Options Trading vs Equity Trading

[Music] welcome back to episode 7 of the basics of trading with pratik and me hope you guys have been watching these episodes and practicing side by side let's take a quick recap in the previous episode we learned how to navigate through a broker terminal what are the different types of orders and how to place them and in today's episode we learn about the different types of trading we'll have an overview about trading with equity futures and options and currency and we'll learn about how time frame trading works and determine our trading style but before we do that you know the drill hit that like button immediately and leave a comment no no no today we will leave a comment about pratik sir just leave a comment saying pratik sir you are too op i'm sure it'll make his day and will also tell the algorithm that it should probably push this video out to more people it would really help the channel a lot if you like and comment on that note let's start the episode [Music] this [Music] hello welcome to episode number seven brazique both right tell me what are the different styles of trading and let's start okay cool so uh there are different ways you can trade right one can be different assets that you'd like to trade one can be achieved to trade multiple times a day someone may say okay i want to trade only multiple times a year okay so they're different ways and styles so i just break that down so the purpose is once you know what the existing styles are you can find what works for you correct okay multiple times a day you're damn busy right i mean i just want to yeah i'm just too lazy uh correct five fair enough uh so uh tell me an asset tell me nasa we can trade uh i mean bitcoin is an asset technically bitcoin okay i was looking for stocks but tk you're right actually bitcoin is that asset but bitcoin is like digital right correct okay so what i'll do is [Music] uh bitcoin here it's like some special effects it's cool right so we have crypto bitcoin is an asset that you can trade so this is one example of something that can be traded on a daily basis or maybe some people use it for investment as well correct gold a store of value what about do people trade in gold yeah actually that's a good point so then you have gold then it's normally uh put into something called commodities correct right you've probably heard of that gold is within something called bullion which is silver and gold got it right within commodities you also have stuff like oil you also have um stuff like chana that you can trade people can trade many people people trade chana they can trade all sorts of commodities including other things as well [Laughter] but yeah all commodities a lot of commodities can be traded it's traded on the mcx got it right uh there's also the ncdx uh but yeah you can trade commodities on different exchanges then there's also you want to guess what this is uh this is the dollar yes the u.s asset is currency currency right so usd inr very popular um and other currency pairs can also be traded this isn't something called the futures market can i trade chana with usd i mean you can trade chana and usd but i can't be like yours ten dollars worth of chana but actually um so these two things right uh these two things are traded in something called futures and options um so you can trade futures and options in these things what is futures and options so we don't need to get into the details of what futures and options are i know a lot of you guys who are watching this want to trade features and options probably even tried to did you try to trade options [Laughter] so it's a good idea to maybe either make a different series on it got it okay uh but basically they're leveraged instruments you put in a small amount of money to control a large amount of stock garden uh and stated in futures and options got it the other thing um we have is of course equity yes uh so this is an actual share of what a share certificate of reliance industries this is real actually right so this is what it used to look like if you saw oh harsh and metallic camera yeah they would sit in the ring and they would be holding these yeah so they won't be holding these that's right but the order and this is what you would get uh this person owns 25 shares i think right number of equities 25 shares and this is what goes into a digital version of this goes into a demand account exactly so got it no one can tear this up and be like nathan correct it stored so that's another thing that you can trade we've already seen equity and then you have futures and options um and it's very difficult to show as a prop right uh because it's a contract uh the futures and options for stocks and indices so nifty or sensex you cannot trade directly to trade them via futures and options got it uh and you can trade stocks via future tata steel will have tata steel futures starter steel options got it so going back to styles of trading people will say my bitcoin trader who keem a commodity and currency so some people describe themselves like this so so far we've mostly been discussing equity trading yeah i mean the last episode we discussed like intraday trading correct a little bit correct got it but everything works in a similar way yeah i mean for the trader they're all assets and the price is moving got it they all have a chart they all have support resistance they all can be back tested got it but they're different uh they're different uh assets different instruments understood yeah cool okay so tell me what do you trade in um so i've traded everything but what i've gravitated the most words is actually just equity uh futures and options is decently less compel uh compared to this but mostly equities just worked for me it's worked entire day