Category: Trading

Price Action Analysis: An Easy Explainer
Have you ever felt the stock market is a complex puzzle with cryptic messages hidden within its charts? Price action analysis can be your decoder ring. This trading technique sheds light on the market psychology by focusing on the price movements.

In this blog, we will delve deeper into the world of price action analysis, exploring its core principles and how you can use them to make informed trading decisions.

Price Action Overview

Price Action Analysis is a method for traders to understand the market by examining the movement of a security’s price over time. It is a core concept in technical analysis, though some consider it distinct because it completely focuses on price movements without relying on additional indicators.

Price action traders concentrate on the highs, lows, openings and closings of a security’s price to identify trends, buying and selling pressures and trading opportunities.

By analysing price movements, traders can determine whether the price is in an uptrend, downtrend, or consolidation phase.

Traders use price action analysis to make informed decisions about entering or exiting trades.

Evolution of Price Action Analysis

Although the exact origin of price action analysis is unclear, but we can trace its roots back to the beginning of the market analysis.

In the early 20th century, before formal technical analysis existed, traders tracked prices on charts. This focus on price movements itself is the foundation of price action analysis.

In the 1880s, Charles Dow, a journalist and financial analyst, laid the groundwork for technical analysis with his Dow Theory. While not purely price-action-focused, it emphasized the importance of trends and price movements.

In the 1900s, technical indicators like moving averages and RSI started gaining prominence. While these provided additional data points, price remained a key input.

The late 20th century made traders feel that the dependence on complex indicators was detracted from understanding the price. This led to a renewed focus on price action analysis as a distinct approach.

Since then, the rise of online trading platforms and advanced charting software has made price action analysis more accessible to individual traders.

How to use Price Action Analysis
- Remove clutter from your charts. Get rid of technical indicators such as RSI, MACD, Bollinger Bands, etc. leaving just candlesticks to focus purely on price movements.
- Understand the concept of uptrends and downtrends to understand the overall direction.
- Numerous price patterns emerge from the price action and can signal future movements. Some of the common examples are,
  - Reversal Patterns – Head & Shoulders, Double top/bottom, Triple top/bottom, etc.
  - Continuation Patterns – Pennants, Flags, Triangles, etc.
  - Breakout Patterns – Breakouts above resistance or below support can signal trend continuation.
While price action is valuable, it should not be used in isolation. Consider using it alongside other confirmation methods such as volume, corporate events, news & events, etc.

Once you have grasped these concepts, you can use price action analysis to develop a trading strategy. This entails determining entry and exit points for your trades based on identified patterns and confirmations. Remember that every trader has their own judgement and analysis.

Advantages of Price Action Analysis

There are several advantages of using price action in your trading strategy. A few of them are:
- Price action focuses on the core element of the market, i.e., price itself. This can be easier to learn and understand.
- It can be applied to almost all the markets and asset classes, regardless of the underlying security or economic factors. In forex trading, most of the traders use Price Action analysis as there are no fundamentals in the forex market.
- Price Action highlights trends which allow traders to position themselves according to the prevailing trend.
- Understanding support, resistance levels, and critical concepts in price action analysis can help traders set stop-loss orders to manage risk.
- Unlike some technical indicators that may become outdated as markets evolve, price action analysis focuses on the fundamental concept of price movements, making it a timeless approach.
Disadvantages of Price Action Analysis
- Interpreting pricing trends is subjective, which is a disadvantage. It is highly likely that traders can evaluate the same price activity and come to different conclusions, which can lead to missed opportunities or even bad trades if misinterpretations occur.
- Price patterns are not perfect predictors; they may generate false signals, which can lead to wrong trades. This can be frustrating and result in losses.
- Price movements can be influenced by short-term factors and random noise, making it challenging to distinguish between genuine signals and fleeting fluctuations. This can lead to confusion and difficulty in making clear trading decisions, particularly in short time frames.
- Price action analysis focuses solely on price movements and ignores other important factors that can affect markets, such as fundamental company analysis, economic data and news events. These factors can also affect prices and should be considered for a well-rounded analysis.
- Past price movements do not necessarily dictate future outcomes. Markets can be unpredictable, and unexpected events can cause price movements to deviate from expected patterns.
Read Also: What is Price Action Trading & Price Action Strategy?

