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 EXNO:08

DATE: Trading with Chart Patterns

What is a chart
A chart pattern is a set price action that is repeated again and again. The idea behind chart
pattern analysis is that by knowing what happened after a pattern in the past, you can take an
educated guess as to what might happen when it appears again. That being said, past
performance is not necessarily indicative of future results.

The outcome of each chart pattern will vary depending on whether it appears in volatile or
calm markets, and in bullish or bearish environments. But broadly speaking, there are three
types of patterns you’ll come across.

Common types of chart patterns:

• Continuation - these signal a current trend will continue

• Reversal - these indicate a trend is going to change direction
• Bilateral - these patterns indicate a market could move in either direction due to
volatility

Now that we know the basics, let's look at some of the most common chart patterns in
technical analysis.

1. Ascending and descending staircase:

Ascending and descending staircases are probably the most basic chart patterns. But they’re
still important to know if you’re interested in identifying and trading trends.Take a look at
any market, and you’ll notice that price action is rarely linear. Even in strong uptrends and
downtrends, you’ll see some movement against the prevailing momentum.When markets are

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forming lower lows and lower highs this can be considered a downtrend and forms a
descending staircase. In this phase, traders would consider trading on the short side of the
market. And in a downtrend, a trader could use the mini rallies that go against the bear run as
opportunities to sell.

2. Ascending triangle:

The ascending triangle is a chart pattern that’s created when a horizontal set of highs is met
by an ascending set of lows. The upper horizontal line is the resistance level, and the lower
upward sloping line is support.It is a continuation pattern, usually appearing after an uptrend.
Over the course of the pattern, the market consolidates (which means the trend stalls), but if it
breaks out above the resistance line, then a new uptrend should form.

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3. Descending triangle:

The descending triangle is the opposite of an ascending one. It usually occurs after a
downtrend, and is formed when a horizontal set of lows (the support level) is met by a
descending set of highs (resistance)It’s also considered a continuation pattern, telling us that
the market is likely to break out lower through the support level, making it a bearish signal.

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4. Symmetrical triangle:

Symmetrical triangle patterns occur when two trend lines approach one another. Essentially,
it’s like if you overlaid an ascending triangle onto a descending one – and got rid of both of
the horizontal lines.The symmetrical triangle can signal a few different things, depending on
market conditions.It’s often considered a continuation pattern because the

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market usually continues with the prevailing trend.

5. Flag:

A flag pattern is created when a market’s support and resistance lines run parallel to each
other, either sloping upwards or downwards. It culminates in a breakout in the opposite
direction to the trendling Although they can be considered as reversal patterns – after all, the
price action within the flag reverses when the breakout occurs – flags are usually classed as
continuation signals because they tend to occur after uptrends (bullish flags) and downtrends
(bearish flags).Think of it in three parts: a strong directional move, followed by a slow
counter trend – the ‘flag’ – and a breakout.

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6. Wedge:

A wedge pattern is similar to a flag, except that the lines tighten toward each other instead of
running parallel. As the pattern progresses, it often coincides with a decline in volume.A
wedge pattern can either be rising or falling. After a rising wedge pattern, the market should
break out downward, passing the support level. This presents opportunities for a new bearish
position, or might be a sign to close a long one.For a falling wedge, the price should break
through a resistance level to start an uptrend. You can open a long position at this point, or
close a short one.

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 7.Double top:

A double top pattern is formed after a market’s price reaches two highs consecutively with
small declines in between. It forms an M-shape on a chart.The double top is a bearish reversal
pattern, so it’s thought that the asset’s price will fall below the support level that forms at the
low point between the two highs. It’s crucial to confirm this support level, as basing your
trade solely on the formation of the two peaks can cause a false reading.

8. Double bottom:

A double bottom is, perhaps unsurprisingly, the opposite of a double top. It’s formed when a
market’s price has made two attempts to break through a support level and failed. In between,
there has been a temporary price rise to a level of resistance. It creates a W-shape.The double
bottom is a bullish reversal pattern because it typically signifies the end of selling pressure
and a shift towards an uptrend. Therefore, if the market price breaks through the resistance
level, it is likely to continue rising.

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9. Head and shoulders :

The head-and-shoulders pattern is formed of three highs:All three highs should fall to the
same support level – known as the neckline – and while the first two will rebound, the final
attempt should break out into a downtrend.The head-and-shoulders is a bearish reversal
pattern. Like the double top, the market hits a resistance level that it can’t move past. But
here, the situation plays out a little differently, hitting a smaller high first, and then with
buying momentum clearly falling as the final high doesn’t match the second.

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10. bottom :Rounded top and Patterns
A rounded top or bottom are both reversal patterns. A rounded top appears as an inverted U-
shape, and indicates an imminent downtrend, while a rounded bottom appears as a U and
occurs before an uptrend.Again, the price action here is similar to a double top or bottom, but
this time it plays out across more sessions than just two.

