Which are safe Stocks or Mutual Funds?

A return on stock/mutual fund investment is a huge money, compared to a regular savings account, FDs, government institutional/private institutional bonds. Then, which is safer to invest? To know about it, follow the information provided below. 

First, Download the famous apps of Zerodha, Upstox, Moneycontrol, Angelone discount brokerage companies, and they will give you perfect guidance in their blog corner.

These discount brokerage companies do recommend which company stock is safe to trade, or about a specific mutual fund that helps you in saving tax, and produce good returns on investment. 

In brief, their financial experts provide the best solutions and let you understand the safety measures that should be taken in trading stocks or mutual funds. 

Equity market advisers provide you with a right direction, and consulting good discount brokers shall give you a correct answer, which are safe, stocks or mutual funds? 

Note:

All trading experts do emphasize the fact that you must have the ability to take risk, involvement in risk management, tolerance, patience, and discipline goes hand in hand. 

First you must check the merits/demerits of stocks, and mutual funds, and consider the level of risk you should take as per your priorities. You may prioritize health, education, marriage, etc. 

You must apply risk management properly which is proportional to your age index.  

Younger the age, more the risk bearing capacity you would have, therefore, you must begin investments in younger days of life. 

Merits/Demerits of the Stocks and Mutual Funds:

Merits of Stock Markets:

You can benefit from the blue chip stocks which are progressive in nature. As the company’s performance begins to escalate, the shares automatically raise and dividends are issued based on the after tax cut on profits earned. 

You can make profits by selling your acquired stocks at a higher price. 

You can earn more by making an entry/exit position after making proper technical analysis, and studying the company’s credentials. 

Demerits of Stock Markets:

You also have the darker side of stock trading.  It is not just earning huge money, you are bound to get your entire money washed away, so be careful and gather information since stock prices fluctuation are based upon. 

Keep track of the company performance, financial statements, and business expansions, and favourable news on the company, so on. 

You must monitor and regulate your stocks, for that, you must have a thorough knowledge of the stock market trading ecosystem is essential. 

Merits of Mutual Funds:

Fund managers do recommend you in buying/selling of the securities based on your preferences and they are the best financial advisors. 

Banking institutions like HBSC, ICICI, BOB, AXIS, and so on, do help you manage your funds professionally. 

Fund managers do invest your money in a diversified manner that enables you in reducing the financial risk for a stock market collapse.  

You can purchase and sell units, at a price that the stock market holds. 

A liquidity factor allows you to execute the trade in huge volumes.   

Demerits of Mutual Funds:

At the time of units withdrawal you will have to pay huge expenses as compared to FDs, and bonds.  

Fund managers provide you with an option to select the portfolio, but give you no control on the asset allocation. 

In Nutshell:

Both the securities, stocks & mutual funds have specific merits and demerits, and that is dependent on their market operationality. Therefore, you must make a safe play depending upon your financial ability to invest, age, and other responsibilities. 

What Is the Double Bottom Pattern?

In the double bottom pattern, to enter the long, the price range from neckline to the price objective is the ideal bandwidth to purchase the stocks. Know in detail  about the double bottom pattern, neckline, price objective, in the upcoming lines.   

The stock charts create various graph patterns of the stock/forex/cryptocurrencies prices and each pattern symbolises the trend like bearish, bullish, or sideways. 

In the case of the double bottom pattern, the graph represents the trend reversal, from bearish to bullish, which means, the stock price begins to move upwards, from low to high. 

While you encounter the double bottom pattern, you can go for long positions that means to opt for buy options.

You can do it as the price touches the neckline or wait for the retracement ( a minor pull-back) and then consider long positions. 

Whenever you find a breakout having significant stock volumes, it is a sign of a good trading signal and hence check for high trading volumes of the stocks. 

Schematic Diagram: Double Bottom Pattern

Illustration of Double Bottom Pattern:

Every trading stock in the stock market shows a specific price pattern on the graph plane. Candlestick patterns are the most popular charts utilised for technical analysis. 

The rough sketch drawn above characterises the price variations of stock over a period. 

The graph takes a downward curve, rises to the highest point between the two troughs, and refers to the neckline. 

Neckline is the price where you can observe the first correction. And, the graph falls back to the level of the previous low. 

