What is Demat?

Demat is a commonly used abbreviation of Dematerialisation, which is a process whereby securities like shares, debentures are converted from the "material" (paper documents) into electronic data and stored in the computers of an electronic Depository (SEE next page).
You surrender material securities registered in your name to a Depository Participant (DP). These are then sent to the respective companies who cancel them after dematerialisation and credit your Depository Account with the DP. The securities on dematerialisation appear as balances in the Depository Account. These balances are transferable like physical shares. If at a later date you wish to have these "Demat" securities converted back into paper certificates, the Depository can help to revive the paper shares.

What is the procedure for the dematerialisation of securities?

Check with a DP as to whether the securities you hold can be dematerialised. Then open an account with a DP and surrender the share certificates.

What is a Depository?

A Depository is a securities "bank," where dematerialised physical securities are held in custody, and from where they can be traded. This facilitates faster, risk-free and low cost settlement. A Depository is akin to a bank and performs activities similar in nature.
At present, there are two Depositories in India, National Securities Depository Limited (NSDL) and Central Depository Services (CDS). NSDL was the first Indian Depository. It was inaugurated in November 1996. NSDL was set up with an initial capital of Rs 124 crore, promoted by Industrial Development Bank of India (IDBI), Unit Trust of India (UTI), National Stock Exchange of India Ltd. (NSEIL) and the State Bank of India (SBI).

Improving Your Trading Performance:The Single Most Important Step You Can Take

Brett N. Steenbarger, Ph.D.

A chess player analyzing the board for the next move; fighter pilots maneuvering their planes to get a lock on enemy aircraft; a baseball player tracking the release of the ball from the pitcher’s arm; ballet dancers executing their leaps; an oncologist diagnosing a rare form of cancer; a bodybuilder sculpting a small muscle group to achieve symmetry: all of these are examples of performance activities. They are also examples of fields that have been widely researched in the past two decades, uncovering important clues as to the factors that create successful performance.

This research raises fascinating questions: What makes expert performers different from less successful ones? Is expert performance a function of inherited personality traits and skills, or can it be cultivated in the proper environments? Which techniques has research found to dramatically improve performance? Will the performance-enhancing techniques that benefit chess grandmasters and Olympic athletes also assist traders? The book I am currently writing will tackle all these questions and more. This article has a more modest aim: It will draw upon research studies with chess experts to identify the one most important thing traders can do to accelerate their development.

Trading as a Performance Activity 

Not all trading is a performance activity, of course. A computer can be programmed to enter, manage, and exit positions, but the computer does not perform in the same way as the athlete, dancer, or fighter pilot. Performance, in the psychological sense, begins with the human element in competition. Humans choose when to take action and when to refrain; they can select various courses of action on different occasions and can invent new strategies when needed. The trading computer does not have good days and bad days—only profitable ones and unprofitable ones. Human traders can perform poorly even if they make money, and they can have good days even when they’re in the red. That is because performance is a function of the chosen actions of performers, the correctness of those choices, and the skill with which the actions are carried out. Once an element of discretion enters into trading, it becomes a performance activity: one in which outcomes are dependent upon the choices of the performer.

There are several common features of performance activities:

• They can be executed well or poorly. Activities that are performed well on a consistent basis require a high degree of skill. A lucky outcome, such as winning a lottery, is not a skilled performance.

• There are individuals who can be identified as expert performers. With very rare exception, expert performers are ones who have developed their talents over time. Most expert performers undergo specialized training to cultivate their talents.

• They require a specialized knowledge base. The knowledge may be the “how-to” knowledge of a gymnast or the research knowledge of a scientific researcher. To perform well in a field, a person must master the information and skills specific to that field.

Trading, as a performance activity, has much in common with chess. It is competitive, requiring a high degree of concentration and strategy. It also features a limited number of actions that, in combination, create a large array of possible strategies and actions. This makes both activities easy to learn, but difficult to master. Chess can be played in lightning fashion, with very little time between moves, or it can allow players many minutes to plan moves—or even days (postal chess). Trading can also be conducted on a very short-term basis or can be planned and executed over hours or days. These similarities make chess an excellent starting point for examining the performance dynamics of trading, especially since chess is one of the performance fields most studied by researchers.

