buy a stock on the

terminal he/she has.

Market Order: When a BUY market order is placed, the ask price is paid, kind of

like the buy it now. Chances are that the order will get filled immediately butoften at a higher price than the last price. If a SELL market order is placed, the

same happens except the shares are sold at the bid price.

Limit Order: A limit order is where the price is specified in which to buy/sell the

stock to avoid any surprises. The downside is waiting until a buyer/seller hits thelimit price which may or may not happen.

Stop: This is a little more advanced where the stop price is set for either buying

or selling. For example, a stop loss sell order is set to minimize the loss that a


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trader is willing to take. When the stop price is reached, a market order is sentout at that price.


For example suppose we have sent the customer to buy a stock above 200 and currently the

stock is trading at 198, if he places a market order, his order will get executed at 198. However,this is not the price at which we have recommended the customer to buy. Hence he has to placea limt order above 200. The details of how to place the orders will be explained in the furtherpages.

USPs of the product:

ACCURACY OF 80-85%

HIGH VOLUME (MOSTLY A CATEGORY STOCKS)

ENOUGH TIME TO ENTER THE CALL INTRADAY CALLS

RESEARCH SUPPORT

Trading strategy1 Section

This chapter will brief you on the trading strategy that the customer should follow in DreamGains calls

Nifty Futures- Level 1

3 Chapters

This course will take you through the basics of the Index futures markets and how DreamGains advisesits clients to buy and sell and hence profit from the same. This course will also brief you on theimportant details to know to effectively sell Nifty futures as a product.

Index futures

1 SectionThis chapter will brief you on the general theory about index futures as a financial instrument and theindex futures markets in India.

Basics of index:

An index is the represntative of the exchage which projects a consolidated movement of the entiremarket.


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The Nifty is index that represents the NSE and SENSEX is the index that represents the BSE

Nifty comprises of 50 stocks with the highest market capitalization(market capitalizatio= Priceof the share * the number of outstanding shares)

SENSEX comprises 30 stocks with the highest market capitalization in the BSE.

The stock with the highest market capitalization will have the highest weightage.

Hence the weightage of each stock will vary on a daily basis since the maket capitalization and

prices of a stock changes on a daily basis. SInce indices are just a notional number, they are represented by number of points and not in

ruppee terms. For example if the Nifty moves from 5100 to 5150, it has moved by 50 points andnot by Rs 50.

Lets take an example where Reliance industries, which has a weightage of 13% in the nIfty,moves up by 5% on a particular day. So the NIfty will move up by 13% of 5% i.e. 0.65% fromthe previous day. Suppose NIfty was at 5100 the previous day, it will be move up by 33.15points(0.65%) and close at 5133.15.

Hence the individual movements of all the 50 stocks in lieu of the weighted average will beused to calculate the movement of Nifty in a day.

The movement of SENSEX is also calculated in the same manner.

The NIfty and SENSEX are present both in spot and futures.

Nifty can be traded in the deriavtives segment i.e. futures and options

SENSEX can be traded only in futures

Hence both the Nifty and SENSEX cannot be traded in the spot market.

Nifty Futures Product

8 Sections

This chapter will brief you on the Nifty futures product that DreamGains advises its customers on.

Type of calls :

Below are some of the features of the product that one has to keep in mind. Each one of thesepoints will be explained in detail in the further pages


An average of 5-6 calls will be sent to customers in a week


The risk reward ratio of the call will be 1:1 i.e. The stop loss and target for Nifty futures will be25 points and Bank Nifty futures will be 40 points

Short selling calls also will be given Only buy above and sell below calls will be provided i.e. If it is a buy call, Buy above call will

be sent and if it is a sell call then a Sell below call will be sent. An example of both these typesof calls is as mentioned below

Buy Nifty futures above 5350SL- 5325TG-5375/5400

Sell Bank Nifty futures below 10400


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SL-10440TG-10360/10320



Type of calls- Intraday :

All the calls in the Nifty futures product will be on an intraday basis i.e. If the customer buysNifty futures or Bank Nifty futures recommended by DreamGains today, he has to sell it the sameday. The customer will be informed to do so.

