If You Are A Student, Here’s Why You Should Invest Today
Indians are renowned for their sophisticated financial reasoning, yet there is a severe lack of information and investment appetite when it comes to understanding investing and financial diversification. Young professionals find it challenging to file their taxes, learn about the equity markets, or engage in trading and investing since schools and colleges did not place enough focus on teaching pupils about these significant life subjects. Less than 10% of Indian families participate in alternative assets like mutual funds or equities, the bulk of which choose to preserve their money in bank accounts. When it comes to stock trading and investing, gold, post office savings, and real estate are favoured. While there is nothing wrong with safer investment options like Savings and Fixed Deposits, that money’s value could eventually decline due to inflation. This highlights the necessity of early education in stock trading and investing, educating kids about the ideas of compounding, the stock market, portfolio diversification, and much more that may make them more financially literate as adults. College students have an advantage over other adults who begin investing in their 30s since they are youthful, active, and have the passage of time on their side. Consider a capital of Rs100. It has the potential to earn 10% a year in returns when invested in Nifty 50 stocks. Rs 110 will be the total sum for the first year, Rs 121 for the following year, and Rs. 133 for the following year. For college students, the power of compounding really shines since it gives their money more time to grow. Early investment also enables them to take measured risks without worrying about how they would damage their families and livelihoods. In reality, it provides insight into stock evaluation and investment dangers, enabling customers to evaluate current share prices and watch their rise and fall in order to make wise decisions. Recently, the Sensex and Nifty both reached their all-time highs when it was thought that Indian shares were valued at their highest ever levels. Although the pandemic has led to a weak economy, negative growth, and the lowest GDP ever, the stock market is shattering all previous records. People who lack understanding tend to label anything as "gambling" or unrelated to reality. However, with the right information and its understanding, you can build generational wealth in a few decades. Since students are beginners in investing, even a little investment if done properly, may generate significant returns over time and serve as a reliable source of income. It is a fantastic chance for students or recent graduates to generate enormous returns and support their families. It is crucial to have an accurate understanding of the market before starting to invest, even if it is for a small capital. Here's a quick tip for student investors: Invest in businesses or brands that you use frequently, in products that you require frequently and that are in great demand. By doing this, you boost your chances of getting a positive return because you are a consumer of the brand and are assisting them in growing sales and making profits, which will eventually increase the brand's stock value and benefit you. It goes without saying that investing is a wise approach to increasing money. However, investing all of your funds in the market out of a desire to make money is not a good idea. Trade wisely by becoming knowledgeable about the financial market. Being an early investor, especially during the market's all-time high, should enable you to take advantage of the benefits and see your net worth increase. What investing choices are available to college students? The most fundamental type of financial investment, a savings account enables you to safely deposit money while receiving interest. On certain occasions, the real rate of return obtained from an investment, also known as the annual percentage yield, exceeds 0.50%. Fixed Deposits: These types of accounts are comparable to savings accounts but have a fixed term and a higher fixed interest rate. Stocks: By acquiring a stock, you are effectively buying a share of a certain corporation. Depending on how much stock they possess, the shareholder is entitled to a piece of the corporation's assets and income. Mutual funds: Mutual funds pool the money contributed by several investors and invest it in stocks, bonds, and other assets. The "portfolio" refers to the particular stocks, bonds, and assets that the funds are invested in. Exchange Traded Funds (ETFs): While ETFs and mutual funds both consist of a group of assets, ETFs are specifically created to track a certain index, industry, commodity, or another set of assets. As a result, you may have an ETF that tracks real estate or corporate bonds. You should invest in low-cost, well-diversified ETFs as a college student since they provide you access to hundreds of stocks without requiring you to individually examine each one. Index Funds: An index fund is a similar thing to a collection of assets, but it is tied to an index, such as the Nifty 50 or the Sensex. One benefit of index funds is that they often have cheaper costs as no professional takes the time to choose stocks or bonds for the portfolio. Bonds: A bond is, in the simplest sense, a loan from an investor to a borrower, such as a particular corporation. Bonds are an essential component of a balanced portfolio because they may lessen the impact of a decline in the stock market. As you can see, there are several options for students to choose from. However, they require a significant amount of knowledge to get started. This is where Zebu School comes in. We have market experts who teach about the basics of the share market and help investors make the right financial decisions. Our courses are simple and pocket-friendly and can help you make the most out of the share market. To start learning today, please get in touch with us now.