Conclusion

Price action analysis offers a valuable lens for understanding the market. However, it is just one piece of the trading puzzle. You can strengthen your trading decisions by combining it with other technical analysis methods, such as RSI, MACD, Moving Averages, etc., and sound risk management strategies.

Moreover, to accurately spot patterns using price action analysis, it needs time and effort. New traders may require assistance interpreting the charts correctly.

As you gain experience, you will develop your own analytical edge and become more confident in navigating the ever-changing market landscape.

If you’re facing difficulty in Risk Management, check out our blog – Risk Management in Trading

Frequently Asked Questions (FAQs)
1. What is a Price Action analysis?
  In Price Action analysis, you look at price movements on charts to identify trends, support/resistance levels, and trading opportunities.
2. What do price action traders focus on?
  The price action traders focus on Candlestick patterns and analyse how price interacts with past highs and lows.
3. Is price action challenging to learn?
  The core concepts are relatively simple, but mastering it takes time and practice.
4. Do I need special software for price action analysis?
  There is no requirement of a special charting software. Any charting platform that shows historical price data will work for Price Action analysis.
5. Is price action analysis good for day trading or long-term investing?
  It can be applied to both, depending on the specific patterns and timeframes used. However, the shorter the time frame, the higher the chances of generating noise, which may create issues in identifying trends.

April 26, 2024

Chart Patterns All Traders Should Know

When analyzing trading charts, certain formations appear repeatedly. Traders use these to identify potential trading opportunities. In this article, we’ll explore various chart patterns crucial for understanding the Indian stock market.

What is a Chart Pattern?

A chart pattern is a specific formation on a price chart that is repeated over time. By studying these patterns, traders attempt to predict future price movements based on historical outcomes. However, it’s important to note that past performance does not guarantee future results.

Types of Chart Patterns

Chart patterns can be broadly categorized into three types:

Continuation Patterns
These patterns indicate that the current trend will continue. Examples include flags, pennants, and triangles.

Reversal Patterns
These suggest that the current trend is likely to change direction. Examples include double tops, double bottoms, and head and shoulders.

Bilateral Patterns
These patterns indicate that the market could move in either direction, often due to increased volatility. Examples include symmetrical triangles.

Common Chart Patterns in Technical Analysis

Ascending and Descending Staircases
These are basic chart patterns that indicate a clear trend. An ascending staircase shows a market moving upward with higher highs and higher lows. Conversely, a descending staircase indicates a downward trend with lower lows and lower highs.
Ascending Triangle
An ascending triangle is formed when a horizontal resistance line meets an ascending support line. It usually signals a continuation of an uptrend.
Descending Triangle
A descending triangle occurs when a horizontal support line meets a descending resistance line. It typically indicates a continuation of a downtrend.
Symmetrical Triangle
This pattern forms when two trend lines converge symmetrically. It can signal a continuation of the current trend or indicate potential volatility leading to a breakout in either direction.
Flag
Flag patterns are short-term continuation patterns that resemble a small rectangle sloping against the prevailing trend. Bullish flags slope downwards, while bearish flags slope upwards.
Wedge
Wedge patterns are similar to flags but have converging trend lines. A rising wedge is a bearish signal, while a falling wedge is bullish.
Double Top
A double top is a bearish reversal pattern that appears after a significant uptrend. It consists of two peaks at roughly the same level, signaling a potential downtrend.
Double Bottom
A double bottom is a bullish reversal pattern seen after a significant downtrend. It features two troughs at similar levels, indicating a possible upward trend.
Head and Shoulders
This is a bearish reversal pattern with three peaks: a higher central peak (the head) flanked by two lower peaks (the shoulders). It signals a trend reversal from bullish to bearish.
Rounded Top and Bottom
These patterns are reversal signals. A rounded top suggests a shift from an uptrend to a downtrend, while a rounded bottom indicates a transition from a downtrend to an uptrend.
Cup and Handle
This bullish continuation pattern resembles a cup with a handle. The cup forms a rounded bottom, followed by a smaller consolidation (handle) before a breakout.

How to Trade Using Chart Patterns

Confirm the Pattern
Wait for a pattern to confirm itself by watching for a breakout in the expected direction. Volume indicators can help confirm the validity of a pattern.

Set Stop Loss
Always set a stop loss to manage risk. Place it at a level where the pattern is deemed to have failed.

