Market correction

Market correction is a process whereby stockbrokers try to correct the value of over priced stocks. The stock market responds to both fundamental news and rumours. These two factors can drive the price of stocks to an over-priced level or an under-priced state. When market is grossly overvalued, there will be problem especially for those who borrowed money to buy shares. Overvalued stocks are stocks that have reached their peak for a period; they either enter into a resting phase or in most cases begin to decline.

Importance of Central Securities Clearing System(CSCS)

Importance of Central Securities Clearing System(CSCS). Registering with CSCS will enable you have record of your shareholding with the companies you have shares with and make such units available for trading if necessary. This record of your shareholdings can be printed out for you monthly by your stockbroker. Doing this monthly will enhance your trading proficiency. You can also access your account daily if you have internet access through the CSCS website with an annual fee. CSCS keep up to date records of transactions on the stock exchange.

Functions of CSCS

Functions of CSCS: 1. Provides depository for share holders who wish to deposit their certificates for stock market transactions. These share certificates are kept in the coffers of CSCS; such certificates are dematerialized for transaction purposes. 2. CSCS processes inter-market transfers(that is, transfers of transactions from money market to capital market etc). 3. CSCS operates as an issuer of central securities and clearing house of the exchange. 4. CSCS is in charge of securities on the stock exchange that is they guide and supervise stock transactions on the floor of the market. 5. CSCS is a safe and central depository for share certificates of companies quoted on the NSE or any other stock exchange around the world. 6. Issue of central securities identification numbers to stock brokers and investors.

Stop-loss method

Stop-loss method: This method is focused on the price movement of the stocks in a particular portfolio against the purchase prices. The current market price of stock is consistently compared to the purchase price to determine the market direction of these stocks. Stop loss method works. You can use it to forestall heavy losses. An investor who purchases a stock at $100 with a stop loss of 10-20%. It therefore means that if the stock drops below the range of 80-90 automatic sale of the stock is expected to be executed. If your stop-loss is 10% you can't lose more than 10% of your stake plus your stockbroker's charges. By using this system you may sometimes sell a good stock too soon and frustratingly watch it go on up and up. That is the price you pay for operating a safety net.

How to protect your portfolio from loses

How to protect your portfolio from loses: The method used for screening your portfolio from crashing in monetary value is called stop-loss method. The success of portfolio is embedded in the selection of stocks that comprise that portfolio. Selection of mono-sector, single-class, penny stocks can be risky because of unfavourable government policies a times. Thus a mix of various sectors and different classes of stock can serve as a shock-absorber for the portfolio.