FROM AN EXPERIENCE
Heart / Courage – Trading is a business that requires a person to do things that will cause some degree of consternation from time to time. Trading promises many opportunities but yields few victors at the end of the day. As a result, having the ability to buck the crowd is something that can help you achieve great things.
An example of this occurs when a trade setup happens, and one must balance the potential pain of a losing trade against the desire to make money. There are benefits to getting into trades with favorable reward-risk ratios, and they can put you in the driver’s seat to success. Many of the potential opportunities look easy after the fact, but the truth remains: In real time, one must have a great deal of courage to pull the trigger.
Someone asked about my business recently. In no particular order here are several original principles developed along my way and some paraphrased thoughts from many of those very bright trailblazers who molded my thinking:
You don’t need to be ‘big’ to be good, you need to be smart.
When there is no market, create one.
Engage someone as if your life depended on it.
Nothing is more important than the wisdom to help transform someone.
Make your vision grounded in your uniqueness.
Focused on the unexamined dimensions of your efforts.
The race goes to the curious and slightly mad.
Dry obligation to anything in life will figuratively kill you.
No one gives permission. Seize the mantle.
If you can’t solve a problem, you are playing by the rules.
Hard work, sustained concentration and drive are the so-called secrets.
Telling the truth is the best defense for every situation.
Winners understand sunk costs and opportunity costs.
Plan to win, prepare to win and have every right to expect to win.
It’s in your power to change your belief systems. No one is stuck.
And for those who complain that they were born without the silver spoon consider:
Money cannot completely compensate for a lack of talent, for sloth or a flawed vision, or for a pedestrian frame of mind. And the absence of cold hard cash can’t keep you from making movies (or whatever) if that’s what you want to do and you’re clever about it. To think otherwise suggests not just a lack of imagination but also a failure of the optimism necessary for attracting good things. If you’re paying close attention, there are buoyant, cheerful accidents in life and strange twists of plot to help you on your way.
And when you think about it, it’s much nicer to have pleasant things happen to you than to work out every last bit of your life from a master plan, detail by detail.
(to be contd)
HERE's THE PICTURE OF INTRADAY (14-11-2011)
Resistances today @ 5237-58
Supports today @ 5158-22
Supports today @ 5158-22
If trades above 5186, surely it touches 5235
& reaches 5258 if crosses 5237 with good volume
SO WATCH
5185 today
Suppose if trades below 5185
it slides down to 5158 and if that too breaks 5122
is possible – but chances are very remote in this direction todayit slides down to 5158 and if that too breaks 5122
ALSO TODAY...
SKSMICRO, EDUCOMP, AXISBANK and AUROPHARMA on rise
Exact levels and timing strategy only to the subscribers
MEANING OF SOME IMPORTANT BANKING TERMS
How many of you read the news last week “RBI increases Repo and Reverse Repo rate by 25 bps” ? For most of us these words do not make sense, and we move on to next news item. Little do we realize that we are affected by these rates and a basic knowledge about it is a must.
So let’s first understand what these banking terms means, and then we’ll see how these rates affect a layman.
Bps
Bps
It is an acronym for basis point and is used to indicate changes in rate of interest and other financial instruments. 1 basis point is equal to 0.01%. So when we say that repo rate has been increased by 25 bps, it means that the rate has been increased by 0.25%.
Repo Rate And Bank Rate
People often get confused between these two terms. Though they appear similar there is a basic difference between them.
Repo rate or repurchase rate is the rate at which banks borrow money from the central bank (read RBI for India) for short period by selling their securities (financial assets) to the central bank with an agreement to repurchase it at a future date at predetermined price. It is similar to borrowing money from a money-lender by selling him something, and later buying it back at a pre-fixed price.
Bank rate is the rate at which banks borrow money from the central bank without any sale of securities. It is generally for a longer period of time. This is similar to borrowing money from someone and paying interest on that amount.
Both these rates are determined by the central bank of the country based on the demand and supply of money in the economy.
Reverse Repo Rate
Reverse repo rate is the rate of interest at which the central bank borrows funds from other banks for a short duration. The banks deposit their short term excess funds with the central bank and earn interest on it.