Aug 13, 2022
Should You Invest During A Recession?
After Russia invaded Ukraine, the stock markets in India went down a lot. India imports more than 80% of the energy it needs, and prices for crude oil are going through the roof around the world. Also, international institutional investors have been taking their funds out of the Indian stock markets slowly since October 2021. As investors from all over the world rush to the safety of US government bonds, the Indian stock markets may fall even more. Should you buy stocks during a recession? Why do investors think it's a good time to buy stocks when the economy is down? During a recession, the value of stocks tends to go down. When the stock market goes down, you may be able to buy shares of strong companies for less money. It is a business that is financially stable and has good corporate governance. If you want to invest in stocks that will give you good returns over a long period of time, you should choose companies with an economic moat. These businesses have an edge over their competitors because they have things like strong brands or good distribution networks. During a recession, you might want to invest in the stock market, which is known for long-term growth. Also, a stock market drop happens before a recession, so the economy goes through a stock market crash before it goes through a recession. Before buying stocks, many people wait until the stock market is at its lowest point. Analysts of the stock market warn against using this strategy because it's hard to know when the stock market will hit bottom. To invest in a stock market that is going down, you need to know how to do it right. How to invest your money when the stock market goes down If you're new to the stock market, you might want to invest in a diversified equity mutual fund instead of buying stock in a single company. Investing in stocks from different industries and businesses gives you the chance to spread your risk. For example, weaknesses in one area can be made up for by strengths in another. With a systematic investment plan, or SIP, you can put your money into equity-diversified mutual funds. It is a way to invest a fixed amount of money in a mutual fund scheme on a regular basis. When stock markets go down, you will buy more equity fund units, and when markets go up, you will buy fewer units. It helps make the price of buying units of equity funds more stable over time. If you know a lot about the stock market and are willing to take on more risk, you can invest directly in stocks. It is helpful to do research and choose cyclical companies with strong fundamentals that could do well when stock markets recover. For example, changes in the economy's big picture have an effect on cyclical stocks in industries like financial services, travel, and hospitality. During a bad market, you might want to invest in companies that are safe. Some examples of defensive stocks are those from the fast-moving consumer goods, pharmaceutical, and utility industries. These are the stocks of companies whose products and services are still in high demand even when the economy isn't doing well. During a recession, you shouldn't buy stocks from companies that have a lot of debt on their balance sheets. When the economy is bad, it can be hard for these businesses to pay their interest bills. You could fight the urge to stay away from the stock market when it goes down. If you don't, you'll miss out on important opportunities to make money from the market's recovery and higher returns. During a recession, you might be able to buy fundamentally sound stocks at lower prices. Also, after doing a good job of researching stocks, you need to invest using a good investment strategy.
