Fundamental Analysis Is Equally Important For Stock Investing

Many of us are not aware of what they are doing while trading and it is said that the risk comes from not knowing what you are doing. It is also said that that the fundamental analysis of companies is key to sustainable wealth creation over the long term. To assess the long-term prospects of a company and its competitive advantage you must analyze it fundamentally.

Vision of industry

The investor must know the external environment in which the company operates, in order to know the prospects of a company. One must be able to assess the parameters like the size of the industry both domestic and global. One should also look the import-export scenario of the company that indicates the potential for the company. Likewise, one must understand the industry growth stage along with the changing trends and intensity of competition. Its future plans, including expansion, diversification, and acquisitions can also be sensed from this.

Position of the company

You must find out the assessment of a company’s positioning as it let you know about how well it is placed within the industry and its strategy to achieve long-term goals. You must understand the target segments of the company in terms of geographies and demographics when evaluating a company’s positioning. Check whether it caters to business or directly to consumers. This will let you know about the competitive advantages of the company and provides insights into the appropriateness of strategy in achieving its stated long-term vision. This will reveal the challenges that the company is likely to face while pursuing its growth strategy. It might be a risk related to the industry performance, competition, cost pressure and adequacy of funds to name a few.

Quality of management and corporate governance

We know that a company is run by people so it is important to understand how they qualify on integrity. Take a look at the assessment of the management’s capabilities, including the second rung leadership, is essential because it defines the strategy and decisions taken by the company. The corporate governance practices are also important. Corporate governance practices like disclosure norms, transparency in reporting, board practices and quality of discussions, the profile of board members and independence of the board.

Money Classic Research well carries out the fundamental research along with in-depth technical research, thus they are capable of delivering accurate stock market tips.

Day Trading Based on Buying Volume and Selling Volume

Volume analysis is the method of reviewing the strength of a trend, based on volume activity. In the market Volume is one of the oldest day trading indicators used by market technicians. Apart from technicians, market fundamentalists also consider the volume or the number of shares traded for a given security.

The higher the volume the easier it is to buy and sell large quantities of stock, because other traders are there to fulfill the other side of the trade.

For each transaction, there must be a buyer and seller. To buy a seller must sell to you, and to sell a buyer must buy from you.

This leads to some confusion because you'll often hear phrases like:

The sellers are in control.

Buying volume is outstripping selling volume.

It's a heavy buy volume day.

Buyers are in control when the price is getting pushed higher. The volume that occurs at the offer price is known as Buying volume. It is the lowest advertised price sellers are willing to sell it. If someone buys at that price it shows the stock is desired and is called buying volume.

Thus, it can be concluded that the volume indicator is one of the simplest methods for observing the buying and selling activities of a stock at important levels. However, the trickiest part is that a volume can provide conflicting messages for the same setup. Still, the deciding factor to turn a profit in the market can be calculated based on your ability to judge what the volume is telling you in combination with price action.

The volume is a very powerful tool, but many traders and technical analysts do not use it, as this is a simple indicator. Still, many traders believe the strength of using the volume indicator and use it to get maximum profit. In fact, the volume is the most popular indicator used by the technicians. Volume is a tremendously valuable tool and is used in different ways. The few common volume-based indicators are On Balance Volume, Chaikin Money flow, and Klinger Volume Oscillators. The team of Money Classic Research uses these technical tools to generate accurate stock market tips.

How Can You Cut Your Losses

We know that no investor will purposely buy a stock when they believe will go down in price and will be worth less than what they have paid for it. On the other hand, buying stocks that drop in value is inherent to the nature of investing. Hence, the objective is to minimize the losses but not to avoid losses. If you have realized a capital loss before it gets out of hand separates successful investors from the rest. Therefore, in this post, you will get to learn how to minimize the risk of losses by standing out from the crowd. You will know how to identify when you should make your move in the stock market with accurate share market tips.

Though you have the logic for cutting losses short, many of you are still left holding the proverbial bag. Whether you want or not, you unavoidably end up with a number of stock positions with large unrealized capital losses. It is believed that the reason you have so many large, unrealized losses is that you bought the stock at the wrong time or it was a matter of bad luck. But you may not even think that it is because of your own behavioral biases.

