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FUNDAMENTAL ANALYSIS OF STOCKS

  What we do when we say that we are doing  fundamental analysis   of stocks We actually study the underlying business of that stock. To understand the need of fundamental analysis of business, let’s take a small example. Suppose you want to eat a chocolate, what you will do? You will go to the market and take a bite of KitKat or have a Munch. This is easy, and this is the way everybody buy chocolates in this world. But suppose you want to buy the company itself which manufacturers KitKat and Munch. What you will do now? For sure, buying Nestle (the company) will not be as simple as buying its end products (kitKat). Why? Because capital required to buy a company is very large. But apart from the capital limitation, as an investor we must also be careful buying in buying Companies. Why? The reason is simple, we should limit ourselves to buying stocks of fundamently strong    compnies. This is what  fundamental analysis  does for its investors. It helps people to identify good business  
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FINANCIAL STATEMENTS: UNDERSTANDING PROFIT AND LOSS ACCOUNT (INCOME STATEMENT)

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  Profit and loss account is also known as income statement. It is a document which is prepared by the company to report its income, expense, and profit happened in last 12 months.  P&L account talks about few important things about the business. First of all it talks about how much  income  the company has generated in last FY (12 months). In India the financial year of a business generally starts from first of April and ends on 31st of March. So when P&L account is prepared it is prepared for a period between 1st of April and 31st of March.   The next important thing that profit and loss accounts states is various  expenses  that the company has incurred in the last FY.  Once the income and expense line items are listed by the company, the next important deduction that is made is called the  gross profit . By adjusting depreciation, interest expense, and tax expense,  net profit (PAT)  of the company is deduced in the P&L account.  Statement of Profit and Loss Account Thi
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FUNDAMENTAL ANALYSIS: HOW TO READ A BALANCE SHEET REPORT?

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  Profit and loss accounts give the status of profitability for a year. The cash flow report gives the status of cash flows for a year. But the balance sheet report tells the status of assets, liabilities, equity from the day a company is formed. Talking about the balance sheet in more colloquial terms, we can say that it tells  how a company has handled its finances . Better utilization of finances ultimately leads to more profitability and cash flows. So we can say that for a company it all starts with its balance sheet. Let’s know more about it. Simplified Balance Sheet The above image is a graphical representation of a balance sheet. What a balance sheet  balance ? It is balancing  Assets  on one side and  equity plus liabilities  on the other. That’s the most basic understanding of a balance sheet report that we must remember. It gives us our  Balance Sheet Formula .  From a general perspective, this is what a balance sheet reports tells us about the company. Liability Side Source
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How to do technical analysis

  Like any other field of study, technical analysis is about certain theories. These concepts serve to guide a technical analyst's approach to financial markets. Some common concepts are: * Breakout – whereby prices forcefully penetrate an area of prior support or resistance. If you are interested in trading in only indices, look for breakouts in Nifty technical chart. * Chart pattern – distinctive pattern created by the movement of security on technical charts. * Cycles – time targets for potential change in price action * Elliott wave principle and the golden ratio - are used to calculate successive price movements and retracements * Fibonacci ratios – used as a guide to determine support and resistance of a security * Momentum – the rate of price change * Resistance – a price level that may prompt selling activity * Support – a price level that may prompt buying activity Technical analysis is an indicator that helps the investor to know: * When to enter or exit a trade * What is
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Technical Analysis of Stock

  Technical analysis refers to the use of price charts and other bits of market information. Technical charts are a key aspect of the study. There are also frameworks like Dow's theories that are all used to make investment decisions. Technical analysis basically tells you the direction of the security i.e. stock, index, currency or commodity. Along with direction, you also get an idea about entry and exit price for a successful trade. Tools like stock charts, candlestick charts and stock ticker are used by technical analysis experts.     Many investors, who are new to the markets, after opening an account starting learning about ways to make money. Technical analysis can come very handy for such investors to understand the basics and trade.     People say some aspects of technical analysis began to appear in Amsterdam-based merchant Joseph de la Vega's accounts of the Dutch financial markets in the 1700s. In the 1920-1930s, Richard W. Schabacker published several books on tech
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