Then, further rises above the neckline level and after a short rise it pulls back to the neckline. 

From there it rises to the price objective. The level of the price objective is the upward price movement, equal to the distance between the neckline and the first bottom. 

Graphical Representation of Stock Price:

The stock takes a downtrend and reaches a low of INR 50, then rises to INR 60, and again falls back to 50. 

The two lows of 50 are considered as first/second bottom, also referred to as the double bottom pattern.

As the graph rises above the second bottom, it is an indicator to say that the share price is accelerating to the upward movement.

Experts say that it is the reversal of the downward movement, also called the bearish reversal. 

How to Use the ABCD Pattern

ABCD pattern is the simple way to execute a sell put or the buy option

Follow the thumb rule of ABCD pattern that explains the drawing of the geometric patterns and depending on the extension of the CD leg and the trend it forms, either buy or sell stocks. 

Remember !  

Fibonacci ratios do form the basis for the identification of resistance/support levels. 

The same fibonacci ratios are applicable, and they form to be the key elements in defining ABCD patterns. 

What Is all About the ABCD Pattern?

It is a chart pattern that represents three consecutive price swings. It forms the picture of a diagonal lightning bolt. 

Fundamentally, it is a combination of four points, A,B,C,D forming three lines, with variations representing buy/sell positions.

Cutting across the various segments of stock trading like Forex, Commodities, Stocks, etc, these price swings relate different conditions like trends, and range bound, regardless of the timeframes. 

From Point A, a new price trend forms, then the prices in the market retraces at B, and the trend again resumes at C. Further, the price goes for the next correction at D, here you can trade. 

In the set example, you can find a pattern where in the trading signals keep on forming the ABCD pattern in isolation. 

ABCD Pattern Rules:

As the prices move from A to B, the market is expected to be within range bound A & B. 

Likewise, the same should be applicable for the prices moving from B to C, and C to D. 

In the bullish moves, the ABCD pattern must have point C at a level lower than A, and D must be at a level lower than B. 

In the bearish moves, the ABCD pattern must have point C at a level higher than A, and D must be higher than B. 

How to Buy/Sell Stocks Using the ABCD Patterns?

Do open the market chart and find AB, likewise find BC. 

Make sure that the retracement should reach 61.8% or 78% of the move from A to B. 

By making use of AB, and BC lines you are expected to draw the CD. 

Remember, a general principle, CD must be equal to AB. Moreover, CD must be 127.8% or 161.8% of BC, in terms of price and time. 

Observation: 

You must consider the CD leg and measure the price gaps and wide ranging bars, these shall indicate about the formation of an extension. Therefore, you can find the CD to be longer than the AB. 

You will find a retracement at D, for a bullish ABCD market buy stocks, and for bearish ABCD then open a sell position. 

Can I Buy in Delivery and Sell in Intraday

Before I get into details of delivery & Intraday trading, you must understand the nature of trade that goes into. 

In intraday, you will have to buy and sell the stock on the same day. For some reason, your preoccupation with other activity can make you ignore the selling before 03:15 pm then the risk management team shall square off the position automatically.

In case you forget to square off the product (stock) then you will be fined INR 20.00 at the time of stock market closure. 

Important Note:

In case of intraday, you can prefer margin from your stock broker in which you need not make a complete payment while purchasing a stock ( option buy) a portion of the stock shall receive leverage from your stock broker. 

Delivery trading is a different ball game, once you buy a stock you are free to wait for days, or months, or years, the choice to make your selling goes in accordance to your willingness. 

Important Note:

In case of delivery trading, you will have to make complete payment of the stock you are preferring to purchase and hence a greater portion of the money gets blocked in your delivery. 

The payment for stocks involve cash and carry and the stock brokers do not entertain any leverage on, hence cannot receive margin support. 

Now, your question is, can I convert my delivery shares into intraday shares and square off by the close of day’s stock market operations. You can do so.

Usually, you may opt for it when you find it essential for liquid funds. While converting into intraday, a portion of the bought share value will be credited to your trading account and the intraday stocks then will receive margin from your stock broker. 

You can also prefer to convert when you realize that the delivery can create a loss to profit rather than. 

Important Note:

On converting the delivery stocks to intraday stocks, you will find that there will be an alteration in the stock positions relatively. You will have to bear such losses though come out to be of little expense.