How to know if a bank is going to do well in future?

When everything seems fine we observe there's sudden change in demand and supply of a bank's share. As a stocks-trader we want to know more and more about the bank's image in the market, it's stocks demand and supply condition. We want to know if the bank is going to do well in future so that we can earn certain amount of from it. How will you do that?

Well, it start with basics first. You try to know about a bank's current position. That is you study it's financial statements. The financial statement provides you necessary information about how bank is doing financially. You will know it's earning, expenses, profits, dividend provided, retained earnings and many more. Knowing these information is much more important if you don't want to follow over all market flow and want to do what seems to a possible profit oriented decision for you. The important part of this study is to find how bank is doing financially and acquire the information about increase in the banks earning from previous year in each share. This is important because two merged bank will definitely have more income but per share income could be less if properly analyzed. The status of the earning per share is important while determining the current position of bank in the eye of common stock traders.

Common stock traders are interested in making money from the share they are trading and the ability of a bank to earn money will definitely change the decision that people make while purchasing stocks of a bank.

Second thing is the use of the available information technology to gain information about the condition of a bank. A poorly performing bank and a efficiently performing bank has huge impact on the bank's stock. A bank whose investments are being defaults, current performance is low, investments are providing very less return on investment and other image degrading news will provide strong support for buyers not to purchase the stock. This leads to a decline in the share price.

Thirdly staying updated: News, Information from friend, information from people you know and information that might induce appreciation in share price like possible merger approval for banks from central bank of Nepal. Information like this will rise the price of the stock and increase in the value provide more return from the investment.

Even though you do everything you could and follow everything stated above we are never going to predict precisely what will happen next. We will not be able to say what will be the price of the stock of a particular bank two days from now or three days form now. But we can still do what we all always do, predict and this time our predictions are not on the basis of the analysis of the trend in which the stock price is changing but more than that it would be based on the instincts and thoughts we put to predict the price of the stock.

What does NEPSE index tell us about trading?

The whole stock market of world including NEPSE is all about numbers. A fact or piece of data from a study of a large quantity of numerical data is statistics.Well normally statistics is not considered pure science because it is based on artificial assumptions. But it shows us the deviation and convergence in the data provided. Today, we are discussing about what actually NEPSE index tells us, the information we can get from the NEPSE index and it's use.

NEPSE index is a indicator that provides information about market growth since the base year's first day's transaction. Just like CONSUMER index, NEPSE index shows us the over all changes taking place in the stock market. These changes include positive change in the index and negative change in the market. Positive or the increase in the NEPSE index means there increase in the transaction, more purchase, more demand of stock and bullish market. This shows that the purchase or sell of stocks at current time frame can be beneficial. In case of large investors positive index is always a good sign. Its also same for small investors but sometimes due to converging focus of small investors in a single or targeted organization's stock, the correlation may not be seen vividly between NEPSE index and stock price. That is even though the index is increasing the price may drop. This happens because index is calculated in over all capitalization basis.

Next is the decreasing NEPSE index.
A decreasing index tells us that the there is less activity in the stock market and most of the stock holders are trying to sell their stocks but there are very few buyer who want to purchase stocks in a bearish market. In decreasing index situation, the price of stocks starts to decrease which encourage the investors to purchase the stocks at low price if they think that the price won't further deplete. If this activity is copied and followed by many investors then again we have increasing index and a positive market. Thus, there is check and balance situation.

Furthermore, the market in whole is interlinked between prices and index. A positive index may introduce more transaction in the market and prices may go up, with more and more increase, the buyers may not want to purchase stocks. This will cause decrease in transaction and price of stocks as well as decrease in index. Then when the investors believe the stocks price may not further decrease, then they will start to purchase stocks the will increase the price as well as index and the process repeats again and again. This is why NEPSE index or any stock market index shows only the financial situation of the economy. They are do not provide information about the real economy because they may be connected to the group of value creator but in case of Nepal, they are just connected to the financial institutions like banks and finances which means industries' stocks are not traded. So a positive Nepal Stock Exchange index may not provide necessary information that the economy is growing too.

Does stress is more intense for stock traders in Nepal?

Well, normally stress is intense for stock traders all over world. This obviously include stocks traders in Nepal. What I wanted to ask is, is it that more pressure is a legacy to stock traders in Nepal?

When the news about NEPSE will be going online came, I was feeling so happy about it. Online trading provides various benefits and most vivid and important of all is that it can reduce stress in a very dramatic way. How? The process is simple. Trade begins and finishes in expected time period and the time between selling and receiving money is minimized. It's decreases account receivable period providing you interest benefits. This step of NEPSE trading online would be the most appreciated action and this does not stop stock traders from worrying about the trades they make.