A glance at a long-term chart of any major stock index will see a line that moves from the lower-left corner to the upper right. You know that the stock market, over any long time period, will always make new highs. Investors have the idea that the stock market will go higher, even then they might mistakenly assume that their stocks will eventually bounce back. However, a stock index is made up of successful companies. It is an index of winners. At one time, you will notice that these less successful stocks may have been part of an index. However, if they have dropped significantly in value, they will eventually be replaced by more successful companies.

Although you know that there is no particular rule to win in the stock market, you can try to follow some in order to be a successful trader. Money Classic Research is one of the best advisory firms that offer free intraday tips to their clients.

All That You Need To Know About Bull Trap

A bull trap occurs when a trader or investor buys a stock that is about to break out above a resistance level - a common technical analysis-based strategy. While most breakouts are preceded by strong moves higher, there are some cases when the stock quickly reverses direction. These are known as bull traps since the traders and investors that bought in are trapped in the trade.

Traders and investors can avoid bull traps by looking for confirmations following a breakout. For example, traders may look for higher than average volume and bullish candlesticks following a breakout to confirm that the price is likely to move higher. A breakout that's proceeded by low volume and indecisive candlesticks - such as a doji star - could be a sign of a bull trap.

From a psychological standpoint, bull traps occur when bulls fail to support a rally past a breakout level, which could be due to a lack of momentum or profit-taking. Bears may jump on the opportunity to short-sell the stock to send prices back below resistance levels, which can then trigger stop-loss orders from the originally bullish traders.

The best way to handle bull traps is to try and see the warning signs ahead of time, such as low volume breakouts, and then exit the trade as quickly as possible if a bull trap is suspected to minimize any losses. Stop loss orders can be helpful in these circumstances - especially if the market is moving quickly - to avoid letting emotion drive decision making.

The trader could have avoided a bull trap by waiting for a breakout before purchasing the stock or mitigated losses by setting a tight stop loss order just below the breakout point.

Impact of Gujarat Election Results on the Stock Market

The technical analysts are of the view that political considerations are likely to play a more dominant role in driving economic decisions. Stock markets at present levels, though are pricing in a BJP victory to some extent, they are likely to trade sideways till the final outcome is known.

There are 12 assembly polls in between now and the general elections, which analysts believe, in a way will also be interpreted as a referendum on the Modi-led government's two key reforms. First is the note ban drive and second is the Goods and Services Tax implementation.

The focus will be on Gujarat, Karnataka, Madhya Pradesh and Rajasthan. According to some reports, the EC could hold elections for states that are scheduled to hold assembly elections between end-2018 and mid-2019 simultaneous with the center 2019 general election.

Few analysts stated that once the results of this election are out, the anticipation for the outcome of 2019 Lok Sabha election would be quite near. The second important thing to notice is that Gujarat being the home state of the PM Modi, his popularity in the home state would be taken as a significant sample for his popularity at all-India level.

There are big-ticket reforms that are behind us and we expect incremental reforms to focus on execution of already announced measures - the banking sector, strategic stake sales, infrastructure spending, and privatization. It can also be expected that the government to pause on fiscal consolidation in FY18.

According to economists, we do not expect the government to throw caution to the wind, but we do expect some shades of populism to emerge over the next year.

Although most analysts expect Narendra Modi to come out victorious in Gujarat, which could impact the market sentiment due to the political stability and the current thrust of the government on the economic reforms are the source for the anticipation of long-term bull-run in the markets.

Why December Is Best Month to Be an Equity Investor

April and December are the best months to be an equity investor as, during these months, the FTSE 100recorded the highest average monthly returns between 1980 and 2016, according to a study. Since 2000, October has overtaken December as the second best-performing month in global market.

The months with the lowest - in fact, negative - returns are May, June, and September. Since 2000, January has equaled September in having the worst average returns. Meanwhile, in a 2013-published analysis, it was found that monthly returns from stock markets in 70 countries are signi­ficantly higher in January, February, April, July, and December relative to the other months of the year. September is again the worst month to be invested.

Investors no longer abandon the City for the summer, but an analysis of returns over the past 30 years shows that there is typically fall in the market in between May and September. Since 1986 the FTSE 100 index, excluding dividends and charges, has ended down more than half of the time between 1 May and 30 September. Taking the period as a whole, the index has lost 29.7% over the five summer months - an average of 0.99% per year - but has made 194.3% during the seven winter months. The FTSE All-Share index reflects a similar picture: it fell 31.8%, an annual average loss of 1.1%, during the summer, but rose 211.4% during the winter.