11. Cup and handle :

The cup-and-handle pattern is similar to a rounded bottom, except it has a second, smaller,
dip after it. The second smaller curve can resemble a flag pattern if the trend lines are parallel
to each other.

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 EXNO:09

DATE: Share Trading on Virtual Platforms

Share trading on virtual platforms has revolutionized the way individuals and institutions
engage with financial markets. These platforms provide a range of features and tools that
make trading more accessible, efficient, and user-friendly. Here’s a comprehensive overview
of share trading on virtual platforms:

How Virtual Share Trading Platforms Work

Virtual share trading platforms allow users to buy and sell stocks online. Users create an
account, deposit funds, and use an intuitive dashboard to access real-time market data and
analysis tools. Trades are executed using various order types, and users can monitor their
portfolio performance continuously. Platforms also offer educational resources and customer
support to assist traders.

Pros and Cons of Virtual Trading Platforms

Pros: Accessibility: Available 24/7 with mobile and web access, making trading convenient.

Cost-Effective: Lower fees and commissions compared to traditional brokers.

Advanced Tools: Offers real-time data, analytical tools, and automated trading features.

Flexibility: Allows trading in global markets with customizable alerts and educational
resources.

Cons:
Risk of Loss: High market volatility and leverage can lead to significant losses.

Technical Issues: Potential for platform outages and reliance on a stable internet connection.

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Security Concerns: Vulnerable to cyber threats an data privacy risks

Information Overload: Complexity of tools and data can overwhelm beginners, leading to
decision

fatigue.

Advantages of using Virtual stock trading platforms

1. No need to open a Demat/trading account or go through any documentation process.

2. No real money is required to start virtual trading.
3. Real-time market scenarios to try out different strategies and to learn the basics.
4. Risk-free trading practice.
5. Okay to make mistakes and take risks as there’s no real loss

Disadvantages of using virtual stock trading platforms

1. Lack of Emotional Realism: No real financial risk affects genuine emotional

experience.
2. Market Dynamics: Virtual trading assumes perfect liquidity, unlike real markets.
3. Unrealistic Features: Platforms may not replicate actual trading complexities.
4. Learning Limitations: Simplified processes might not prepare for real-world trading.
5. Data Discrepancies: Delayed data doesn't reflect real-time market conditions.
6. Psychological Impact: Success in virtual trading can lead to unrealistic expectations

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EXNO:10
DATE: Futures and Options

What is Futures and Options:

Futures and options are the major types of stock derivatives trading in a share market. These
are contracts signed by two parties for trading a stock asset at a predetermined price on a later
date. Such contracts try to hedge market risks involved in stock market trading by locking in
the price beforehand.Future and options in the share market are contracts which derive their
price from an underlying asset (known as underlying), such as shares, stock market indices,
commodities, ETFs, and more. Futures and options basics provide individuals to reduce
future risk with their investment through pre-determined prices. However, since a direction of
price movements cannot be predicted, it can cause substantial profits or losses if a market
prediction is inaccurate. Typically, individuals well versed with the operations of a stock
market primarily participate in such trades.

Difference between Futures and Options:

Future and option trading are different in terms of obligations imposed on individuals. While
futures act a liability on an investor, requiring him/her to follow up on a contract by a pre-set
due date, an options contract gives an individual the right to do so.A futures contract to buy
sell underlying security has to be followed up on the predetermined date at a contractual
price. On the other hand, an options contract provides a buyer with a choice to do the same, if
he/she profits from a trade.

Types of Futures and Options:

While futures contract holds the same rules for both buyers and sellers of a contract, an
options derivative can be divided into two types. Individuals entering an options contract to
sell a particular asset at a pre-asserted price on a future date can do so by signing a put option

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contract. Similarly, individuals aiming to purchase a particular asset in the future can enter
into a call option to lock in the price for future exchange.

Who Should Invest in Futures and Options:

Hedgers:

Such individuals enter into futures and options contracts in the share market to reduce
investment volatility concerning price changes. Locking in a price for transaction at a future
date helps individuals realise relative gains if the price moves adversely with respect to a
trading position assumed by a buyer. However, in case of a favourable fluctuation,
individuals entering into a futures contract can incur significant losses. Such risk is mitigated
in an options contract, as an investor can pull out of a deal in case of favourable price swings.

Speculators:

Speculators predict the direction of price movement in a market as per an intrinsic valuation
and economic condition and choose to take an opposite stance in the present to gain from
such price fluctuations. Taking a futures and options example, if an investor predicts the price
to increase in the future, he/she can assume a short position in the derivatives market. It
indicates a purchase of a stock/derivative in the present to sell it on a later date, at a higher
price.

Arbitrageurs:

Arbitrageurs aim to profit from price differences in the market, which arise due to market
imperfections. A price quoted in futures and options trading includes the current price and
cost of carry, along with an underlying assumption that a strike price matches the contractual
price. Any price difference arises from carrying the underlying security to the future date,
known as the cost of carry. Arbitrageurs essentially remove all price differences arising from
imperfect trading conditions, as they change the demand and supply patterns to arrive at
equilibrium.

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