it's worked over a long time uh i know it's damn boring but it's worked this one is worth the best so god so that's it another way uh to describe a style is via a time frame okay how often do you trade let me clear this out so i'll just call this described by time frame and you probably already know this i'm just giving a name to it the first is hft you know what this is higher time higher frame time it's high frequency trading oh high frequency rating right so hft is probably the most exciting of the lot huh so hft does possibly hundreds of trades every few seconds what it could yeah hundreds of trades every few seconds okay um or every minute or so is something an hft firm or a high frequency trading firm can actually do and obviously it's not manual right they're not people sitting in just like pressing orders um it's completely via an algorithm they'll find a small gap in the market and they'll trade that and for a small amount of money that they'll make per trade they'll just do many many many trades got it uh and that's how they make money right okay so i basically lots of trades these people these people what they do and they keep doing that right the other kind of trader is the scalper scalper so here what i'll do is i'll reduce the chips a little bit he also makes a lot of trades but uh this is done manually okay so he may make many many many many trades um and we even know a scalper i know scalper who's done this and it's completely discretionary you can't make a system out of schedule correct uh so this guy would take one trade and he would exit between one minute to six minutes and he'd do this multiple times in a day got it so to me the scalping is literally like like scalping yeah correct little little and then you're on the edge gets just called the exit karna we are nicola be nicola then you're out i need to do that again yeah i mean i think that's emotionally very tiring training yeah uh so i'm sure by the end of the day this guy's like oh my god can't handle this so i don't know if this is something that people should aspire to be it sounds very sexy though i'm a scalping culture i think it's very difficult though the next uh which is more popular i would say right is intraday this is fine uh if you're new you'll also find this super interesting so again the number of trades over here there might be two trades in a single day right uh this is all in a single day um entertainment is basically market full time you enter and you exit before it closes before it closes yeah very simple we discussed this yesterday correct correct way you place orders so this is what i think most new people when they start reading this is what they start with yeah do you think they should start here though uh i mean i don't know it's up to them yeah so i i think uh they can do it for fun maybe with a very small capital like a 5000 rupees just to see how it is but you should trade with intraday initially for sure right because you don't know what you're doing so so basically that's intraday a few trades that you're doing in a day okay now yes right so all of this was within a day right so this is actually all intra day right so very short time frame actually a better word is short time frame right now we'll change the time frame and so okay this person will take only a few trades in a week okay this is called swing current okay a swing trade also called a positional trade is this person will take one trade every week or so right so this this will look something like this right um one to three trades is what he'll do in a week he'll exit within that same time frame so sardines and thus then could be 15 days also but it's it's not intraday and it's a little infrequent more like active trading right this is something that works for new guys i think uh this is interesting uh finally after swing and position you have long term investing got it right which is this right investing ah this is long term right so you take one trade ever so often right so this is you want to do a summary uh so these these three styles they all happen within a day so they're technically intraday trading correct this is high frequency trading which is where you're taking trades like multiple trades every second and then someone who's a scalper will get in and get out get in and get out very quickly yeah uh and then there's intraday trading which is um which is within one day you enter an exit at least once with one particular uh you know stock or commodity and there's swing trading swing trading is a slightly longer time frame correct you get and then get out maybe you know once every every couple of weeks correct then there is investing which is uh let's it's not even trading yeah it's not even trading i don't even know why this is here this is just invested smart you can also do this so yeah based on time frame oh yeah got it uh and what we will learn is about it's a swing trading strategy that we learn uh but it's slightly slower than a swing trading strategy so you're almost investing it's like active trading so you have that thrill of trading very often but it's also not too often correct so it's just right in the middle so we'll learn that very soon got it uh next what we should do we learn actual styles okay so the different ways of trading so now what like i think the people watching this what they should do right what you should do i will tell you what it's your long-term dedication which will make the money not the style got it personality yeah let's learn it let's learn the different styles so the first style the one that i actually really gravitated towards when i started is called trend following what's simple because so trend following can you guess what it is it's pretty self-explanatory right what it probably is it's just following