Choose a Profit Target
Determine a profit target based on the height of the pattern. For instance, if a flag pattern has a height of 50 points, set a profit target 50 points beyond the breakout level.

Conclusion

Understanding and recognizing chart patterns can significantly enhance your trading strategy in the Indian stock market. By identifying these patterns, you can make informed trading decisions and better manage risks. Remember, while chart patterns provide valuable insights, no pattern is infallible, so always use risk management strategies.

FAQs

What is the most successful chart pattern?
The most successful chart pattern can vary, but many traders consider the head and shoulders pattern to be one of the most reliable.
Which chart pattern is most powerful?
The head and shoulders pattern is often considered the most powerful due to its strong predictive nature for trend reversals.
What is the most accurate trading pattern?
The double bottom pattern is often seen as highly accurate, especially for identifying bullish reversals.
Which chart style is best for trading?
Candlestick charts are generally considered the best for trading due to their detailed representation of price action.
Which is the most accurate chart?
Candlestick charts are regarded as the most accurate for technical analysis and trading decisions.
How many types of chart patterns are there?
There are three main types of chart patterns: continuation, reversal, and bilateral patterns.
How many types are chart patterns?
There are three types of chart patterns: continuation, reversal, and bilateral.
What is the most successful chart pattern?
The head and shoulders pattern is often cited as the most successful chart pattern.
Which chart is best for trading?
Candlestick charts are widely considered the best for trading.
How many types of charts are there in the stock market?
There are four main types of charts used in the stock market: line charts, bar charts, candlestick charts, and point-and-figure charts.
How to use a chart pattern?
To use a chart pattern, identify the pattern on the chart, confirm it with volume and other indicators, set a stop loss, and determine a profit target based on the pattern’s size.
Which chart pattern is best for trading?
The head and shoulders pattern is often considered the best for trading due to its reliability.
What is the chart pattern strategy?
The chart pattern strategy involves identifying specific patterns on price charts, confirming them, and making trades based on the predicted price movement.
Are chart patterns enough for trading?
While chart patterns are valuable, they should be used in conjunction with other technical indicators and risk management strategies for effective trading.
How to read a chart in trading?
To read a chart in trading, understand the basic components such as price action, timeframes, and volume, and identify patterns and trends.
What is a chart pattern analysis?
Chart pattern analysis involves studying historical price movements to identify patterns that predict future price movements.
What is charts analysis?
Chart analysis, or technical analysis, is the study of price charts to forecast future price movements based on historical data.
How do you make a chart analysis?
To make a chart analysis, select a chart type, identify trends and patterns, use technical indicators for confirmation, and interpret the data to make trading decisions.
What are the three types of chart patterns?
The three types of chart patterns are continuation patterns, reversal patterns, and bilateral patterns.
Why are chart patterns important?
Chart patterns are important because they help traders predict future price movements and make informed trading decisions based on historical price behavior.

April 24, 2024

What is T+0 Settlement : Overview And Benefits

In the evolving world of financial markets, every second counts. From traders seeking to capitalise on fleeting opportunities to investors aiming to swiftly reallocate their portfolio. Efficiency in transaction execution is crucial. This demand has fuelled the evolution of settlement systems in India and the much-awaited T+0 settlement is here, revolutionising the Indian trading landscape with lightning-fast transactions. But is it all sunshine and rainbows?

In this blog, we will explore its benefits for investors along with some important considerations before you jump in.

Overview

T+0 settlement refers to a system where trades in shares are settled on the same day they occur. In simpler terms, when you buy a stock, the shares are transferred to the buyer, i.e., your demat account and the seller receives the money immediately.

SEBI is launching T+0 in a beta version. This allows brokers to offer it optionally alongside the existing T+1 system in India.

Did you know?

As of April 2024, China is the only country with T+0 trade settlement cycle.

If we look back at history, the settlement cycle in the Indian stock market was shortened from T+5 to T+3 in 2002 and then further to T+2 in 2003. In 2021, Sebi introduced the T+1 settlement cycle in a phased manner, which was fully implemented from January 2023.

Currently, India operates on a T+1 settlement cycle, where trades are settled on the next business day.

With the introduction of the T+0 settlement, sellers will receive their money right away, and buyers get the shares they purchase on the same day. This allows for greater liquidity, flexibility, and faster settlement; allowing traders to react to the market movements more quickly.