Nifty shows an average fluctuation of 40-45 points in intraday trade and we try to capture 25-30points of this movement


The primary focus of a trader must be to safeguard his capital and hence intraday trading is a

safer avenue since the loss is limited for that day.


Short selling is a concept where in the trader can profit from from a stock which is depreciatingin value. Here the trader sells the index future at a higher price and buys the index future back ata lower price thereby completing his transaction in the same day.

For example the trader short sells Nifty futrues at 5200 in expectation that it will fall to 5150.Suppose Nifty futures falls to 5150 he/she can buy it back thereby making a profit of 50 pointsper lot. SInce the lot size for Nifty futures is 50(i.e. one has to buy minimum 50 quantity ofNifty futures to trade in 1 lot), the profit he/she would make if Rs 2500. This is the exactly theinverse of buying Nifty futures at a lower price and sell it at higher price thereby making aprofit on the price difference.

Number of calls :


The customer is informed that he/she will receive on average 5-6 calls in a week for him/her toplan her investment accordingly.

The investment required to trade in Nifty and Bank Nifty futures calls is as explained below

The lot size for Nifty futures is 50 and for Bank Nifty futures is 25 i.e. If one wants to trade inNifty futures he has to buy a minimum of 1 lot(50 qty) and in Bank Nifty futures 1 lot

constitutes 25 qty. If one wants to buy 1 lot of Nifty futures, the investment required will be 5200*50( assuming

Nifty futures is trading at 5200) = Rs.2,60,000. Hence if one wants to buy 1 lot of Nifty futuresthe approximate investment will be between 2.5L and 3L

If one wants to buy 1 lot of Bank Nifty futures, the investment required will be 10400*25(assuming Bank Nifty futures is trading at 10400) = Rs.2,60,000. Hence if one wants to buy 1 lotof Bank Nifty futures the approximate investment will be between 2.5L and 3L

This makes it very difficult for all traders to trade in Nifty and Bank Nifty futures.

To encourage more traders to participate in the marekt, brokers all over India provide something


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cslled as MARGIN for trading. This means that the trader does not have to pay the entire 2.6Lto trade in 1 lot. He has the option to pay only 10% of the actual investment. Hence hisinvestment will be 26,000.

The broker provides margin for customers only if it is intraday trade. This is done because therisk of the broker is limited to that particular day.

Most brokers provide a margin of 10% to encourage high volumes in trading.

Risk reward ratio :

As mentioned before the risk reward of all the calls given will be 1:1 i.e. the target and Stop loss inNifty futures will be 25 points each and in Bank Nifty futures will be 40 points.

The customer has to trade in equal number of lots in all calls. The ideal investment we suggestis a minimum of 2 lots in each call.

SInce we give 2 targets, the customer has to book 50% at Tg1(1 lots) and 50% at Tg2(1 lot)

The has to buy a minimum 2 lots in all calls to distribute his risk. Unequal invesment will resultin possibility of higher loss.

Maintaining a stop loss :


The concept of a stop loss is to limit the loss of the customer to Rs 1250 per lot if Nifty futuresand Rs 1000 if Bank Nifty futures

Suppose the analysis says that the Nifty futures price will rise, but due to some reason theanalysis fails, the customer has to book his loss to a limited extent.


Suppose the customer does not maintain a stop loss, the customer can lose more than Rs 1250per lot where as he could have limited his loss at Rs1250.

Failure to maintain a stop loss can substantially erode the traders capital and hence limit hisability to take positions in future profitable calls.

It is very important to maintain a stop loss while trading. This will help in minimizing the lossin case the stock price is moving is the unfavorable direction. Assume that the share bought fallsdown drastically, in this case one may end up with huge loss. But stop loss will help restrict theloss to a certain limit.

Buy above and sell below :

As mentioned before, the calls that we give our customers will be Buy above if it is a buy call and Sellbelow if it is sell call.


What is important to understand now is that when Nifty breaks a resistance level it is expectedto move further up and if it breaks a support level it is expected to fall down.

Suppose the resistance for Nifty fturues is at 5200 and currently it is trading at 5180, we will


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send out a call to buy Nifty futures ABOVE 5200 as it is expected to move further up after itbreaks the 5200 level

Suppose the support for Nifty futures is at 5150 and currently it is trading at 5175 we will sendout a call to sell BELOW 5150 as it is expected to fall further if it breaks the 5150 level.

