Bangladesh Share Market has two stock exchanges- Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). So, Bangladesh Share Market analysis means analyzing of DSE and CSE to take buying and selling decision.
Making money from share market is a difficult task. Hence, you should analysis the market before putting your hard-earned money in share market. Many people want to earn easy money from share market. They even don’t know stock market basic knowledge.
As a result, they lose their money. Like other investments, share investment is more profitable but high risky. Therefore, you need discipline, quick learning, patient and experience to make profit from share market.
Note: In Bangladesh, the term “Share Market” is more preferable than “Stock Market”. There is no mentionable difference between these two terms. In this article, I prefer to use both Share Market and Stock Market interchangeably.
Bangladesh Share Market Background
On 13 May, 1954, Dhaka stock exchange (DSE) started its journey. DSE is the first stock market in Bangladesh. On the other hand, Chittagong stock exchange (CSE)– the second stock exchange in Bangladesh- started its journey on 12 February, 1995. Currently, DSE market capital is over 65.65 Billion USD.
Moreover, market capital to GDP ratio is nearly 18.75%. Dhaka Stock Exchange has three major indices: DSE X index, DSE S index and DS30 index. You can understand the whole market movement by following these the indices. I have already posted an article on Dhaka Stock Exchange broad index analysis.
In this article, I analyzed one-year market movement- uptrend and downtrend. On the contrary, Chittagong Stock Exchange has five major Indices: CSE30, CSCX, CASPI, CSI, CSE50.
Truth about Share Investing
If you want to quick rich by share investing, just stop reading the article and search for another path. Are you ready to accept the truth? If “YES”, start reading the remaining post! How to analysis Bangladesh Stock Market is the burning question for new investors and traders.
Newbies like to buy courses and take part in training session to gather knowledge about stock trading and investing. You should flourish yourself by knowledge. But nothing can guarantee you to make money from shares. So, I request you to follow my discussion as learning purpose.
By learning and experience, you will make money from shares. So, invest your time on learning, applying new strategies and acquiring skill.
How to Analysis Bangladesh Share Market
You can analysis any stock market by, Technical Tools, Fundamental Tools, Data Analysis, Economic Growth and Political Stability. But your main target is not analysis the whole market. First of all, you should analysis the whole market.
By following the same approach, you should analysis the selected stocks. Finally, you should by shares from your selected analysis. In this section, I will discuss- how to select best stocks for making profit.
Technical Indicators for Bangladesh Share Market Analysis
Technical indicators are suitable for trading decision. Bangladesh Share Market is not suitable for trading. Buy short or sell short is not allowed in Bangladesh share market. Nevertheless, you should learn technical indicators to know the price movement of whole market or any specific stock. In this section, you are going to read 9 technical analysis tools.
1. RSI (Relative Strength Index)
RSI is one of the best technical analysis tools. Its values remain between zero to hundred. RSI has three important parts. You can analysis whole market or a single stock by applying RSI indicators. You can learn application of RSI indicator as buying and selling signal.
1. RSI Values Below 30 indicates oversold
RSI value less than 30 indicates buying signal. But you should understand the market movement carefully. You should buy shares when some other indicators suggest to buy. Only RSI indicator isn’t enough to take buying or selling decision.
In most cases, a share price falls down from 52 week high if its RSI below 30. This is demand and supply mechanism. If you know trading strategies, you can trade trend reversal.
As demand for this share increased, supply also increased. At one point, supply exceeds the demand and price begins to fall. When supply starts to increase for any share, this stock price falls undoubtedly. Hence, you should wait for right time.
2. RSI Indicator Above 30 indicates overbought
Traders should not buy any stock when RSI cross over 70 unless any other suitable factors hint to buy. Other factors mean any good news, economic condition, uptrend market, healthy financial condition of the company. Generally, stock price starts to reverse if it reaches near 100.
Wait for some time, this stock price will downtrend in near future and you can decide to buy when it starts to uptrend again. RSI value over 70 indicates high Value at Risk (VaR).
3. RSI Indicator Between 30 to 70 is neutral
Uptrend or downtrend market brings opportunity for traders to make profit. But they need to identify trend at the very beginning. But a neutral share price movement is predictable. Neutral share price increases or decreases in a predictable manner. Less opportunity to make money from neutral shares.
2. Candlestick Chart
Candlestick chart is used to know the price movement for a share or whole market. Generally, traders use this chart to identify trend reverse point to take entry or exit decision. A trader needs enough skill to read the candlestick chart to take right decision at right time.
1. Entry Point- buying time
When candle starts to uptrend from downtrend, traders wait to take buying position. Entry techniques vary from traders to traders. When trend is reversed from downtrend to uptrend and if this trend is confirmed to continue, then traders will entry to buy this stock.
2. Exit Point- Selling time
A successful trader may not sell an uptrend share. But a trader also tries to minimize losses. So, perfect exit time to sell a share when its uptrend price starts to reverse. When your holding price is soaring up, you should wait until this trend changes to opposite direction. Later, at the time of opposite direction starts, you should sell your holding.
3. Neutral Point- Undecided time
Neutral point happens when candlestick chart shows a candle without body. This situation occurs when buyers and sellers remain undecided position. If this is a bear candle, that share under sellers’ control. Hence, buyers have to increase price to buy that shares. As demand starts to increase, that shares price goes toward uptrend.
On the contrary, a bear candle occurs when the stock is under buyers’ control. As supply increases, buyers decrease price to buy shares from this company. So, this share price starts to move downward. But in neutral condition, neither buyers nor sellers can control the market.
In this situation, you should follow watch and see strategy for next movement. Shares price may move up or down at any time. Just confirm the market trend and take your buying or selling decision.