According to the technical analysts, even though stock markets are meant to be efficient, this sort of seasonal behavior still exists.

The stock market seems to be the following trend this year, having performed well over the winter months. This means that markets might take a breather over the summer, as they have been pricing in a more optimistic outlook.

Why You Must Start an Investment Fund Based On a Fully Automated System

Following are some of the best reasons that tell you that it is the right time to start an investment fund based on a fully automated system.

1. Trade While You Sleep

One of the best advantages that do not necessarily appeal to the FX junkies who remain glued to their screens at the wee hours of the night. Automated trading makes it possible to participate in the market while you are catching your sleep at a time.

2. Backtest The Results

There are series of challenges when it comes to attempting backtesting a manual trading strategy. But it is not an issue with automated systems.  Even platforms like MetaTrader 4 allow the user to backtest a strategy at no cost to the user.

3. Overcome the Challenges of Trading

One of the greatest difficulties a trader faces is deciding when to pull the trigger.

4. Diversify

Various traders enjoy running systems while simultaneously placing trades on their own.  Suppose you might be comfortable trading EUR/USD but have nightmares about the last time you bought GBP/JPY. Therefore, instead of avoiding volatile pairs you can allow a system to trade it on your behalf.

5. No Time for Trading

The automated system allows you to still participate in the market even if you do not have the time for it.

If you are also a trader and want to generate accurate intraday cash calls, then you can also take the help of auto trading software. However, the technical analysts of Money Classic Research generate the accurate intraday cash tips for you.  So if you want to get the best advice you need to subscribe the services right now. On the other hand, the experienced analysts also perform fundamental analysis by simply gauging at the economic factors like interest rates and the overall state of the economy that help you in predicting the future of the market.

Traders Must Assume Profits and Losses as a Part of Intraday Trading

Traders who study markets can generate good profits in intraday trading. Traders can start with reading markets and keep themselves updated with both domestic and international markets. They can also read about company updates, government updates and so on. These are those factors, which will affect the direction of stock markets and this is what the trader needs to concentrate on.

You must have a practical approach

The intraday stocks always move based on the market sentiment and hence if you have to make profits in intraday; the trade has to be based on the movement of the stock market. For example, if the market is bullish, then buy and sell a few times to earn small profits rather than waiting for that big move. Similarly, if the market is bearish, you can short sell and buy at the lower levels to gain some small profits with 2-3 trades.

Reduce your losses

Intraday trading is all about generating small profits with multiple trades. This helps reduce the losses and generate daily profits. One way the traders can reduce the losses is to wait for the right time to trade rather than trading at every move in the stock 's price.

Never wait to generate huge profits in just trade; instead, plan multiple trades and earn small profits. Many times traders tend to overtrade and they end up in losses. When it comes to intraday trading, no one has the control over the movements of stocks and hence if the trader waits too long and the direction of the stock reverses, the trade then enters into a loss.

Another important aspect to remember during intraday trading is to use stop losses. Stop loss helps to minimize your loss in case of sudden reversal in the direction of the stock.  One also has to be careful not to use the margin amount that is provided by the broker. If you do so, the trade has to be squared off before the closure of the market irrespective of loss or profit. If the trader just uses the money, he/she can opt for the delivery of shares bought if the trade gets to loss.

How Can You Use Stop Loss While Trading Online?

A stop-loss order is a type of advanced trade order that can be placed with most brokerages. To put a stop loss and profit target is one of the best risk management techniques in stock trading.

For traders, Stop Loss orders are extremely important tools. We know that the global markets operate day and night, making it virtually impossible for a single trader to follow multiple deals on a variety of shares, commodities, currencies, and indices. Various instruments are extremely volatile and can experience huge price changes in a matter of hours, or even minutes. However, the Stop Loss orders offer a simple solution to investors’ need to carefully monitor changes and help protect a trader’s balance.

Various veteran traders believe that Stop Loss orders are not a perfect solution if they are not used carefully as they can also limit potential profits by effectively closing a deal too soon.

This is the best way to minimize the loss that you may face while trading. Stop loss is said to a point or price beyond which if the stock’s current price goes, in that case, you need to reverse your earlier position. A trader must keep in mind that a stop loss order instructs your broker to sell when the price hits a certain point or price. The main goal of putting stop loss is to get out of the stock before it falls any further and it indicates maximum loss you are willing to absorb.

If you want to understand the theory of stop-loss with an example then suppose if stock breaks below a key support level, in that case, traders often sell as soon as possible.