Aug 12, 2022
Why The Rupee Is Falling And What It Means For You
The value of the rupee goes down every day. This year was the first time it went up to 80 against the dollar. Due to several global economic factors, the Rupee has been fluctuating and eventually, it hit a new record low and went past the psychological 80-per-dollar mark. What does it mean for a "rupee" to "drop"? When the Indian rupee loses value against the dollar on the foreign market, what does it mean for the economy? This means that when India imports from the U.S. or any other country, it will have to pay more because the payment is made in dollars. In other words, less import will cost more. India imports a huge amount of things: 20.96% of its GDP. Mineral fuels, oils, electrical equipment, nuclear reactors, mechanical appliances, jewellery, and many other things are among them. Since all of these imports are paid for in dollars, the fall in the value of the Indian rupee against the dollar is having an effect on these industries. 1. Energy Over 85% of India's oil and 50% of its gas come from outside the country. As the value of the currency goes up, this industry is losing money. The prices of crude (Indian Oil, BPCL, HPCL, RIL, and Nayara) and gas (GAIL and GSPC) may go up for companies that buy them. 2. FMCG About half of the costs come from importing raw materials like crude oil and palm oil derivatives. Businesses are now raising their prices to make up for the higher costs of the things they use. 3. Technology India will buy an average of $56.73 billion worth of electrical and electronic goods from other countries. A huge 40–60% of all input costs, including component costs, come from outside the country. This number goes up to 70–80% for cellphones. Since the value of the dollar has gone up, they may cost more. 4. Telecom services Importing network equipment costs the telecom industry about $6 billion per year. When the rupee falls in value, the cost of imported goods goes up. 5. Alternative Energy Most of India's solar power projects use imported solar cells and modules. Because of this, the cost of the project will go up. For example, the next bids will have higher tariffs. Why is the rupee going down? The main reasons for this rupee depreciation are the rise in crude oil prices, the withdrawal of foreign capital from the Indian market, and the regularity of business in India. Early stock market statistics show that foreign institutional investors sold more than they bought on the capital market. What difference will it make to you? The price of imports will go up because the rupee is losing value. Since the rupee has gone down against the dollar, importers will now have to pay more for the same thing at the same price and amount. Those who wanted to study abroad during this time would have to pay more for tuition. People who live abroad but have family in India will pay more to send money to them because they send more rupees overall. But when the rupee falls, the cost of exports goes down.
Aug 11, 2022
Should You Invest In The National Pension Scheme?
If you're looking for assets that can lower your tax bill, the National Pension Scheme (NPS) should be at the top of your list. In addition to the tax benefit, NPS is a great way to invest if you want to increase your wealth and build up a strong retirement fund. This article will talk about the tax benefits of the National Pension Scheme and why it should be on your list of investments that save you money on taxes. The main goal of the NPS is to make sure that account holders continue to get a steady income after they retire, even if their investments have made a lot of money. What is the NPS program and how does it work? Before we look at the tax benefits of the NPS scheme, let's take a closer look at how it works. People who have an NPS account can make regular payments to their account while they are working. If you are a Tier I subscriber, you must give at least Rs. 6,000 per year. If you are a Tier II customer, there is no minimum amount you must give. If you do decide to give, you may contribute Rs 250. A person with an NPS account can take out about 60% of the money in their account after they retire. With the remaining 40% of the total amount invested, an annuity should be bought so that there is a steady source of income after retirement. What are the basic parts of NPS tax savings? Not sure if investing in the NPS plan will be worth it? NPS has many benefits, such as being a cheap way to save for retirement and invest. It is important and helps you plan for retirement, and it also gives you stable long-term returns and a good income after you retire. Here are some more reasons why NPS is good: It's up to the investor to decide where to put their money. Investments in the NPS are handled by people who are qualified to do so. The person who uses the account can decide how much to give each month. Accounts in the NPS can be managed from anywhere in India. NPS gives you a tax break. Let's look at the NPS Income Tax Benefit in more depth. Under Section 80CCD, NPS gives tax breaks of up to Rs. 1.5 lakhs (1). Also, Section 80CCD(2) of the Income-Tax Act says that the employer's contribution to the NPS can only be deducted from taxes up to 10% of the employee's salary (base plus DA). Salary people who have already claimed the tax exemption of Rs. 1.5 lakh under Section 80C can save more money on taxes through NPS. Section 80CCD lets people who have NPS accounts and invest up to Rs 50,000 get a tax break. This is true for both salaried and self-employed people (1B). Section 80CCD allows this extra deduction, but only for owners of Tier I NPS accounts (1B). Unlike Tier I NPS accounts, Tier II NPS accounts are not affected by Section 80C of the Income Tax Act. Another thing to remember about the NPS tax benefit is that the deduction under Section 80CCD is available to both salaried and non-salaried people (1). But under Section 80CCD (1), the most a paid professional can deduct is 10% of their income for the year. Those who don't get a salary, on the other hand, pay 20% of their gross annual income. An important point The government has also agreed to raise the costs of the NPS fund manager from 0.01% to 0.09%. This is a small raise to make sure that the pension fund's management can pay for it. IPOs and more than 200 stocks are now available to NPS fund managers.
Aug 10, 2022
What Are Upper And Lower Circuits In The Stock Market?