The Performance Ingredients of Chess

A well-replicated finding in chess research is that the memory processes of experts are different from those of non-experts. One intriguing set of studies took chessboard arrangements from a past tournament games and briefly showed them to expert players and novices. Afterward, the expert chess players were able to recall the positions of many more pieces than the novices. When the two groups were shown chessboards with randomly arranged pieces, however, their recall of the positions of the pieces was quite limited. The researchers’ conclusion was that experts do not have better memories than non-experts; rather, they have better memories for meaningful relationships among chess pieces. Instead of remembering where each individual piece was on the board, the experts viewed the board as clusters of pieces and remembered these. When the board was randomly arranged, there were no meaningful clusters of pieces and the experts had no effective means for encoding their information.

How do expert chess players gain this ability to perceive meaningful patterns among pieces? Because chess players are given ratings based upon their tournament play, it is relatively easy to compare experts (masters and grandmasters) with less accomplished players. When a variety of factors are incorporated into multiple regression equations to predict chess ratings, two stand out as highly significant:

1) The number of books owned – Research conducted by Neil Charness and colleagues finds that the correlation between books owned by chess players and their current performance ratings was .53.
2) The cumulative number of hours spent in practice – Those same researchers found that the correlation between the amount of time spent in practice and current performance ratings was .60.

To appreciate these findings, it is necessary to understand what chess books are and how they are used. These texts typically break the game down into components (opening, endgame, defenses, etc.) and present historical games from tournaments, along with annotation from an expert author. Readers do not merely skim over these games; they learn specific opening or defensive sequences and then see how these were utilized in actual games. They recreate those games on their own boards and carefully play through the positions, so that they can see what the expert players saw. They also play through alternate sequences to observe where these might lead.

Interestingly, chess experts do not have significantly more chess-playing experience than non-experts. Rather, a higher percentage of the experience of experts is spent in the systematic practice of various facets of the game. Non-experts tend to spend a higher proportion of their time in games against similarly-skilled opponents. This experience neither exposes the learner to the moves of experts, nor does it provide time for a careful review of moves, exploration of alternate lines, etc. In the Charness work, the correlation between solitary practice and chess ratings is almost twice as high as the correlation between practice with others and ratings. This is because solitary practice with chess books allows learners to obtain chess knowledge in context. Instead of focusing on the moves of an opponent, learners encounter—again and again—those meaningful configurations of pieces that appear in the games of experts.

Enhancing Trading Performance

Students of trading are at a huge disadvantage relative to students of chess. Chess books document the performance of centuries of experts in actual tournament situations. Because of this, chess students can create and play through almost any challenging situation imaginable, drawing upon the accumulated wisdom of experts. Trading possesses no such database. Trading books, unlike chess texts, are not annotated compilations of the trading decisions of objectively rated experts. One cannot use trading books to recreate trading sessions or to systematically explore trading decisions and their alternatives. Chess books lend themselves to independent deliberative practice; trading books present ideas outside the context of actual trading.

As a result, traders tend to spend little time in the systematic practice that is the single greatest predictor of chess expertise—not to mention expertise in music, athletics, and dance. This violates a principle from the performance research that is so striking that it might even be called a law:

If this analysis has merit, then most of the services offered to traders in the popular media have limited value. Self-help techniques, exhortations regarding discipline, didactic presentations of patterns, and general rules and advice do not turn chess novices into experts, and there is no reason to believe they will advance the performance curve for traders. Knowledge and practice—and especially the direct experience of knowledge-in-practice—are the keys to the acquisition of expertise.

We commonly hear the statistic that 90% of all traders ultimately fail. If this is so, it is not because they lack the right personality traits, indicator patterns, or software programs. Rather, they have failed to structure their learning to facilitate expertise. This is one of the most important lessons we can learn from the decades of research and hundreds of studies on the topic of performance. The path to our greatness lies not only in performing, but in the systematic work we put into performance. The next great advance in trading technology, I believe, will be the creation of dynamic learning environments that serve as the electronic equivalent of chess books. The learning platforms we rig for ourselves today will pale in comparison to tomorrow’s technology, but that matters little to those pursuing self-development. The single most important step you can take, Ayn Rand realized, is to fight for tomorrow, so that you might live in it today.