Another reason for giving buy above and sell below calls is that the customers must getsufficient time to execute the trades advised by DreamGains and hence a message to buy above

a particular level will provide them sufficient time to enter the call.

Types of orders :


Market Order: When a BUY market order is placed, the ask price is paid, kind of like the buy itnow. Chances are that the order will get filled immediately but often at a higher price than the lastprice. If a SELL market order is placed, the same happens except the shares are sold at the bid price.




For example suppose we have sent the customer to buy a stock above 200 and currently thestock is trading at 198, if he places a market order, his order will get executed at 198. However,this is not the price at which we have recommended the customer to buy. Hence he has to placea limt order above 200. The details of how to place the orders will be explained in the furtherpages.

USPs of the product :

LIMITED CALLS A DAY

ACCURACY of 80-85%

BENEFIT OF ALL 50 NIFTY STOCKS

INTRADAY CALLS

RESEARCH SUPPORT

MCX Commodities- Level 12 Chapters

This course will take you through the basics of the commodity markets and how DreamGains advises


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its clients to buy and sell and hence profit from the same. This course will also brief you on theimportant details to know to effectively sell MCX commodities as a product.

Commodities and Commodity markets

2 Sections

This chapter will brief you on the general theory about commodities as a financial instrument and theIndian commodity markets.

Commodities:

A commodity is a product having commercial value that can be produced,bought, sold, and consumed.

Commodity future is a contract to buy or sell specific commodity, of a specific quality, at aspecific price, for a specific future date on the exchange.

As in capital markets, a commodity exchange is an association or a company or any other bodycorporate that is organizing futures trading in commodities and is registered with FMC(Forward Market Commission). Two major national level commodities exchanges are MultiCommodities Exchange of India (MCX), National Commodities and Derivatives Exchange ofIndia (NCDEX).

Commodity Market in India is regulated by Forward Market Commission (FMC) under theguidance of the Ministry of Consumer Affairs, Food, & Public Distribution.

The biggest advantage of trading in commodity futures is price risk management and pricediscovery. Farmers can protect themselves against undesirable price movements and decideupon cropping pattern. The merchandisers avoid price risk. Processors keep control on rawmaterial cost and decreasing inventory values. International traders also can lock in their prices.

Commodities have predefined lot sizes (set by the respective exchanges as per existingregulation) where current price of a particular commodity, for selected expiry, is shown incontract information available & rate units differ for different commodities. The standard unitbased on which the price of the contract is quoted for trading is called quotation or base value.E.g. for gold contract, the quotation or base value is 10 grams while it is 1 kg in case of silveron MCX. This will be explained in the further pages.

Since all commodities traded in MCX are futures contracts it has the same characteristics of anyfutures contract. They are as explained below

Like equity markets, commodity market has circuit limits. Exchanges have circuit filters inplace. The filters vary from commodity to commodity but the maximum individual commoditycircuit filter is 6 per cent. The price of any commodity that fluctuates either way beyond its set

price limit will fall in circuit breaker category. Short selling of contracts is allowed and can be carried forward till the contract expiry. This is

irrelavant to us since DreamGains provides only intraday advise in commodities.

The futures contract in commodities have a definite lot size and a contract expiry. The lot sizefor each commodity will be explained in the further pages.

MCX(multi commodity exchange) is the major exchange in India that allows trading in allmajor commodities. The same is


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MCX have 3 parts (A) Bullions (B) Base Metals (c) Energy

In Bullions, it have 2 parts : (a) Gold (b) Silver

In Base Metals, it has 5 Parts : (a) Copper (b) Zinc ( c) Lead (d) Aluminium (e) Nickel

In Energy, it has 2 parts : (a) Crued Oil (b) Natural Gas

Apart from the above mentioned commodities, there are some agri commodities that are tradedin the exchange. However, the volumes traded in these agri commodities is very minimal andhence the calls given in MCX commodites are only as mentioned in the graphical representationabove.

