• ‘Day Trading’ by definition is to close the trade taken at the end of that day. It is not ‘Daily’ Trading. Please remember it is not necessary to trade daily in-fact you must trade less frequently but when you trade the probability of a profitable trade should be heavily in your favour.
• It is more important to trade less number of times bur get most of those correct than to trade everyday even when there is less chance of success and hence lose capital.
• ‘Short Term Trades’ are basically Trades for that week usually from 1- 5 days.
• ‘Positional Trades ‘ are for that month ie till the futures expiry.
• For Trading in ‘Derivatives or Futures and Options the month is from the last Friday of the previous calendar month to the last Thursday of the next Calendar
• ‘Delivery Trades’ are for any period longer than Positional Trade it could be 6 weeks to 1 year.
• When we refer to a ‘BULL MARKET’ we mean a market that is going ‘UP’. It is characterized by an ’UPWARD TREND’ by a series of Higher Lows and Higher Highs.
• Bull Market is when one can profit by buying at Lower Prices and selling when the Stock or Index goes ‘UP’ and profit from the difference. This is also called going ‘LONG’.
• When we refer to a ‘BEAR MARKET’ or a ‘DOWNWARD TREND’ means market is falling or correcting.
• Usually a Bear Market will follow a Bull Market and bring prices of Stocks and Indices to a Lower Level. This is characterized by a series of Lower Highs and Lower Lows.
• Bear Market is when one can profit by Selling at a Higher Level then buying back after the Stock or Index falls and make profit on the difference.
• The process of Selling first also called going ‘SHORT’ then buying back is also referred to as ‘SHORT SELLING’ and ‘SHORT COVERING’.
• An ‘OPTION’ is a derivative available for trading in the derivative market. It allows us to take a large position at a much lower amount of Investment. This is also called a ‘LEVERAGED POSITION’

Every Option has the following

• Nature of Option– ‘CALL’ or ‘PUT’. Call Option is to be bought when trading ‘LONG.’ ‘Put Option is to be bought when trading ‘SHORT’.
• Premium – this is the amount you pay to hold the Option for a maximum period of a futures month.
• Period for which Option is active From the last Friday of the previous calendar month to last Thursday of next calendar month.
• Time Decay – this is unique to only an Option not to Futures Contract. The premium at the start of the future month is more than at the middle or end of month Ie. The value of the Option Premium keeps falling as the days to expiry reduce.
• This very important to understand as even if the Stock or Index does not fall or Go up much the Option will lose its value.
• Hence when trading Options ideally one should try and close the position as soon as possible generally within 1-3 days.
• ‘LOT SIZE’ when trading in Futures & Options you have to buy or sell minimum one lot of shares of a stock or Index unlike in Cash Market where you can buy minimum 1 share to any quantity, the number of shares in a lot will depend upon the price of the stock or index stock to bring the value of the contract to somewhere around 10 lakhs . So Nifty is in a lot of 75 at present but from next month -June 2021 it will be 50. Bank Nifty is in lot size of 25.
• STRIKE PRICE each stock or index will have strike prices at a certain predetermined gap eg Nifty is at a gap of 50 points Bank Nifty is at a gap of 100 points. So Strike Prices on Nifty will be 10000,10050,10100,10150,10200 etc. Same for individual stocks as well. The Strike Price will also determine the Price of the Option.
• So the Total Investment to buy 1 Option Contract is = Premium x Lot Size . If premium of an option of Nifty say is 200 then the premium will be 50 x 500 = 25,000/-for this investment you can hold one lot of Nifty (50 shares for 1 month.)
• LEVERAGE now we need to understand that for a small amount we are able to hold a position of a much larger value Eg. One lot of NIFTY would be valued at 50 x 15000 = 7,50,000/- ie if we were to actually buy 50 shares of Nifty but by only paying 25,000/- we are able to hold 50 shares of Nifty for a month.
• The Ratio to our investment to amount we hold is 25,000 : 7,50,000. Ie. 1:30. In this example.
  This hence exaggerates both Profits and Losses by the same ratio ie it will exaggerate profits by 30 times and losses by 30 times.
• Profit or Loss in Option Trading is by the increase or decrease in the premium of the Option due to the rise and fall in the Stock or Index if the move is in your favour you will make profit if the move is against then you will lose money.
• STOP LOSS – This is a Fundamental method of Risk Management / Capital Preservation when Trading or Investing. This is a level at which you need to exit form a Trade or Investment which has gone against you.
• The Stop Loss basically allows you to exit trade with a small loss to avoid a much larger loss which can wipe out your entire capital.
• It is compulsory to Trade / Invest always with a Stop Loss in place.
• MONEY MANAGEMENT – This is another Fundamental Concept which is very important.
• Use only 30% of your Trading Capital or Investment Fund for a Single Trade.
  Eg. if you have 100,000/- then not more than 30,000/- should be used for a trade.
  So if in 30000/- you get only one lot then trade one lot if you can get two then trade two.
• SIZE of a Trade even if you can afford it please don’t trade large quantities until you have at least 1-2 years of trading with consistent profits.
• Larger Lot Sizes means Larger Profits but even more Larger Losses.