the train as if it's going uptrend or downtrend correct so you make your bets according to that we don't do that here correct so yeah so now we'll use the word invest and trade uh and not bets anymore because now we're moving towards systematic trading so we'll stop using this word uh basically what's happening is if the market's going up you're following the market you're staying long as long as possible if the market is falling you'll stay short for as long as possible or you just won't trade so if you're going long yeah you want to be long until you start seeing uh until you start seeing double top on resistance interesting if that is part of your exit strategy yes got it correct so let's understand what kind of person you need to be to actually trade a trend following strategy generally if it's not suited to you that's true so here i think you need to be a person first of all with eyes who can see your chart nice okay that's the guys you can't do this without internet connection so please you realize they can't say this yeah am i a joke to you nice nice let's look at hypothetical one two three four five trades okay okay let's imagine um in this case you entered immediately the market fell continued to fall again oh wow nice no this is a tough one and finally uh let's say another good one you have the market's gone like this okay again you've entered here enter kertay market went up went up and it crashed again wow let's say you entered here right at the top imagine entering with all your network like in february of 2012 i mean if i see a comment somewhere they're like man i'll be like dude didn't you watch the series over here you have not exited over here you have not exited here you exited immediately because market area okay there is a trend following system will stay on a trend for as long as possible okay that means you have to have patients holding on to a stock never exiting till eternity patience correct your losses correct right so the exit may come a few weeks after you enter but the stock that you bought five years ago you're still long you've not realized that profit you're still holding on portfolio medicare basically all your trades will be lost trades when you execute you'll book a loss and you'll never realize you'll never exit your profit trades because you're holding on to them for a long time correct you know you need to be chill with that over here also you exited immediately here you didn't exit so what will happen is in one week minus 10 000 rupees okay over here another in say two weeks minus 9000 rupees you need to be okay with that and then you have two years plus i don't know maybe one lakh again one year plus sixty thousand and maybe another one year maybe this one is fifty thousand so you realize wealth was created but you're holding on time so when you see your um [Music] long time actually even if like me how many shouldn't make it vc forms without correct so what kind of person you need to be uh to be a trend follower so you need to have a lot of patience correct at the same time you need to recognize when there's a loss that you that you foresee to probably exit when that's happening but otherwise you need to be okay with losing money and you also need to be okay with not making money from the first day itself because a lot of this is about just waiting for correct good moves to be in a profit so you hold on uh for as long as you can yeah until you foresee the loss yeah this reminds me there's one more thing about trend following is that you'll have one stock let me change this number from one lakh to save four lakhs as an example you need to be okay to not to sell this ah when it's doing better when it's doing well and you hold on to this for as long as possible i mean imagine if it's like say sequoyah who had invested in facebook sold at bula kia one billion dollar evaluation correct i will sell facebook correct uh but you know facebook is worth probably much more now it's probably uh much higher so they held on just like you you're doing it as a retail level you'll get one stock which is doing really well you don't exit until your system tells you to exit but how do you develop that patience right like when a stock is growing yeah it's never like this like this like this exactly it's always like this like the exact place like this and then you don't know where it will go yeah so how do you hold on i think the only thing that you can do is tell yourself that this works and if you can follow a system for a very long period of time uh system is about a set of rules it's a promise you make to yourself but sure if you're gonna hold on for hold on to it for like two years and all yeah don't you need like fundamental analysis and not necessary technical analysis yeah absolutely so how you do this it could be fundamental plus technical so what you could do is you could take the top 20 best managed companies and apply technical analysis on it but this honestly feels like this is just investing yeah like trading was supposed to be slightly more exciting than this correct actually you're right um my point was that the profit trades you'll be holding on for a longer time frame and the and the lost trades will be holding like you'll exit very quickly so you can just change the numbers over here and be like okay uh if you change the time frame from say weekly like what i'm showing over here is a weekly time frame you just change this to say hourly same analysis same everything trend following your this two years on an hourly chart i'll put edge here instead of two years it will be something like one day right got it your loss over here instead of two weeks will be something like uh i don't know 10 15 minutes yeah you're right got it got it 15. so is it you're following the trend you