The lot sizes for each of the above mentioned 9 commodites are as follows

Commodity Lot size

Gold 1 kg

Silver 30 kg

Copper 1000 kg

Crude Oil 100 barrels

Natural gas 1250 MmbtuZinc 5000 kg

Lead 5000 kg

Aluminium 5000 kg

Nickle 250 kg

Hence if one wants to buy the commodity futures in MCX he has to buy in a minimum of thelot sizes mentioned above.

The market timings for MCX is 10:00 AM to 11:30 PM on Weekdays and 10:00 AM to 2:00PM on Saturdays.

MCX Bullion Commodity product8 Sections

This chapter will brief you on the MCX bullion commodity product that DreamGains advises itscustomers on.

Number of calls:

Below are some of the features of the product that one has to keep in mind. Each one of thesepoints will be explained in detail in the further pages




The risk reward ratio of the call will be 1:1 i.e. 1 stop loss and 2 targets



Buy Gold(March) above 28000SL- 27950


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TG-28050/28100

Sell Silver(April) bellow 58000SL-58150TG-57850/57700

All calls will have a stop loss and 2 targets


Types of calls- Intraday:

All the calls in this product will be on an intraday basis i.e. If the customer buys a commodityrecommended by DreamGains today, he has to sell the commodity the same day. The customer will beinformed to do so.

The risk associated with intraday trading is much lower when compared to thepositional/delivery based trading. This is because the profit or loss is booked the same day and

major fluctuations in the markets are avoided by squaring off the position the same day. The primary focus of a trader must be to safeguard his capital and hence intraday trading is a

safer avenue since the loss is limited for that day.


Short selling is a concept where in the trader can profit from from a commodity which isdepreciating in value. Here the trader sells the commodity at a higher price and buys thecommodity back at a lower price thereby completing his transaction in the same day.

For example the trader short sells Gold at 28000 in expectation that it will fall to 27900.Suppose Gold falls to 27900 he/she can buy it back thereby making a profit of Rs.100 per lot.This is the exactly the inverse of buying the commodity at a lower price and sell it at higherprice thereby making a profit on the price difference.

What is important to note is that the the transaction has to be completed in the same day i.e. Ifone has bought the commodity he/she has has to complete the transaction the same day byselling the commodity. If one has sold the commodity he/she has to complete the transaction thesame day by buying the commodity.

Number of calls and Investment:


The customer is informed that he/she will receive on average2-3 calls in a day for him/her toplan her investment accordingly.


We advise the customers to buy a minimum of 2 lots per call.

The approximate investment required to trade in 1 lot of each commodity is as follows

CommodityApproxInvestment

Gold 1-2-1.5L

Silver 70-75k

Copper 18-20k


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Crude 20-25k

Natural gas 8-10k

Zinc 20-25k

Lead 20-25k

Aluminium 20-25k

Nickle 15-20k

Hence ideally a customer should have an investment of around Rs. 2.5-3 lakh to trade in ourintraday commodity calls

Risk reward ratio :

As mentioned before the risk reward of all the calls given will be 1:1. The risk reward ratio foreach commodity is as mentioned below. Please note tha same can be changed depending onmarket conditions. However, 1:1 will always be maintained in all calls.

Commodity Risk reward Lot size Profit/Loss per lot

Gold Rs.50 1kg Rs.5000

Silver Rs.150 30kg Rs.4500

Copper Rs.2 1000kg Rs.2000Crude Rs.20 100 barrels Rs.2000

Natural gas Rs.2 1250Mbtu Rs.2500

Zinc Re.1 5000kg Rs.5000

Lead Re.1 5000kg Rs.5000

Aluminium Re.1 5000kg Rs.5000

Nickle Rs.10 250kg Rs.2500

Hence if one trades in 1 lot in Gold in DreamGains call and it hits the first target, then he standsto gain Rs 5000. Similar is the case for all the other commodities as mentioned in the tableabove.

This stop loss target ratio in all commodities is maintained by DreamGains based on theexpreience of the research team. This does not mean that all companies maintain the same ratiosas DreamGains.



The concept of a stop loss is to limit the loss of the customer to a limit.

Suppose the analysis says that the commodity price will rise, but due to some reason theanalysis fails, the customer has to book his loss to a limited extent.