But on the other side, profit target is the price at which you need to sell a stock and book a profit on the trade. Usually, this happens when the extra upside is limited to the given risks. In general, you sell the profitable shares quickly and hold on to the losing stocks for a longer period of time in the hope that in future they will bounce back.

Worst Mistakes That All Novice Trader Makes

Are you the one, who has just started trading in stocks then you must carefully read this article as this post embraces certain common mistakes that all novice traders commit.

Intraday trading is buying and selling of stocks in one single day. Hence, the intraday trading involves frequent market fluctuation, which is not that easy to understand by novice traders. However, if you are trading under the guidance of some knowledgeable person or technical analyst, who can generate best intraday tips, then you may get the profit. On the other hand, if you are capable of implementing technical indicators then you can generate free intraday tips.

You must never think that you cannot try out Intraday trading on your own. Learn from your mistakes and only a few things you need to keep in mind is never risked more than 2% of your trading capital on every trade. The study proves that no one will go bust in trading if they trade with proper risk management.

This post embraces some of the best as well as simple strategies to generate intraday trading tips.

Letting Losses Mount

If a trade is not working out then move on to the next trade idea. But, unsuccessful traders, get paralyzed if a trade goes against them. Instead of taking quick action to cap a loss, they may hold on to a losing position in the hope that the trade will eventually work out.

Failure to Implement Stop-Loss Orders

For trading success, Stop-loss orders are crucial. If you fail to implement them then it is one of the worst mistakes that can be made by a novice trader. Fix to stop losses generally ensure that losses are capped before they become sizeable.

You must get in touch with the experienced technical analysts to avoid such mistakes.

What You Need to Know About Commodities Trading

Various trading commodities like corn, wheat, and soybeans are among the most complex forms of investing. Therefore, experts warn strongly against novices entering the venue. Such types of trades can offer the most rewards as well as the most risks due to wild price fluctuations.

Traders almost never buy or sell commodities completely. They buy a contract to either buy or sell the commodity at a future date and set price instead. And it is known as a futures contract.

Few basic facts about trading in commodities futures:

Some of the most commonly traded agricultural commodities are corn, soybeans, wheat, oats, rice, and cotton.

One can do trading either through a broker or through online trading systems.

Investors usually are required to put down a portion of the contract's value to buy a contract. These minimums that are known as margin buying may vary greatly. For instance, holding a corn contract, costs $1,000, while holding a Standard & Poor's 500 commodities contract costs $10,000.

You may be required to put up more money to hold onto the contract if commodities prices change enough to make the value of your contract worthless.

Depending on which way the contract moves contract holders either reap profits or pay losses.

You can minimize your exposure by ordering an offset, which would limit losses in case the commodity hits a particular price point. It is significant to monitor the rapid fluctuations in prices to minimize losses that are not covered by offset trades.

There is no necessity to purchase futures to trade commodities. Exchange-traded funds have issues that imitate the movements of various commodities, without the risks and rewards of futures trading.

For more information about commodity trading get in touch with the experts of Money Classic Research, who are experienced in generating accurate MCX tips.

Few Tips to Improve Risk Management Technique

Usually, on the priorities list of most traders, risk management ranks very low. Traders feel that only important factor to be a successful trader is just finding a better indicator, more accurate entry signals or worrying about stop hunting and unfair also-trading practices. But it is not. Along with these factors, you also need to focus on risk management techniques to do a profitable trading. Without proper knowledge about risk management techniques, you cannot book profit. You need to understand how to manage your risk, size your positions and create a positive outlook on your performance. If you want to become a profitable and professional trader then you must follow following tips;

Set orders and the reward: risk ratio beforehand

Think where you will like to place your stop loss and take profit order before itself when you spot an entry signal. Measure the risk: reward ratio, when you have identified reasonable price levels for your orders. Suppose if it does not match your requirements then you must skip the trade. Never try to widen your take profit order or tighten your stop loss to achieve a higher reward: risk ratio.

Always avoid break-even stops

It is very dangerous to move the stop loss to the point of the entry and thus create a “no risk” trade. Usually, it is unprofitable as well. You must always protect your position, as the break-even strategy often leads to a variety of problems. If you move your stop too soon, then a break-even stop will get out of potentially profitable trades.

Take spread seriously

You must always take spread seriously. Spreads are usually just a few pips for the most liquid instruments and thus you may consider them as they do not exist.