can just apply this to intraday trading as well basically correct so one thing you should know joby style you change the time frame and it will become trading or investing got it you make a higher time frame investing money yeah make a lower time frame trading money got it the next style is mean reversion you've already seen this actually so it's called mean reversion basically price is moving like this and there is a mean let's say this is the average of the price okay every time price goes say higher than the average you look too short yeah you bought deviate career my shortcut if it goes too low then you say okay i'm going to go long got it i mean bye so it's basically it will revert to the mean it will cover that will come back to the meme anyway yeah so the only guy who can actually do this is a contrarian right contrarian a contrarian so you're okay with going against the grain markets are going up you will look too short markets behold you'll go to go long so for example march major lockdown guitar make the market and everyone's like it's the end of the world and your mean reversion system said bye you should be chill with placing that buy order yeah why are you looking at me i'm just saying you know i did buy all right this is like it's this is called gravity investing gravity this is this is your gravity if it goes up you just know it's gonna come back here ah correct so so mean reversion could be intraday or it could be long term as well but it can be used intra day as well mean reversion right got it the last is actually uh momentum got it you bought exciting yeah i think you already know what it means right yeah it's it's where you trade when there's momentum momentum movement movement market upper jar is made to look something like this market's done this bought by resistance i had made an all-time high made another all-time high made another all-time high and people like yeah but the momentum investor says right the momentum person says that he will enter stocks when it's higher so so normally people say buy low sell high momentum is buy high and sell even higher correct so what kind of person do you think would actually be able to trade something like this it's someone with more capital chemistry yeah correct so uh the person who's trading momentum if you're very like optimistic i would say um then you would buy this because imagine a stock has reached uncharted levels and it's all-time high supercabi yeah you need to be an optimistic person to be okay so it just doesn't sound like me um so the strategy we learn is based on momentum god it's also faster because when a stock is in momentum it's in the news a lot of people are trading investing in it it will move faster right so if you don't have patience for trend following what time weight gain mean reversion may uh it's it's fast also momentum is even faster because there's already a lot of activity happening and you're entering at that time so it's quite your learning curve will be a lot faster because there's a lot of movement correct so we'll see that when we actually trade the system based on momentum are there more styles of trading yeah actually there are a bunch more but i mean discussing them will be out of the scope basically there's something like discretionary like we discussed like scalping japan there is no system there is also techno fundamental where you combine technical analysis and fundamental analysis then there is the calendar spread there is arbitrage and there's also pair trading hopefully someday we'll discuss those styles as well correct okay cool okay so let's just focus on the simplest stuff right now yeah perfect you know what segment this is right oh my god but this time it's easy okay it's not that difficult exam time let's do it only two questions first question um in a month in a month what kind of style is that three to four trades in a month uh it sounds like a trend trend following style your answer is swing trading now according to your personality what um style works for you according to my personality uh i i like the idea i don't want to trade every day okay make sure i want to trade like you know uh every week or so like the trade have taken ha that's fine what time frame is daily or weekly weekly yeah so weekly trend following style for and you're okay with this kind of but you can hold on to the profits yeah yeah that's cool holding them if you want to know what type of trading suits your needs check out the courses on learnab.com where you will get access to 200 plus courses by paying just one fee and guess what the link in the description gets you two months of extra access for absolutely free and of course trade karthik you can analyze your stock fundamentals and history in depth all thanks to ticker tape and before you begin trading one must have a dmat account so open your own demand account with the link in the pinned comments so are you ready yeah uh this is the part where you tell us that this is in the next episode that's right guys oh my god that's just so predictable all right click click we're gonna start we're gonna learn um momentum trading in the next episode coming up next these three things basically form a good system and we'll be able to measure them what will be the traits of these stocks what's your observation they will do what they will consistently hit all-time highs okay regularly right good at maths were we i was good man oh you were yeah you should be okay then yeah what's a system bro so ideally your stop-loss should also keep increasing right stop-loss price actually a better word is short time frame right oh that is that's not to shut the up right you need a you at the end yes i can't read [Music] oh my god

2021-06-28 11:27

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