We've all wished that we could choose a stock and get a return of 50%, 100%, or even 1,000% on the day we bought it. This may not be possible, though, because there may be limits to how far the price of a stock can go. In India, the Securities and Exchanges Board of India (SEBI) decides what the upper and lower circuits are. Here, we explain what upper and lower circuits are, how stocks can reach them, and what happens when they do. What is the upper circuit? The upper circuit is the highest point where the price of a stock above which it can't go up in one day. Stocks that are in the upper circuit have a lot of buyers but zero sellers. The closing price from the day before is used to figure out upper circuits. Some stocks may have upper circuits that are 2% above the price at which they closed the day before. Other stocks can have upper circuits that are 5%, 10%, or 20% above where they closed the previous day. The price of a stock can't rise more than its upper circuit in a single trading session. But if some people start to sell, the prices can go down. What is the lower circuit? The lower circuit is the point where the price of a stock or the value of an index could drop the most. Stocks that a lot of people want to sell but not many people want to buy may drop in price. Lower circuits are also calculated using the stock's closing price from the day before, though they may be different for each stock. For some stocks, the lower circuit could be 2% lower than the last closing price. For other companies, it could be 5%, 10%, 15%, or 20% lower. A company's price may not fall below its lower circuit in a single trading session, but if investors start buying the stock, the price may go up. What makes stocks trade in higher or lower circuits? Let's look at some examples of stocks that have touched the upper or lower circuit to learn more about why this might happen. When a stock hits its upper circuit, it has: Imagine that a new pharma company unexpectedly beats the market leader in terms of market share. This would cause a lot of people to want to buy this stock at once. The people who own shares in such a company are not likely to sell them. But people who want to buy these stocks may offer more money for them. Upper circuits can protect investors from volatility and unwarranted speculation, like the pump-and-dump operation. When a stock is in the lower circuit Let's say you heard that a certain business was doing business in a way that wasn't right. The government is likely to take harsh action against this company. The shares of this company are no longer worth much. Since no one would want to buy, the people who already own shares won't be able to sell them. If no one buys a stock, its price might go down. The stock price might keep going down because investors don't want to buy stocks that are already going down. So that this doesn't happen, lower circuits are set up. So, in theory, a stock could reach its circuit limits if something happened that changed how desirable the stock was. For a stock to move to the upper or lower circuit, there must be a big change in how people feel about it. Sometimes, when the market is manipulated, stocks hit their upper or lower circuits.
Aug 09, 2022
How to Avoid False Breakouts?
How can we avoid false outbreaks? Since this is a problem that many traders face, it was also the reason we wrote this post. At first, trading breakouts may seem easy, but they quickly become hard to do in real time. This article gives you five important tips for trading breakout setups with more success and confidence. Let's begin. Rule 1: Change the map and look for patterns. No trader knows for sure if a breakout will work or turn out to be a false break. As usual, the market decides what to do and what to say. We traders must listen and follow, NOT the other way around. Many traders make the mistake of studying and making predictions about the markets, only to blame the market when their predictions don't come true. Trading doesn't operate like this. The most likely path of least resistance, which acts as a road map for pricing, needs to be found over and over again. This is not a set path, and you have to keep improving it. Also, keep in mind that chart patterns come first, and breakout trade ideas come after that. Learn and recognise all chart patterns, or at least the most common ones. For example, if you know what a contracting triangle is and how it is expected to form five waves (ABCDE), you can figure out when to expect a real breakout. Rule 2: Wait for breakouts with strong candlesticks We can tell if a breakout is successful by looking at how strong the candle closes. When the candlestick closes close to the high or low, this is called a powerful candle closure. How a breakout setup and a candlestick closure work together is as follows: A strong bullish breakthrough is shown by a candle that closes close to the high. When a candle closes close to the bottom, this is a strong sign that the price is going down. The power can also be seen in the size of the candle. Compared to the other candles in that time frame, a big breakout candle is shown by a big candle, not a small one. Even though candle size is important, how close the candles are to each other is more important. Rule 3: The break of the break Traders love trading breakouts by focusing on a single time frame, watching for a drop, and then letting the trade develop. If you could see a pattern on a 4-hour chart, for instance, you would zoom in on a 1-hour chart and look for a smaller pattern to show up over that time. Why? Because when price makes a pattern after a big breakout, it shows that the breakout is real. It shows that the price is in fact making a new correction after gaining momentum. Price psychology in the market suggests that this is a sign of more of the same. If prices don't form a pattern after the breakout, it's likely that they will turn around and move quickly in the opposite direction. If that's the case, the price is either making a false breakout or has hit a major support or resistance level and is now strongly going back up. In any case, it's smart to stay outside. Rule 4: Candle Close and Body Above the Support and resistance Reviewing how market activity relates to the support or resistance (S&R) level is a good approach when employing moving averages and trend lines. When the candle body is above the MA or trend line (50% is respectable), the breakout is at its finest. By following these tips, you can avoid a significant amount of false breakouts. To open a demat account with Zebu and start trading breakouts today, please get in touch with us.