In stock trading, one of the best risk management techniques is to fix a stop loss and profit target.

Can You Be a Successful Trader without Hiring a Technical Analyst?

If you want to understand the importance of technical analysts in your life then you must first know the significance of technical analysis. We know there are a lot of magical indicators and systems that help you in recognizing the trend of the market. So it would be not wrong to say that some parts of technical analysis probably work simply because so many people believe they do. Usually, technical analysis measures where supply and demand meet or in other words, it can be explained as measure where there are more contracts of a financial instrument available than the amount wanted or vice versa.

One of the most common forms of technical analysis is Fibonacci based. The mathematician Leonardo Fibonacci discovered during the Renaissance. Fibonacci retracement is the method of analyzing technically the support and resistance levels. Fibonacci retracement uses horizontal lines to represents the areas of support and resistance.

The horizontal lines are divided in the ratio of Fibonacci series, i.e. 0, 1, 1, 2, 3, 5, 8, 13, 21, 34…………..

In Fibonacci series, the sequence number is the sum of the previous two numbers. In any trading scenario, there are no guarantees. You cannot win trading without the benefit of a crystal ball, using common sense, a solid trading strategy, and the appropriate technology tools. A veteran trader can predict the price movements correctly. They can find whether these movements are short-term retracements or long-term reversals and thus generate accurate tips. For more information, you must get in touch with the technical analysts of Money Classic Research, who have experience of providing accurate Intraday Cash Tips.

One of the other common reasons to look at technical analysis importantly before placing a trade in the stock market is that it helps you in reducing the urge to trade based on your gut reaction. This is a common way in which traders lose money in the stock market and a bad stock trading habit that is hard to break without an alternate solution.

Secrets of Successful Intraday Trading

We know that buying and selling on the same day is known as intraday trading, where it may be either buy first or short selling. Usually, intraday traders book profit in small margins. It is observed that the investors are making a profit by repeated trades or by trading large quantities. However, we must not forget that intraday trading is high risk involved.

Some of the Golden rules of intraday trade are mentioned in this article. The first thumb rule is to ride the trend. Therefore, the first step to making a profit in intraday trade is to determine the stock. To identify stocks for trading intraday, intraday charts are the best way. It is also said that one should make a good homework before entering in intraday trade.

Here, homework means, study the historical charts and find out the upward or downward moving stocks. You must be able to find out the support and resistance levels. Usually, it is said that the better strategy is to buy at previous days support level and sell at previous days resistance levels. Another good idea is to sell below support level and buy above the resistance level.

Always keep stopping loss for intraday trade. If you fail to follow this rule then you will lose heavily. But, while keeping stop loss, it is very important to note that where you are keeping stop loss. You can get help from previous days intraday charts. Another important thing to remember is to keep trailing stop loss and revise stop loss when one is in profit. You can keep stop loss for profit and can revise according to upward movement, instead of booking profit. Generally, this strategy works in intraday trade.

If you want to take help of advisory firms then you must approach the reliable advisory firms like Money Classic Research, who has a huge client base.

Best Technical Indicator For Stock Market

To become a successful trader, you need to develop two distinct sets of skills. One is the capability to analyze the market fundamentally and other is to analyze the market technically. You may think that these skills are similar to each other, but there is a world of difference in both the skill sets. Both are equally important to learn if you truly want to win in trading and know what is going on with your stocks.

In this post, we will be discussing two frequently used technical indicators that are used to analyze the market technically. These technical indicators can be used individually, as well as in combination with each other to gauge the trend of the market. The technical analysts have to study stock charts, which open on the basis that trends tend to occur over and over again. So the trend can be gauged with the help of following two technical indicators.

Fundamentally, Moving Average Convergence Divergence indicator is the comparison of two moving averages. You are allowed to set two moving averages for any time period that you want to calculate. It could be the 12-day and 26-day moving average of the stocks that are used. Basically, the concept behind MACD is that when the short-term line crosses the long-term line, then the signal of future stock activity is generated. When the short-term line tends to run under the long-term line or crosses above it, then the stock will trade higher.

Similarly, traders and technical analysts can predict a sell-off when the short-term line crosses under the long-term line. The Relative Strength Index is an oscillator that is easy to implement. Even a novice trader can implement this technical indicator effectively to generate accurate stock future tips. Oscillators like the RSI help the traders in determining when a stock is overbought or oversold. The RSI is the right indicator for traders, those like to buy low and sell high.