Since no analysis is 100% accurate, the Stop loss becomes an insurance against a failure of the

same.

Suppose the customer does not maintain a stop loss, the customer can lose more than the stoploss where as he could have limited his loss at that level


It is very important to maintain a stop loss while trading. This will help in minimizing the lossin case the commodity price is moving is the unfavorable direction. Assume that the commoditybought falls down drastically, in this case one may end up with huge loss. But stop loss will help


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restrict the loss to a certain limit.

Types of orders:


Market Order: When a BUY market order is placed, the ask price is paid, kind of like the buy itnow. Chances are that the order will get filled immediately but often at a higher price than the last


As mentioned before, the calls that we give our customers will be Buy above if it is a buy calland Sell below if it is sell call


What is important to understand now is that when a stock breaks a resistance level it isexpected to move further up and if it breaks a support level it is expected to fall down.

Suppose the resistance for a commodity is at Rs150 and currently it is trading at 145, we willsend out a call to buy the commodity ABOVE Rs 150 as it is expected to move further up afterit breaks the 150 level

Suppose the resistance for a commodity is at 200 and currently the commodity is trading at 205we will send out a call to sell BELOW 200 as it is expected to fall further if it breaks the 200level.


Another reason for giving buy above and sell below calls is that the customers must getsufficient time to execute the trades advised by DreamGains and hence a message to buy abovea particular level will provide them sufficient time to enter the call.


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price. If a SELL market order is placed, the same happens except the shares are sold at the bid price.



We recommend the customer to buy/sell the commodity through a limit order. This is donebecause we recommend the customer to buy above a particular level and he can do so byplacing a limit order.

For example suppose we have sent the customer to buy Gold above 28000 and currently it istrading at 27950, if he places a market order, his order will get executed at 27950. However, thisis not the price at which we have recommended the customer to buy. Hence he has to place alimt order above 28000. The details of how to place the orders will be explained in the furtherpages.

USPs of the product:

ACCURACY OF 80-85%

EVENING CALLS

INTRADAY CALLS

RESEARCH SUPPORT

NCDEX Commodities- Level 12 Chapters

This course will take you through the basics of the commodity markets and how DreamGains advisesits clients to buy and sell and hence profit from the same. This course will also brief you on theimportant details to know to effectively sell NCDEX/Agri commodities as a product.

Commodities and Commodity markets

2 Sections

This chapter will brief you on the general theory about commodities as a financial instrument and theIndian commodity markets.

Commodities:

A commodity is a product having commercial value that can be produced, bought, sold, and consumed.

Commodity future is a contract to buy or sell specific commodity, of a specific quality, at aspecific price, for a specific future date on the exchange.


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As in capital markets, a commodity exchange is an association or a company or any other bodycorporate that is organizing futures trading in commodities and is registered with FMC(Forward Market Commission). Two major national level commodities exchanges are MultiCommodities Exchange of India (MCX), National Commodities and Derivatives Exchange ofIndia (NCDEX).

Commodity Market in India is regulated by Forward Market Commission (FMC) under the

guidance of the Ministry of Consumer Affairs, Food, & Public Distribution. The biggest advantage of trading in commodity futures is price risk management and price

discovery. Farmers can protect themselves against undesirable price movements and decideupon cropping pattern. The merchandisers avoid price risk. Processors keep control on rawmaterial cost and decreasing inventory values. International traders also can lock in their prices.

Commodities have predefined lot sizes (set by the respective exchanges as per existingregulation) where current price of a particular commodity, for selected expiry, is shown incontract information available & rate units differ for different commodities. The standard unitbased on which the price of the contract is quoted for trading is called quotation or base value.

Since all commodities traded in NCDEX are futures contracts it has the same characteristics ofany futures contract. They are as explained below

Like equity markets, commodity market has circuit limits. Exchanges have circuit filters inplace. The filters vary from commodity to commodity but the maximum individual commoditycircuit filter is 6 per cent. The price of any commodity that fluctuates either way beyond its setprice limit will fall in circuit breaker category.

Short selling of contracts is allowed and can be carried forward till the contract expiry. This isirrelavant to us since DreamGains provides only intraday advise in commodities.