Basics of Stock Market
Financial markets provide their participants with the most favorable conditions for purchase/sale of financial instruments they have inside. Their major functions are: guaranteeing liquidity, forming assets prices within establishing proposition and demand and decreasing of operational expenses, incurred by the participants of the market.

Financial market comprises variety of instruments, hence its functioning totally depends on instruments held. Usually it can be classified according to the type of financial instruments and according to the terms of instruments’ paying-off.

From the point of different types of instruments held the market can be divided into the one of promissory notes and the one of securities (stock market). The first one contains promissory instruments with the right for its owners to get some fixed amount of money in future and is called the market of promissory notes, while the latter binds the issuer to pay a certain amount of money according to the return received after paying-off all the promissory notes and is called stock market. There are also types of securities referring to both categories as, e.g., preference shares and converted bonds. They are also called the instruments with fixed return.

Another classification is due to paying-off terms of instruments. These are: market of assets with high liquidity (money market) and market of capital. The first one refers to the market of short-term promissory notes with assets age up to 12 months. The second one refers to the market of long-term promissory notes with instruments age surpasses 12 months. This classification can be referred to the bond market only as its instruments have fixed expiry date, while the stock market’s not.

Now we are turning to the stock market.
As it was mentioned before, ordinary shares’ purchasers typically invest their funds into the company-issuer and become its owners. Their weight in the process of making decisions in the company depends on the number of shares he/she possesses. Due to the financial experience of the company, its part in the market and future potential shares can be divided into several groups.

1. Blue Chips

Shares of large companies with a long record of profit growth, annual return over $4 billion, large capitalization and constancy in paying-off dividends are referred to as blue chips.

2. Growth Stocks

Shares of such company grow faster; its managers typically pursue the policy of reinvestment of revenue into further development and modernization of the company. These companies rarely pay dividends and in case they do the dividends are minimal as compared with other companies.

3. Income Stocks

Income stocks are the stocks of companies with high and stable earnings that pay high dividends to the shareholders. The shares of such companies usually use mutual funds in the plans for middle-aged and elderly people.

4. Defensive Stocks

These are the stocks whose prices stay stable when the market declines, do well during recessions and are able to minimize risks. They perform perfect when the market turns sour and are in requisition during economic boom.

These categories are widely spread in mutual funds, thus for better understanding investment process it is useful to keep in mind this division.

Shares can be issued both within the country and abroad. In case a company wants to issue its shares abroad it can use American Depositary Receipts (ADRs). ADRs are usually issued by the American banks and point at shareholders’ right to possess the shares of a foreign company under the asset management of a bank. Each ADR signals of one or more shares possession.

When operating with shares, aside of purchase/sale ratio profits, you can also quarterly receive dividends. They depend on: type of share, financial state of the company, shares category etc.

Ordinary shares do not guarantee paying-off dividends. Dividends of a company depend on its profitability and spare cash. Dividends differ from each other as they are to be paid in a different period of time, with the possibility of being higher as well as lower. There are periods when companies do not pay dividends at all, mostly when a company is in a financial distress or in case executives decide to reinvest income into the development of the business. While calculating acceptable share price, dividends are the key factor.

Price of ordinary share is determined by three main factors: annual dividends rate, dividends growth rate and discount rate. The latter is also called a required income rate. The company with the high risks level is expected to have high required income rate. The higher cash flow the higher share prices and versus. This interdependence determines assets value. Below we will touch upon the division of share prices estimating in three possible cases with regard to dividends.

While purchasing shares, aside of risks and dividends analysis, it is absolutely important to examine company carefully as for its profit/loss accounting, balance, cash flows, distribution of profits between its shareholders, managers’ and executives’ wages etc. Only when you are sure of all the ins and outs of a company, you can easily buy or sell shares. If you are not confident of the information, it is more advisable not to hold shares for a long time (especially before financial accounting published).

SURPLUS
1. A situation in which assets exceed liabilities, income exceeds expenditures, exports exceed imports, or profits exceed losses.

2. A surplus is the opposite of a deficit. When a country exports more then it imports, it is said to have a trade surplus.