3. Minutes Chart
Minute charts show the price movement for one minute to any extended minutes. It represents bar to indicate price movement. This chart somehow similar to candlestick chart. But, many traders prefer candlestick chart to minutes chart. As the application is somehow similar, you can follow one of them or both in together.
4. MFI (Money Flow Index)
Money flow index indicator is similar to RSI indicator. But MFI considers only value. Moreover, this indicator indicates overbought or oversold condition. MFI below 20 indicates oversold and above 80 indicates overbought. MFL’s value between 20 to 80 indicates neutral position.
5. SMA (Simple Moving Average)
Simple moving average may consist of any number of days. Generally, SMA may show 20 days, 50 days or 200 days average value. By using SMA indicator, you can learn the average price for a period of time. Generally, the nearest SMA shows the more recent time average price.
6. EMA (Exponential Moving Average)
Exponential moving average is similar to other types of moving average. But, EMA is calculated by using more recent data. That means, you can put more importance on EMA than SMA.
7. WMA (Weighted Moving Average)
Weighted moving average also weights for recent data. Present data are more valuable than past data. You can follow WMA price to understand the difference between the present price and weighted average price.
8. MACD (Moving Average Convergence Divergence)
Moving average convergence divergence is a trend following momentum technical analysis tool that shows the relationship between two moving average of a stock price. Traders may buy a stock at bearish when MACD crosses above its signal line and sell at bull when MACD crosses below the signal line. Generally, traders can follow MACD signal line to take buying or selling decision.
9. Beta technical analysis
Beta Coefficient is a technical indicator which indicates systematic risk of an individual stock in comparison to unsystematic risk of the entire share market. In order to know the volatility of a share compared to market movement, Beta Coefficient is used.
If beta value is 1 for a share, this indicates that its price is highly correlated with market movement. On the contrary, its value is less than 1 means that this stock is less correlated with market movement. Moreover, its value greater than 1 means this share is highly volatile than market movement.
As beta indicates price volatility for a stock, more than 1 beta value is better for traders. They can easily sell this stock. On the other hand, Beta Value less 1 is preferable for investors.
Fundamental Indicators for Bangladesh Share Market Analysis
In this section, you are going to learn about top 3 fundamental indicators for long term investment. Moreover, these indicators help you to learn how to buy stock for long term investment.
1. EPS
EPS (Earnings Per Share) is the number one fundamental indicator for long term investment. It is calculated like this (Net Income – Preferred Dividends)/Number of shares outstanding for the year. Simply, if a company earns more, investors can expect that it will give more dividend.
After all, investors want attractive dividend and capital gain from their investment. As a long-term or short-term investor, you should choose high dividend paying shares.
2. Dividend yield
Dividend Yield is the second fundamental indicator. It is calculated like this way (Annual Dividends Paid Per Share/Market Price Per share).
Although dividend is calculated on face value of a stock, you cannot buy shares on face value from secondary market unless you get shares from IPO.
As a result, dividend yield is the main fundamental indicator for investors. So, you should choose high dividend yield shares for investment.
3. P/E ratio
Price to Earnings Ratio (P/R Ratio) is the third fundamental indicator. P/E ratio is calculated like this (Market Price /EPS).
P/E ratio is the utmost important indicator for long term investment. Investors should invest on those companies, which have low P/E ratio.
P/E ratio high indicates that an investor invests relatively more for get a return. For example, an investor wants to earn 10% return and he bought a share at 100 tk. P/E ratio is 10 times (100/10). If he bought another share at 8 times P/E ratio, his second share is more profitable than his first share.
Ideal Market Indicators
Economic growth, political stability, business-oriented government, positive circulation about stock market are the good indicators for favorable share market. Any natural calamity can negatively affect the share market. In 2020, Covid-19 impacted the business negatively.
As a result, like other share markets, Bangladesh share market also affected by the outcome of Covid-19 deadly virus. So, a prudent investor should observe the surrounding carefully to take share investing decision.
How to Take Shares Buying and Selling Decision
When to buy & when to sell a stock depends on perfect time matching. You may buy a good share. But you may not earn nothing from it unless you bought the good stock in the right time. Matching of proper time and good share can bring a suitable profit.
When others are greedy, you should fear and when others are in fear, you should greedy.
By Warren Buffett
When to buy shares to make profit?
1. You should buy shares at downtrend reverse point for trading. For this, you should learn how to trade trend reversal.
2. For share trading, buying shares at its downtrend reversal is the best time to earn capital gain.
3. For share investing, buying at 52 weeks’ lowest price is the best strategy. Or try to buy at discounted price.
When to sell a stock to make profit?
1. Selling at uptrend reverse point is the golden rule for traders to make money.
2. For share trading, best time to sell shares at uptrend reversal point.
4. For share investing, best time to sell shares at 52 weeks’ high price.
5. Sell immediately before dividend declaration so that you can avoid dividend declaration impact. Moreover, you should try to sell your holding before record date. Otherwise, you will fall at record date effect.
Traders shouldn’t sell shares when price is increasing. They just hold their holding. They don’t premature sell an uptrend share. Moreover, they try to cut short loss as much as possible. Hence, they follow stop loss rule strictly if they make trading mistakes.
Bangladesh Share Market Limitation
Bangladesh share market doesn’t support day trading. Moreover, short sell was forbidden by Bangladesh Securities and Exchange Commission. Almost all the countries in the world allows day trading and short sell. But Bangladesh is exception in this regard.
To Sum Up
Bangladesh Share Market analysis starts from basic background to shares buy and sell decision. In order to succeed in share investing, first of all, you should analysis the whole market. Later, analysis specific stock to buy. You can select stocks by analysis technical and fundamental indicators. I hope, this article helps you to learn Bangladesh Share Market analysis techniques.
Founder of The Financial Ask