The formation of new government came with hopes and new enthusiasm for the stock traders.But the NEPSE index is not showing good sign of the stock market right now in Nepal. For initial time frame from the formation of the new government the index was positive and  then after it again started to regress downward showing the decrease in the trading of the stock.

NEPSE Index

Stress level for traders should always be balance. The habit of worrying too much can even lead to depression. In case of Nepal, most of the traders are job holders or independent and self-employed traders. They choose to be stock trader for making money through stocks. And political stability should always provide the stable business environment so that banks, hydro-powers could do better which consequently will induce more positive activities.

In conclusion, we still have more days to come where we hope to see more remarkable changes in the system and the business environment. Stress for a trader could be a friend at the same time, it could be a foe. So, the ultimate decision is our to choose whether to be stress free or take stress because in stock market, no one can decide what comes next, no one knows whether the stock price will go up or down.

Become a Stock Trader in Nepal for doing more than making money.

The fundamentals of becoming a stock trader is same as becoming a businessman. Then what is the difference?
We are talking about price of share here and the value it carries with it. According to demand and supply, it goes up and down. But no body knows when will it goes up or down. The beauty of the deal is that everyone thinks they can get benefits from the share they are buying and you are the player. So, as a player a stock trader should always be alert about price changes and the factors that can change the price of stocks that you are dealing with. Becoming alert is not so easy as it sound. A stock trader needs updates about banks and hydro-powers that are being targeted. And there updates can change the decisions that you make about trading stocks. The starting phase of becoming a stock trader in Nepal is to choose first which bank or banks you will be keeping eye on and being updated on them.

Now, after the decision of being updated what will be the next move to become a stock trader?
1.Choosing a broker.
Brokerage firms are now establish in major cities all around Nepal. If you know a broker already and trust him then you are lucky to find a partner. If you don't know a broker but you are able to find one and trust him then also you are lucky. But, if you don't trust a broker then changing the brokerage firm is the best option available.
2. Fill a form about trading your share.
The brokerage firm you have chosen will give a form to fill. I includes everything about you and your share.
3. Verifying your share certificate.
The underwriter of specific bank will do this. Normally brokerage firm will do that for you but it's a lengthy process and might take more then a month is you depend on the firm. So the best option is to go the underwriter all by yourself and verify your share certificate of the bank or institution of which you are a shareholder.
4.Placing bid for buying or selling.
This is the tricky part. The most important of all in the trading stock and becoming a stock trader. While you intend to be a stock trader you should never forget that you are making profit while buying a share but not while selling it. After all profit is the difference between selling price and buying price, a simple school classroom principle.
The next thing is you will be asked for confirmation by the broker and as i have already said earlier in the article that the overall  process is slow in Nepal, it might take 10-15 days while completing a transaction. That is if you are selling then it might take more than a week to get your money and if you are buying then it might take more than a week to get your share certificate.
Once you have done it, you will be familiar with the codes and conducts of becoming a stock trader. As a trader you should always keep an eye upon share price and activities of the bank you are intending to trade stocks. After the familiarity with 'how to' of stock trading you are now a stock trader officially. Becoming a stock trader will make you economically free as well as it might give you intense pressure too. If you are the type who cannot handle stress then you might not want to become a trader. So, it's  always best to find a place where you enjoy while you work and take minimum stress possible.

Why should you be trading stocks in Nepal?

With hopes and thrills together NEPSE is experiencing a situation as predicted by the experts before the formation of government. Now, the new government has been formed in the leadership of Sushil Koirala and along with that various doors for the improvement of transactions too. We are now discussing about the choice we can make by trading stocks in Nepal.

Why should you be trading stocks in Nepal?

Trading is always enhanced with the excitement and depression. Well, if you are not the one who breaks down easily then trading is a great choice you can make. The intensity of pressure will always be high and the only thing that all trader should know is that once a choice is made; the only option we will have is to move forward and concentrate on next target.

Anyone can wonder why trading stocks in Nepal could be "you should" and here's what I have found:
Formation of new government:
A stable government is the most demanding feature for investment. Since Nepal has a new government with specific aims and policies, people are expecting a stable, growth oriented economic environment. As a trader , you should always know that a simple reason can make everyone follow a trend at a given time.

Improvement in Policies
Most of the trading in NEPSE is related to stocks of banks. Improvement in financial policies by Nepal Rastra Bank provides a stable and controlling mechanism for the prevention of bankruptcy. So, stocks of Nepalese banks do provide a promise of attractive return on share.

Trading is as hard as it could be. Its all about managing stress and money. Hope you enjoy trading stocks in Nepal.