It is a pilot program, launched on March 28, 2024, and applies to 25 stocks initially.

T+0 Settlement will happen in two phases:

In the first phase, an optional T+0 settlement cycle for trades till 1:30 pm is envisaged, with the settlement of funds and securities to be completed on the same day by 4:30 pm.
In the second phase, an optional immediate trade-by-trade settlement will be carried out for trades till 3.30 pm.

According to SEBI, a shorter settlement cycle can improve efficiency and transparency for investors, while strengthening the risk management for clearing corporations and the entire stock market system.

Operational Guidelines for T+0 Settlement

1. Eligible Investors

All investors can participate if they meet the requirements fixed by the Market Infrastructure Institutions (MIIs) like depositories and exchanges. These requirements could involve factors like risk management capabilities and transaction timelines.

2. Trade Timings

Currently, T+0 trading happens in a single session from 9:15 am to 1:30 pm.

3. Price Band

To manage volatility, T+0 trades occur within a price range of +/- 100 basis points compared to the T+1 market price for the same security. This range will be adjusted whenever the T+1 market price moves by 50 basis points.

4. Index Calculation and Settlement Price Computation

Trades happening within the T+0 settlement won’t influence index calculations or final settlement prices. Additionally, there won’t be a separate closing price specifically for T+0 trades.

Furthermore, the only method of early payment for T+0 sell obligations will be through the use of a locking mechanism. T+0 will not accept early payment via pool or regular pay-in instructions.

5. Fees/ Charges

All the charges/fees like Transaction Charges, STT, and Regulatory Turnover Fees that are applicable for T+1 settled securities will be applicable for T+0 settled securities.

Other key Points

T+0 trades are separate from T+1 trades. There is no netting of obligations between the two cycles.

T+0 trade prices will not be reflected in market indices or settlement price calculations, and separate closing prices won’t be determined based solely on T+0 trades.

There won’t be any Trading in T+0 settled securities on the following days:

On the Ex-date of any corporate action in the corresponding T+1 settled securities (including the scheme of arrangement).
On the day of the index rebalancing of the corresponding T+1 settled securities.
On the settlement holiday.

List of Stocks

As of April 2024, there are a total of 25 stocks available in T+0 settlement cycle:

Name of the Company
Ambuja Cements Limited	LIC Housing Finance Limited
Ashok Leyland Limited	MRF Limited
Bajaj Auto Limited	Nestle India Limited
Bank of Baroda	Nmdc Limited
Bharat Petroleum Corporation Limited	Oil & Natural Gas Corporation Limited
Birlasoft Limited	Petronet Lng Limited
Cipla Limited	State Bank of India
Coforge Limited	Tata Communications Limited
Divi’s Laboratories Limited	Trent Limited
Hindalco Industries Limited	Union Bank of India
The Indian Hotels Company Limited	Vedanta Limited
Jsw Steel Limited	Ltimindtree Limited
Samvardhana Motherson International Limited

Benefits for Investors

With immediate access to funds, investors can react more quickly to market fluctuations. They can sell a stock and use the proceeds to buy another one right away, potentially capturing short-term gains.
The increased ease and speed of transactions under T+0 could lead to higher trading volumes, benefitting investors who enjoy active trading.

Let us understand the T+0 settlement with the help of an example:

Consider a scenario where an investor buys 100 shares of company named “Pocket” through an online brokerage platform. With T+0 settlement, the transaction is processed immediately, and the investor’s trading account is debited for the buy amount + transaction charges while the shares are simultaneously credited to the buyer’s demat account.

Similarly, the seller’s trading account is credited with the proceeds from the sale instantly upon execution, and the shares are debited from the demat account.

Conclusion

To sum it up, T+0 settlement offers investors a faster and more dynamic trading experience, particularly those focused on short-term strategies. The quicker access to funds and reduced settlement risk can be beneficial for navigating the volatile markets and capitalising on fleeting opportunities.

However, investors should also be aware of the potential drawbacks, such as the possibility of increased volatility and the need for stricter discipline to avoid impulsive trades. It is also important to keep in mind that T+0 is a relatively new concept and there may be some unforeseen challenges. Investors should carefully consider the risks before actively trading in a T+0 environment.