The futures contract in commodities have a definite lot size and a contract expiry. The lot sizefor each commodity will be explained in the further pages.

Indian Commodity markets- NCDEX:

National Commodity & Derivatives Exchange Limited (NCDEX) is the countrys leading agri futurescommodity exchange.

NCDEX is a professionally managed on-line multi commodity exchange offering commodityfutures trading in a wide range of commodities viz, agricultural, base metals, precious metals,energy, ferrous metal, and others.

Although commodotes apart from Agri are also traded in NCDEX, the volumes in these othercommodities are very thin. The volumes in agri commodities are high and hence DreamGainsprovides calls only in Agri Commodities traded in NCDEX. Metals and energy commodity callsare given in the commodites traded in MCX as expalined in the previous modules.

Although there are a total of 23 agri commodites that are traded in NCDEX, there are only

about 9 Agri coomodites that are frequently traded. The lot sizes and names are as below.

Commodity Lot Size

JEERA 30MT

SOYBEAN 100MT

CHANA 100MT

PEPPER 10MT

SOY REFINEDOIL

1000MT


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GUARSEED 10MT

GUARGUM 50MT

TURMERIC 50MT

SUGAR 100MT

Hence if one wants to buy the commodity futures in NCDEX he has to buy in a minimum of thelot sizes mentioned above.

Although the market timings for NCDEX is 10:00 AM to 11:30 PM, the Agri commodites inthe NCDEX market trade between 10:00 AM to 5:00 PM on weekdays and 10:00 AM to 2:00PM on Saturdays.

NCDEX Agri Commodity product7 Sections

This chapter will brief you on the NCDEX Agri commodity product that DreamGains advises itscustomers on.

Number of calls:

Below are some of the features of the product that one has to keep in mind. Each one of these pointswill be explained in detail in the further pages




The risk reward ratio of the call will be 1:1 i.e. 1 stop loss and 2 targets



Buy Pepper(March) above 35150SL- 34950TG-35350/35550

Sell Soybean(April) bellow 2250SL-2262TG-2238/2226



Types of calls- Intraday:

All the calls in this product will be on an intraday basis i.e. If the customer buys a commodityrecommended by DreamGains today, he has to sell the commodity the same day. The customerwill be informed to do so.



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The primary focus of a trader must be to safeguard his capital and hence intraday trading is asafer avenue since the loss is limited for that day.


Short selling is a concept where in the trader can profit from from a commodity which isdepreciating in value. Here the trader sells the commodity at a higher price and buys thecommodity back at a lower price thereby completing his transaction in the same day.

For example the trader short sells Pepper at 35150 in expectation that it will fall to 35000.Suppose Pepper falls to 35000 he/she can buy it back thereby making a profit of Rs.150 per lot.This is the exactly the inverse of buying the commodity at a lower price and sell it at higherprice thereby making a profit on the price difference.

What is important to note is that the the transaction has to be completed in the same day i.e. Ifone has bought the commodity he/she has has to complete the transaction the same day byselling the commodity. If one has sold the commodity he/she has to complete the transaction thesame day by buying the commodity.

Number of calls and Investment:


The customer is informed that he/she will receive on average 2-3 calls in a day for him/her toplan her investment accordingly.


We advise the customers to buy a minimum of 2 lots per call.

The approximate investment required to trade in 1 lot of each commodity is as follows

Commodity Approx Investment

JEERA 12-15k

SOYBEAN 20-25k

CHANA 28-35kPEPPER 45-50k

REFINED SOY OIL36-40k

GUARSEED 2-2.5L

GUARGUM 5-5.5L

TURMERIC 42-47k

SUGAR 15-20k

Hence ideally a customer should have an investment of around Rs. 1.5-2 lakh to trade in ourintraday Agri-commodity calls.

Risk reward ratio:

As mentioned before the risk reward of all the calls given will be 1:1. The risk reward ratio for eachcommodity is as mentioned below

Commodity Risk reward Lot size Profit/Loss per lot

JEERA Rs. 6030MT Rs.1800

SOYBEAN Rs. 12100MT Rs.1200

CHANA Rs. 12100MT Rs.1200


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PEPPER Rs. 20010MT Rs.2000

REFINED SOY OIL Rs. 21000MT Rs.2000

GUARSEED Rs. 1510MT Rs.1500

GUARGUM Rs. 5050MT Rs.2500

TURMERIC Rs. 5050MT Rs.2500

SUGAR Rs. 12100MT Rs.1200

Hence if one trades in 1 lot in Pepper in DreamGains call and it hits the first target, then hestands to gain Rs 2000. Similar is the case for all the other commodities as mentioned in thetable above.