Aug 08, 2022
How To Trade With Support And Resistance
Technical analysts use a number of rules to predict how much stocks will go up or down in the future. Once you know what a trend is, the next important idea in technical analysis is support and resistance. The theory of support and resistance According to technical analysis, when the price of a stock reaches certain predetermined price points, it tends to stop and move in the opposite direction. Support level: This is the point where the price of a stock stops going down. It's possible that the price will go up instead of down. At this point, it is likely that the demand from buyers will be much higher than the demand from sellers. Resistance level: The opposite of a level of support is a level of resistance. It is a price level (ceiling) above which the stock price is not expected to rise. At this price, the market for this stock is better for sellers than it is for buyers. What does support mean? The support and resistance levels on a candlestick chart might help you figure out the target price at which to buy or sell. The support level is where the market expects more buyers than sellers. The price at which traders can expect to see the most buying interest in a stock is called the support level on the chart. In a falling market, the support-resistance indicator, which is an important level market player to watch for, is often a sign to buy. The support line is formed when the price of a security goes down and the demand for shares goes up. What is resistance? On a candlestick chart, a price has reached the resistance level when there are more sellers than buyers. Resistance level is a price point on the chart where traders expect to sell as much of a certain stock as they can. It keeps the price from going up even more. Since resistance is always higher than the current market price, it is often a sign to sell. In a bullish market, the resistance level is one of the most important things that traders pay close attention to. Support and resistance are, in a nutshell, the exact opposites of each other. By looking at the support and resistance levels, the trader can get an idea of how the price of a stock will move. But there is always a chance that the stock price will go above these levels. When this happens, which happens often, a new level of support and resistance is set up. If the support level is broken, the stock price will keep falling until it finds a new level to support it. Also, if the stock price breaks through the resistance level, it keeps going up until it hits a new resistance level. Resistance and Support: How Reliable Are They? Even though support and resistance can tell you when to buy or sell, you shouldn't rely on them alone. Or, to put it another way, before deciding whether or not to buy or sell a certain stock, you should think about a number of other things. When it comes to technical analysis, Predicting the future price of a stock is the most important (and hard) part of analysis for a trader in the stock market. The next high (or low) price cannot be predicted with any level of reliability. So, the idea of support and resistance is a good way to understand how prices change. Support and resistance levels help traders make decisions because they let them see patterns. For example, if a trader sees that a stock has reached a support level, he could buy more shares. This is done so that the stock has a better chance of coming back. In a similar way, the trader may sell his shares and make money when the stock reaches a level of resistance. When a stock's price reaches these levels, you should always be careful because the area between the support and resistance levels is known to be very volatile. Conclusion Traders can use the idea of support and resistance to spot trends in the stock market and take advantage of them. This doesn't mean, though, that the stock will never go above a support or resistance level. The price of a stock can always go up or down. Also, as a trader, you shouldn't make trades based only on these levels.