Frequently Asked Questions (FAQs)

Is T+0 suitable for all investors?
While beneficial for day traders and short-term investors, it might not suit everyone because of higher volatility.
What are some drawbacks of T+0 settlement?
Some drawbacks are that higher transaction volume might result in increased volatility, and pressure to make decisions more quickly, which can result in impulsive trades and possible technical issues from clearing houses.
How many securities are available for T+0 settlement in the Beta phase?
A total of 25 securities are available in T+0 settlement as of April 2024.
Who can trade in the T+0 settlement?
All members eligible to trade in the Capital Market Segment shall be able to trade in T+0 settled securities.
I have traded in T+0; can I change the settlement type?
No. Orders for T+0 and T+1 settled securities are executed in separate series.

Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.

April 21, 2024

What are Candlestick Patterns? Overview and Components

Investing directly in stocks can generate more income, but you’re probably next thinking about how to identify the best stock and make predictions about whether its value will increase or decrease. Candlestick patterns are used by both seasoned and new traders to make such predictions.

Use this blog as a beginner’s guide to candlestick patterns.

Overview

Candlestick patterns are used by technical analysts to forecast the direction of stock price movement. Every candlestick represents a different time interval, such as a minute, hour, day, etc.

Parts of Candlestick

There are four major components of a candlestick.

Open Price – This is the price at which a security begins trading in a time frame.
High Price – This refers to the highest price at which a security has traded in a particular time frame.
Low Price – This is the lowest price where the security has traded in a time frame.
Close Price – This is the price at which security last traded in a time frame.

Components of Candlestick

Body – The candle’s body refers to the area between the opening and closing price of a particular security over a time frame.
Wick – Also known as the candle’s shadow, the wick is the thin line extending above and below the body. It reflects the highest and lowest stock prices a stock touches over a time frame.

Colors of Candlestick

Green or White – This coloured candle shows that the close price is higher than the open price and thus reflects an upward or bullish trend in the market.

Red or Black – This signifies a bearish trend in security as it indicates that the closing price is lower than the opening price.

Importance of Candlestick Pattern

The candlestick pattern allows us to visually represent price movements.
Candlestick patterns can be used with technical indicators to provide a better insight into the movement of stock.
It assists the traders in managing their portfolio risk by helping them predict their exit.
The size and color of the candle help traders understand the market sentiment.

Types of Candlestick Patterns

Candlestick patterns can be divided into 2 parts

Bullish Pattern
Bearish Pattern

Bullish Candlestick Patterns

This pattern indicates that following a stock price correction, the stock price will rebound and begin to trend upward. Traders typically utilize candlestick patterns to enter a stock after it has shown an upward trend.

Bullish Engulfing Pattern

This candlestick pattern indicates the completion of a downward trend and a turnaround. It appears as two candles, the larger of which eats, the smaller bearish candle to become a bullish candle. It illustrates how momentum may shift from negative to positive.

Because the body of the bullish candlestick “engulfs” the entire body of the previous bearish candlestick, it is dubbed “engulfing”. This pattern is more likely to appear after a significant decrease in the stock price and when the stock is finding support at its crucial levels. A greater volume also implies that buyers are showing interest in the stock.

Morning Star Candlestick Pattern

Typically, this three-candle bullish pattern emerges toward the bottom of a downward trend. This pattern will show a lengthy bearish candle as the first candle, indicating that sellers have majority of the power over the stock, and a little body candle as the second candle, indicating that selling pressure may be easing. The last or third candle will be a lengthy bullish candle that closes above the middle of the first candle. This implies that buyers are trying to manipulate the price of the stock entirely. The size of the second small body candle boosts the pattern’s power. This pattern is more consistent when it proceeds in a long-term downward direction.

Three White Soldier

This bullish reversal candlestick pattern consists of three successive white or green candles. It usually happens close to the end of a declining trend and suggests an impending upward trend. All three white candles open higher than the previous day’s candle body and close at a higher price. All three candles should be free of an upper shadow, signifying continuous buying pressure. Every candle in the pattern should indicate a purchasing suggestion by having a body larger than the previous one. Through this pattern, it is thought that buyers are actively building momentum in the stock.

Bearish Candlestick Pattern

This pattern typically develops during an advance, when a stock hits its resistance level and the market has a correction in the price of the stock as a result of selling pressure or investor profit-booking.