This stop loss target ratio in all commodities is maintained by DreamGains based on theexpreience of the research team. This does not mean that all companies maintain the same ratiosas DreamGains.



The concept of a stop loss is to limit the loss of the customer to a limit. Suppose the analysis says that the commodity price will rise, but due to some reason the

analysis fails, the customer has to book his loss to a limited extent.


Suppose the customer does not maintain a stop loss, the customer can lose more than the stoploss where as he could have limited his loss at that level


It is very important to maintain a stop loss while trading. This will help in minimizing the lossin case the commodity price is moving is the unfavorable direction. Assume that the commoditybought falls down drastically, in this case one may end up with huge loss. But stop loss will helprestrict the loss to a certain limit.


As mentioned before, the calls that we give our customers will be Buy above if it is a buy call and Sellbelow if it is sell call



Suppose the resistance for a commodity is at Rs150 and currently it is trading at 145, we willsend out a call to buy the commodity ABOVE Rs 150 as it is expected to move further up afterit breaks the 150 level

Suppose the resistance for a commodity is at 200 and currently the commodity is trading at 205we will send out a call to sell BELOW 200 as it is expected to fall further if it breaks the 200level.



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Another reason for giving buy above and sell below calls is that the customers must get sufficient timeto execute the trades advised by DreamGains and hence a message to buy above a particular level willprovide them sufficient time to enter the call.

Types of orders:


Market Order: When a BUY market order is placed, the ask price is paid, kind of like the buy itnow. Chances are that the order will get filled immediately but often at a higher price than the lastprice. If a SELL market order is placed, the same happens except the shares are sold at the bid price.



We recommend the customer to buy/sell the commodity through a limit order. This is donebecause we recommend the customer to buy above a particular level and he can do so byplacing a limit order.

For example suppose we have sent the customer to buy Pepper above 35000 and currently it istrading at 34600, if he places a market order, his order will get executed at 34600. However, thisis not the price at which we have recommended the customer to buy. Hence he has to place alimt order above 35000. The details of how to place the orders will be explained in the furtherpages.

Options- Level 1

2 Chapters

This course will take you through the basics of the options markets and how DreamGains advises itsclients to buy and sell and hence profit from the same. This course will also brief you on the importantdetails to know to effectively sell Options as a product.

Options and Options markets

2 Sections


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The risk reward ratio of the call will be 1:1 i.e. The stop loss and target

1 Sectionwill be worth 8% each. This will be explained in detail in the further pages Short selling calls will NOT be given in options. This will be explained in the further pages.

Unlike other products, buy above and sell below messages wont be sent to customer. In options'buy between' messages will be sent to customer.

Buy Sesa Goa(April) Put option between 10-10.1SL- 9.20TG-10.8/11.5

Buy Nifty 5400(March) Call Option between 100-102SL- 90TG-108/115

All calls will have a stop loss and 2 targets

Tg1 will be of 8% and Tg2 at 15% from the Buy Price.


Investment required:

Options are a very attractive asset class since the investment required is very less when compared to itsderivative counterparts. The same can be explained by comparison.

Buy Nifty 5400(March) Call Option between 100-102SL- 92TG-108/115

Since the lot size for Nifty option is 50, the investment required to buy 1 lot of Nifty is 100(buyingprice/premium) multiplied by 50(lot size)= Rs 5000.

Buy Nifty futures above 5400SL- 5375TG-5425/5450/5475

Here the investment required will be 5400(buying price) multiplied by 50(lot size)= Rs.2,70,000. Thisafter margin of 10% would still amount to Rs.27,000 which is still more than 5 times the investment inoptions.

Hence on an average if one wants to trade in DreamGains options calls, he needs an investment

of 50-75k.

Risk reward ratio:

As mentioned before the ri

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