Aug 06, 2022
Trendline Trading Strategies For Beginners
Individual traders tend to utilise technical analysis more frequently than fundamental analysis, so trendlines are particularly popular in both forex and cryptocurrency trading. Interest rate movements affect forex markets, yet central banks' established interest rates seldom fluctuate. This implies that prices fluctuate in line with traders' predictions of interest rates, which are far more difficult to interpret. Price action and analytical tools like trendlines, according to technical experts, are the most reliable ways to gauge the sentiment of traders. Trading strategies using trendlines There are other methods to employ trendlines, but in this article, we'll go through the two most popular trendline trading techniques as well as a third, less well-known but extremely viable, strategy. 1) Trendline reversal Trading in accordance with the trendline-supported trend is the aim of this technique. Either purchasing or selling near to an uptrend or downtrend line. Steps in the plan: Decide if the price is moving up, down, or sideways. Create a trendline that connects at least three swing points. the trendline be extended into the future A) Watch for a subsequent price contact of the trendline B) Place a limit order at the trendline (adjust as price moves) When the price has reached the trendline, place a trade in the trend's direction. In an upswing, place a stop-loss order under the prior swing low (above the previous swing high in a downtrend) Place a take profit order with a minimum ratio of 2:1 to the stop loss size. Example of a chart: trendline bounce 2) Trendline break-through Although the trendline breakout may be utilised to trade against the trend, that is not what we are promoting here. How is breaking a trendline a trend-following tactic? Trading the breakout of short-term trendlines in the direction of the main trend is how it's done! Steps in the strategy: identify a long-term trend Wait for a price "correction" or buck the general trend. Create a trendline to represent this recent correction. Keep an eye out for the price to go over this trendline. A) Place a stop order past the trendline to enter on the breakout B) Buy at the break of a downtrend line or sell at the break of an uptrend line On the other side of the trendline, place your stop loss order. Place a take profit order with a minimum ratio of 2:1 to the stop loss size. Examples of charts: inner trendline breakout 3) Confluence between trendlines The use of trendlines is effective, however no technical indicator or price action trading strategy is faultless. Using many analysis techniques and watching for possibilities when they all come to the same conclusion will always boost your chances of success on a transaction. For instance: Using Fibonacci retracements, draw trendlines In this illustration, a buying opportunity at a rising trendline is supported by one at the 61.8% Fibonacci retracement level. Moving averages and trendlines In this instance, a rising trendline coincides with the prominent 200-day moving average. Japanese candlestick designs with trendlines In this case, bullish engulfing candle patterns help trendline bounces.
Aug 05, 2022
How To Trade With The Trendline
Trendlines are one of the most simple and useful tools that traders use. Read on to find out what they are, how to draw them, and the best ways to trade based on trendlines. What is a trendline? A trendline is a line that is drawn through a chart to show the trend. On price charts, trendlines are drawn to show the general direction of prices in the trading environment. Traders use this information to decide whether to buy or sell in the direction of the trend. Trendlines can be used to track the price of a stock, a currency pair, or a cryptocurrency. In technical analysis, trend lines are one of the most common ways to show how prices are moving. A good example of how a trendline works Usually, a trendline is made by drawing a straight line between a number of swing highs or swing lows. For an up-trend line and a down-trend line, the swing lows and swing highs are used. In this method, the trendline helps traders understand till when a trend can continue. These can also be thought of as dynamic support and resistance points. Starting on the left side of the chart and moving the line to the right is how you draw a trendline. As a general rule, a trend line must go through at least three price "swings" before it can be taken seriously. How to use trend lines in trading Use a trend line to figure out the direction of the price trend. Traders can then choose to go with the trend if they think it will keep going or against the trend if they think it will change. Both strategies use the same way to read the trendline. Bullish because the price is above the uptrend line, which means the trend is going up. Bearish because the price is below a line that shows the price is going down. Trend following Trend following is a way to trade where you buy when the price is going up and sell short when the price is going down. A common trading strategy is to use an uptrend line to figure out if the general price trend is going up. A decline can also be shown by a line going down. Trading against trend Countertrend trading is a way to trade where you sell when the price goes up and buy when the price goes down. This is more like the basic rule of investing, "Buy low and sell high." Reversion to the mean says that after a price trend goes in one direction, it will eventually go back to its average price. This is why short-term traders trade against the trend. The following point is one of the most important pointers to remember while using a trendline. Using a trendline when there is no trend is the worst mistake you can make as a beginner with trendlines. The clue is in the name! The best angle for a trend line is 45 degrees. Even if the trend keeps going in the same direction, a slope of more than 45 degrees means that the price is going up too quickly and could easily break the trendline. Less than 45 degrees means that the trend is weaker and is almost trading sideways. Three times in total As a trendline goes through more swing points, more traders can see it. This makes the trendline stronger. But after five touches, the chances of the trendline "breaking" are much higher. Zoom out To see where the trend you're trying to show with the trendline started, make sure to zoom out on your trading platform's chart. For example, if you want to draw an uptrend, try to start your trendline at the bottom of the previous downtrend or at the swing low. Five trendlines zones Trendlines are not based on good science. Price doesn't often hit a trendline right before it turns around. The trendlines shouldn't be taken as a specific price but as an "area" of prices. Having this information makes it easier to choose an entry price and a stop loss.