Money Classic Research is one of the best intraday tips providers that offer a wide range of services at affordable prices.

All That You Need To Know About Day Trading

Are you a day trader? If yes then you must definitely know the benefits of intraday trading. We know that the day trading is high in risk, but at the same time, it has huge benefits. In day trading there is no overnight risk and this is one of the greatest advantages of day trading. However, in positional trading, there is an overnight risk. Day traders also have the greatest advantage of making a profit in any direction. To succeed in intraday trading, you need accurate intraday tips.

There are large numbers of people, who indulge in share market trading but only a few are successful. The mystery behind the success of all traders is accurate share market tips. If you are not capable of generating accurate tips then you must certainly take help of technical analysts. Money Classic Research is best advisory firm that embraces most qualified technical analysts. Hence, you must get in touch with the technical analysts of Money Classic Research to get a strict judgment of buying and selling stocks.

Money Classic Research offers accurate stock market tips to their clients. It is SEBI registered and leading provider of accurate intraday tips. It is reckoned name in presenting a wide range of intraday cash tips, equity cash tips, options tips, commodity tips and Forex tips to traders.

The technical analysts of the firm put in all efforts to make strict and significant judgments of buying and selling the stock. Apart from this role, they are also responsible to keep a strict eye on news and events that affect the stock market. They are one-stop mart to give advice on all the segments of the stock market and as we know that the stock trading is a game of time so they reliably offer intraday trading tips through SMS gateways and instant messengers. Tips are provided to the clients before 5 minutes to the triggered point. Money Classic Research is the only advisory firm that is bothered by the daily profit of its clients by ensuring to deliver the accurate intraday tips.

How to Trade With the Directional Movement Index

The directional movement index is a momentum indicator that is typically shown below or above the price chart. The technical analysts calculate it by comparing the current price with the previous price range. The directional moment index then displays the result as an upward directional index and a downward directional index with a symbol (+DI) and (-DI) respectively. It is also implemented to calculate the strength of the upward or downward movement. It then displays the result as a trend strength line, which is known as Average Directional Index or ADX.

Technical analysts use the Directional Movement Index in ranging as well as in trending markets. Generally, it is assumed that when the +DI line is above the -DI line, the market is moving upwards. Similarly, when the -DI line is above the +DI line, the market is moving downwards.

When you are trading a trending strategy, you must favor long positions when the +DI is above the -DI line. You need to avoid long trades when the -DI is above the +DI. Similarly, keep in mind when the -DI is above the +DI, favor short positions, and avoid taking short positions when the +DI is above the -DI.

Average directional index line represents the strength of the price move. Analysts believe that the market is trending when the ADX line is above 25, and ranging when the ADX line is below 25.

There are many investors, who consider an ADX reading above 20 as trending, and below 20 as non-trending.

The average directional index can actually act to further filter or confirm trade signals. One must use these momentum indicators to generate the accurate stock market tips. If you want to approach the experienced technical analysts then visit the official website of money Classic Research.

Things You Must Know About Derivatives Expiry

Usually, the derivatives that are traded on the exchange are of two types. They are Futures and Options. The future and options are contracts that are traded on the exchange. Whoever is willing to buy this contract is known as the contract buyer and he agrees to buy or sell the underlying assets at a fixed price at a future date. Once committed, the buyer has to fulfill the agreement at all costs. The only difference between the future and option is that in an Options contract, the buyer can let the contract expire without fulfilling the terms of the agreement but in future, it is compulsory to fulfill.

What is derivatives expiry?

Derivatives expiry is the future date in which the contracts have to be fulfilled. The exchange has declared that the contracts can only expire on the last Thursday of every month. This is done so that there is no confusion among the traders. However, if last Thursday of every month happens to be a trading holiday, then the previous trading day would be counted as the expiry date.

Derivatives settlement

The contracts are settled on the expiry day. In case of Options, the contracts just get expired on the expiry date. The derivative settlement can be done by two prominent ways. First is that you can buy another contract that nullifies your contract. Or the second method is that you can settle for cash.

Here is an example to better understand the things. Let us assume that you bought a futures contract which allows you to buy 100 shares of ABC Company. So to close the contract, you must buy another futures contract that allows you to sell 100 shares. However, in this case, you will have to pay the difference in the price of the contract. Every contract is traded at a particular value. Therefore, the settlement value of the derivative is tied to the closing price of the stock on the last day.