Hanging Man

This unique candlestick pattern usually appears following an upward trend. It is known as a bearish reversal pattern, indicating that an uptrend is likely to halt and a stock price correction is likely to occur. The candle appears hanging since its top portion is small, its bottom shadow is long, and it reaches beyond the light’s body. On the other hand, there are either very few or no shadows in the upper portion. It emerges following a robust ascent and a rise in sales volume.

Shooting Star

The shooting star candlestick pattern, also known as the inverted hammer candlestick pattern, indicates that an upward trend in a stock is about to halt and a negative trend is about to begin. The lone candlestick in this pattern lacks a bottom shadow, albeit a small one is acceptable. It has a small body with a longer top shadow. This candle usually shows that sellers were applying pressure on the price, which prevented buyers from raising the price even if they tried.

Bearish Engulfing

It is seen as a strong reversal signal, meaning that the current trend is set to halt and there may be further downward movement. This pattern also consists of two candlesticks; the first is green and has a little body. By encompassing the whole range of the previous day’s candle, the second candle opens above the close and closes below the open price. In order for the pattern to exist, there must be a significant difference in size between the first and second candles.

Conclusion

The candlestick pattern is a valuable tool traders use to analyze market trends and forecast the direction of stock movement. But before making any investment, a trader needs to have a deeper comprehension of the candlestick patterns. Technical and fundamental analysis is also necessary to execute a good trade; thus, it’s important to realize that candlestick patterns are not always accurate.

Frequently Asked Questions (FAQs)

How do I use candlestick charts to make trading decisions?
A candlestick chart helps you identify the momentum and direction of the stock, which can help you make your investment decision. However, along with these charts, it is essential to use different technical tools and consider the overall market condition before executing any trade.
Why do candlesticks have different shapes and sizes?
The size of the candle changes with the price movement of the stock.
How can a beginner learn about the candlestick pattern?
A beginner’s first step is learning about the candlestick structure and identifying a few basic candlestick patterns. He can do this through books, online tutorials, educational videos, etc.
Who discovered the first candlestick pattern?
The candlestick pattern was first discovered by a rice trader in Japan, Homma Munesiha, in the 1700s.
What is a wick in a candlestick?
Wicks are shadows or lines that indicate where the price of a stock has fluctuated based on its opening and closing prices. A shadow represents the highest and lowest prices at which a security has been traded over time.

April 18, 2024

Introduction to Gift Nifty: A Cross-border Initiative

If you’re a trader who follows news about stocks, economic developments, and other factors that could affect the volatility of the Indian stock market. In that case, you’ve probably heard of the Gift Nifty, formerly known as the SGX Nifty, and you probably check it before Indian markets open. But you may be wondering why Gift Nifty is called that.
Therefore, we will explain in today’s blog why the SGX Nifty was renamed Gift Nifty.

Capital Market

The capital market is a place where financial instruments with long-term maturity are bought and sold. It provides a place where business houses and the government raise funds for different purposes.
The capital market is divided into 2 parts

1. Primary Market – The place where securities are issued for the first time to the investors.

2. Secondary Market – The place where the investors buy and sell issued securities.

Types of Secondary Market

1. Cash Market – It is a place where investors get the delivery of shares after purchasing them.

2. Derivative Market – The contract is traded in this market, and its value is derived from an underlying asset. A fixed and predetermined date is set for a derivative contract.

Stock Market Index

A stock market index shows how a certain set of stocks has performed. An index is made up of stocks that represent a specific industry or pool of securities. Utilizing the free float market capitalization weighting approach, the index is calculated.

A few examples of indices are the Bank Nifty, which consists of stocks from the banking industry, and the Nifty IT, which consists of stocks from the technology sector.

Did You Know?

Free float shares refer to publicly traded shares and are less than the total number of shares issued.

Nifty

The National Stock Exchange (NSE) launched the Indian market index, known as Nifty50, in 1996. Based on market capitalization, it shows the performance of the top 50 listed Indian firms. An investor can use this index to comprehend the overall market trend, which aids in the development of their trading strategy.

SGX Nifty

Singapore Nifty is another name for SGX Nifty. It was formerly traded in Singapore dollars. Based on SGX Nifty patterns, it helps Indian traders forecast market direction. Foreign investors trade in the derivative contract, giving them access to Indian markets and enabling them to trade the Indian stock market at their local time. Trading in the SGX Nifty usually takes place ahead of Indian market hours, allowing investors to respond to worldwide sentiments that may impact Indian markets.