Aug 04, 2022
Everything You Should Know About Breakout Trading
Did you know that sometimes on the stock market, fake breakouts can happen? But what are breakouts? How can you tell if a breakout is real or not? Assume that there is a resistance for the market at 18,000. When the price reaches there, sellers might come in and try to push the price down. However, if the price manages to move above 18,000, then it is called a breakout. Similarly, you could say that there is some support. When the price gets to the support level, everyone buys. When the price hits this level twice in a row, it means something. When there is a third strike and the price goes through the support level line, this is called a breakdown. Simply put, breakouts and breakdowns are a rise and a fall. First, let's talk about what "breakout" means. What price action will help you the most if there is a breakout? For our breakout to happen, a bullish engulfing pattern must form. Now, the price breakout should be supported by the volume breakout, which means that when the price breakout happens, there should be a lot of volume. This can be seen when the volume bars at the bottom of the chart break over the black line that shows the volume line. The first thing is that a bullish engulfing candle pattern forms, and this is the second thing. The third and most subtle trait is called consolidation. Think about how the market always forms bullish candlestick patterns right before a breakout during intraday trading on a 15-minute time frame. Many people think the upward trend is reliable, but they will learn over time that after the candle breaks out, smaller green candles, a doge, and finally a huge giant red candle are seen, and smaller red candles start moving sideways. As a result, a lot of people lose. Then, how can we stop this? Consolidation. When a breakout happens, it should follow a significant pattern, like three or four contact points. This tells us that the breakout is real, and the breakout of the candle and the volume should back this up. If there has been no consolidation and there is a straight breakout, there is a higher chance that the trade will fail. We should enter those breakout trades when there is a strong consolidation. The fourth quality is that it's been tested more than once. It's important to test the level of resistance more than once. Let's say that over the course of 15 minutes, you can see a lot of consolidations against the resistance level, that the resistance line has been reached before and really broken through the day before. It will be less likely that the stock will break through resistance. When we talk about breakdown, it's for the same reason that bearish engulfing candle patterns, the volume breakout, consolidation, and several tests all work. Once all of these checklists are met, then you can go ahead and take your trade. As always, follow a strict stoploss. Breakout trading is a simple price action strategy that can work wonders if you know how to prevent false breakouts. To open a trading account with Zebu and start trading breakout strategies today, please get in touch with us.
