HOW TO ENTER INTO UPPER CIRCUIT STOCKS?
WHENEVER WE MAKE AN INVESTMENT IN A PARTICULAR STOCK WE WILL DO A LOT OF ANALYSIS BEFORE ENTERING INTO IT. WE WILL OBSERVE A LOT OF PATTERNS BEFORE ENTERING INTO A PARTICULAR STOCK.
DEMAND AND SUPPLY:
GENERALLY, THE PRICE OF THE PARTICULAR COMPANY STOCK WILL DEPEND UPON THE DEMAND AND SUPPLY OF SHARES OF THAT PARTICULAR STOCK. WHEN DEMAND IS MORE, MANY INVESTORS WILL SHOW INTEREST IN BUYING THAT STOCK. SO THE SHARE PRICE OF THAT STOCK WILL GO UP QUICKLY OR SLOWLY BASED ON THE DEMAND AND SUPPLY.
WHEN THE SUPPLY OF SHARES IS MORE IN ANY PARTICULAR COMPANY’S STOCK AND THE DEMAND IS LESS WHEN COMPARED TO SUPPLY. THAT WILL AFFECT THE STOCK NEGATIVELY, AND THE SHARE PRICE OF THAT STOCK GOES DOWN QUICKLY OR SLOWLY BASED ON THE DEMAND AND SUPPLY.
EFFECT OF NEWS ON STOCK :
AS WE ALL KNOW, IT IS VERY DIFFICULT TO UNDERSTAND HOW THE MARKET REACTS BECAUSE IT DOES NOT MOVE CONSISTENTLY IN A SINGLE DIRECTION. MARKET MOVES IN DIFFERENT PATTERNS. ANALYSING THOSE PATTERNS IS CALLED AS TECHNICAL ANALYSIS IN OUR LANGUAGE. THIS TECHNICAL ANALYSIS WILL HELP US TO STAY AWAY FROM LOSSES AND ALSO HELPS US TO GET PROFITS.
EFFECT OF POSITIVE NEWS :
LET’S TAKE AN EXAMPLE TO UNDERSTAND THIS. EXAMPLE OF ABCD COMPANY.
THE ABCD COMPANY GOT AN ORDER OF 5000 CRORES FROM A BIG COMPANY. THIS AFFECTED THE SHARE PRICE TO MOVE UP VERY QUICKLY.
EFFECT OF NEGATIVE NEWS :
LET’S TAKE ANOTHER EXAMPLE OF ABCD COMPANY, AGAIN YOU ARE OBSERVING A SIMILAR STOCK THE NEXT DAY TO TAKE A NEW POSITION, OKAY, THE SHARE PRICE WAS SEEMED TO GO UP BUT UNEXPECTEDLY THE SHARE PRICE WENT DOWN WHY?
HERE IS THE ANSWER, ACTUALLY THE ABCD COMPANY GOT AN ORDER OF 5000 CRORES YESTERDAY AND THE SHARE PRICE ALSO REACTED POSITIVELY, BUT TODAY THE NEWS IS ABCD COMPANY LOST THAT ORDER.
THE ABOVE ABCD COMPANY IS AN EXAMPLE OF MANY REAL-TIME COMPANIES IN THE STOCK MARKET. AS AN INVESTOR YOU MAY HAVE EXPERIENCED A LOT OF THINGS LIKE THIS.
OKAY, FINALLY LET’S KNOW HOW TO ENTER INTO UPPER CIRCUIT MAKING STOCKS:
TO ENTER INTO AN UPPER CIRCUIT MAKING STOCK YOU HAVE TO PLACE A BUY ORDER IN PRE-MARKET WITH THE BELOW CALCULATION EXACTLY AT 9.00 AM.
CURRENT MARKET PRICE X 1.05 = BUY SHARE PRICE.
ADJUSTMENT ( IF NEEDED ): WE ALL KNOW THAT STOCK PRICE WILL MOVE WITH A DIFFERENCE OF 0.05 PAISE ( NSE), AFTER DOING THE ABOVE CALCULATION IF YOU GOT A PRICE LIKE 56.89, YOU HAVE TO PLACE A BUY ORDER AT 56.85.
REASON: IF YOU PLACE THE ORDER AT 56.90 IT WILL EXCEED THE CIRCUIT LIMIT OF 5%.