Reverse Repo Rate is used by the central bank to absorb liquidity from the economy. When it feels that there is too much money floating in the market, it increases the reverse repo rate, meaning that the central bank will pay a higher rate of interest to the banks for depositing money with it.
CRR (Cash Reserve Ratio)
Banks are required to maintain a percentage of their deposits as cash, meaning that if you deposit Rs. 100/- in your bank, then bank can’t use the entire Rs. 100/- for lending or investment purpose. They have to maintain a portion of the deposit as cash and can use only the remaining amount for lending/investment. This minimum percentage which is determined by the central bank is known as Cash Reserve Ratio.
So if CRR is 6% then it means for every Rs. 100/- deposited in bank, it has to maintain a minimum of Rs. 6/- as cash. However banks do not keep this cash with them, but are required to deposit it with the central bank, so that it can help them with cash at the time of need.
SLR (Statutory Liquidity Ratio)
Apart from keeping a portion of deposits with the RBI as cash, banks are also required to maintain a minimum percentage of deposits with them at the end of every business day, in the form of gold, cash, government bonds or other approved securities. This minimum percentage is called Statutory Liquidity Ratio.
Example
If you deposit Rs. 100/- in bank, CRR being 6% and SLR being 8%, then bank can use 100-6-8= Rs. 84/- for giving loan or for investment purpose.
How It Effects Us?
Having understood the meaning of these banking terms, let us now see how we are affected by increase/decrease of these rates.
The central bank uses these rates to control inflation.
All About Inflation
Inflation and Types of Inflation
Inflation and Types of Inflation
Banks earn profit by borrowing at a lower rate of interest from the central bank, and lending the same amount at a higher rate to the customers. If the repo rate or the bank rate is increased, bank has to pay more interest to the central bank. So in order to make profit, banks in turn increase their interest rate at which they take deposit from the customer and lend money to the customer. So the demand for loan decreases, and people start putting more and more money in bank accounts to earn higher rate of interest. This helps in controlling inflation.
An increase in Reverse repo rate causes the banks to transfer more funds to the central bank, because banks earn attractive interest rates and also their money is in safe hands. This results in the money being drawn out of the banking system, thus banks are left with lesser funds.
Thus, by lowering repo rate, central bank injects liquidity in the banking system and by increasing reverse repo rate it absorbs liquidity from the banking system.
Increase in SLR and CRR rate means that banks will have less power to give loans (see our example above), which again controls amount of money floating in the market; thereby controlling inflation. It also makes banks safer to keep money because banks will have a higher liquidity to meet the demand of customers. As we learnt from the recession, giving loans expose banks to great risks. So if banks have lesser funds to give as loan, they become relatively safer.
FREE MONEY FROM U.S. MINT SCAM
Earning easy money online: it is possible! That’s what fans of
a particular scheme involving credit card rewards and the U.S.
Mint claim. Is it worth the work and the risk?
Consumers can purchase large quantities (a minimum of $250)
of gold dollar coins from the U.S. Mint online. The key to this
scheme is that these boxes ship for free. The coins are purchased
using a credit card with some kind of reward (preferably instant
cash rewards) and then immediately deposited in the bank when
they show up. As MainStreet explains:
Net result? If you bought $1,000 in coins on your card and then
immediately paid it all off, assuming you have 2% cash back, this
means you just made $20 or more for only a few minutes of effort.
In addition to that, you might also have accrued 1,000 points or
air miles. The Mint gets its new coins in circulation, and you get a
sweet reward — everyone wins, except the credit card
company (that’s a change, isn’t it).
We’d argue that the U.S. Mint doesn’t really win in this situation,
since getting the $1 coins into a bank’s vault is not the same as
getting them into circulation. This particular scheme
depends on a few factors—the safe travels of the coins, and the
timing of one’s credit card deadlines.
Does this sound like a sound financial plan to you, or a scheme
bordering on legal money laundering? To us, it sounds like a lot
of work for at most $20, but lifting $1000 worth of dollar
coins does have residual fitness benefits.
coins does have residual fitness benefits.
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