Aug 03, 2022
Equity Market vs Commodity Market - Part 2
Investors in the stock market can choose to keep their stocks for only one trading day. Stocks, on the other hand, are great investments for the long term because they can be kept for many years or even decades. For commodities trade, on the other hand, the time frame is very different. On the commodities market, contracts that are usually short-term are bought and sold. Also, unlike stocks, they have an end date, which means you have to trade them before the deadline. So, the commodities market is a great place to invest for short-term goals. Compared to trading stocks, trading commodities often goes on for longer hours. Stocks can be bought and sold from morning to afternoon. However, commodities can almost always be bought and sold. Here are a few more differences between the stock market and the commodity market. Bid-Ask spread: The bid-ask spread, which is a measure of liquidity, is lower for stocks. In the stock market, the bid-ask spread is the difference between the highest price a buyer is willing to pay and the lowest price a buyer is willing to accept. Margin: The margin requirement for trading commodities is lower than for trading stocks. So, it lets traders take bigger risks, which can be very dangerous when the market moves quickly and in large moves. Key indicators: For equity traders and analysts, the most important things are the quarterly results, the company's dividend payments, and the state of the economy as a whole in the country. When trying to understand the market, traders in the commodity market put more weight on the demand and supply situation than on other factors. Also, traders in commodities have to pay more attention to macroeconomic factors than traders in stocks, who focus on the fundamentals of the companies and their markets. Traders and market analysts thought that investing in commodities was a bit easier because it was mostly based on supply and demand. Before deciding how to invest in the stock market, you need to do more research. When you buy a security, for example, you need to look at the company's earnings and how it has behaved in the past. To understand the copper market, on the other hand, you mostly need to keep an eye on the outlook for industrial growth. So, there are less things to keep an eye on in the commodities market than in the stock market, which may be good for a new trader. Stocks can be traded directly in the cash part of an exchange, but commodities must be traded using derivatives. Similarities between the stock market and the commodity market Both the stock market and the commodity market are affected by many different factors. Take the case of interest rates. Changes in interest rates affect both the market as a whole and the companies that depend on those rates. The interest rate affects how much it costs to keep inventory on hand, which in turn affects the price of goods. Pick either stocks or commodities Investors can choose to trade on the stock market or the commodities market, depending on how much risk they are willing to take. On the stock market, a common strategy is to buy an investment and hold on to it for a long time. This is not possible when trading commodities. Whether you trade stocks or commodities will depend on how willing you are to take risks. If you're looking for short-term returns, the commodities market might be a better choice. However, investing in stocks is more likely to help you reach your long-term goals. So, investors should keep in mind that stocks and commodities are different in how they are owned and how long they are held. Open an account with Zebu to trade and invest in both stocks as well as commodities. Get in touch with us to get started today.
Aug 02, 2022
Equity Market vs Commodity Market - Part 1
If a smart investor makes the right investment in the right financial market, they could make a lot of money, especially now, when the internet makes trading in almost every market easier and more accessible than ever. So, we'll compare the stock market and the commodities market, two very popular markets, to see if it makes a difference. What is a stock market, anyway? A stock is a type of security that shows that someone owns part of a company that is traded on the stock market. The amount of company shares a person owns, which he or she can then sell or buy from other stockholders, shows how much of the company that person owns. The group of markets where this buying and selling of stocks takes place is called the "stock market." A person can invest in the stock market by opening a trading and demat account with a brokerage firm. The brokerage firm could then set up accounts for you at the right stock exchanges and make trades for you. What is the commodity market? A commodity is a useful resource or item that can be traded for another of the same kind. There are two types of commodities: soft commodities, like food and livestock, and hard commodities, like gold or oil. A commodity market is a place where traders can buy and sell different goods, either in person or online. There are many ways to trade and invest in commodities. These include both direct investments in commodities and investments in futures contracts on commodities. Differences between the stock market and commodity market After we've talked about the difference between stocks and commodities, let's look at how each market is different. Here are the most important things that set the stock market apart from the commodities market: Effects of inflation: Inflation often means that expected costs go up, which could mean that businesses lose money and the value of their shares goes down. This is bad news for the stock market. But inflation is sometimes good for the commodities market because it lets people who own the items sell them for more than they thought they would. But both situations give experienced players chances to make money. In the same way, a drop in the price of oil or other commodities could help stock market indexes. Ownership: When an investor buys stocks on the stock market, they get a piece of a company. Most people trade on the stock market by holding on to a stock they already own until the market turns in their favour. But futures contracts are the most common way to trade on the commodity markets. When you use futures contracts, there is no change of ownership. Instead, these agreements cover upcoming supplies of goods that are often traded but rarely owned. Volatility: Compared to other asset classes and financial markets, the commodity and commodity markets tend to have the most volatility. The patterns in the commodity market will be much more unpredictable than those on the stock market. This is because the commodities market has a reputation for having less liquidity and is affected by factors like supply and demand and geopolitics that change all the time. We’ll discuss more about the differences between the commodity and equity market in the follow up article as well.
Aug 01, 2022