I received an email recently from a reader asking me to do a post on How to place the trades on ICICI Direct platform. While I admit having never really used the trading software offered by ICICI or most other brokers, I have extensively used Zerodha’s Pi and predominantly Sharekhan’s Trade Tiger and continue to do so. I do believe that while trading platforms offered by various brokers might be different in terms of functionality, the basic trade set up process(Entering & exiting trades) should mostly be quite similar and straight forward.
Set up your Market watch list
Once you populate your ‘Market watch’ window with your favorite stocks, you just have to highlight the stock you want to Buy(or Sell) from that list. This is what it should somewhat look like:
Press F1 for Buy(or Right Click and select ‘Buy Scrip’)
It will bring up a window like this:
Now, for eg. you want to buy 100 shares of KCP Ltd stock at a price of 153.00, you would then have to enter the price and quantity in the corresponding boxes(see below). Make sure that the ‘Product Type’ is ‘Investment’ and click on ‘Place’. During that trading day, if/when the market price of KCP comes to 153.00, the buy trade would get executed and you would have bought 100 shares of KCP stock.
Press F2 for Sell(or Right Click and select ‘Sell Scrip’)
The Sell window would look like this:
Please note that this is the same step for setting a stop loss and/or Profit booking.
In this case, for eg. you want to book a profit when the price reaches a target of 161.00. Upon entering the sell price and quantity information into the corresponding boxes and clicking ‘Place’ would square off(sell) the existing 100 shares of KCP Ltd at a price of 161.00.
Similarly, follow the same method(F2) for setting a stop loss of 152.00 but this time under the ‘Validity’ drop down menu, you can choose the MyGTD option and choose the last trading day of the month so that the stop loss stays in the system and you would not have to set the stop loss every day manually.(Not all brokers offer this facility; you may have to manually set up stop loss every morning – One of the main reasons why I use Sharekhan as my broker)
I hope the process of executing buy/sell trades or setting stop losses on your trades is clear from the above.
Now, to particularly address the questions:
Whether to use Margin(Leverage) or not?
Margin is like a loan offered by brokers to get you to trade a much larger position size than you should. Most brokers offer up to 10 times margin or more. Simply put if you had Rs.1,00,000 in your trading account, utilizing the 10x margin means you can buy stocks worth Rs.11,00,000 while your actual trading capital is only Rs.1,00,000.
What does this mean in terms of your profits/losses?
Margin is a double edged sword, meaning Profits and losses will be huge when you use margin. From the above example, if you are utilizing 10x margin to enter a trade, it means you have actually entered a position worth Rs.11,00,000 and a 1% loss on a single trade will translate to a loss of Rs.11000(which happens to be 11% of your actual trading account balance – 11% of Rs.1,00,000)
Consequently a string of losses in the market(which is very common) can wipe out your entire account. Worse yet, if the stock price has moved quickly in the opposite direction, you may even end up having to pay more than what you have in your trading account to your broker. This concept is known as a ‘Margin Call’.
Hopefully by now you can see why this is such a dangerous facet in trading. In the end, trading with Margin is completely a personal choice. However, since this post is mainly for newbies to trading, my advice would be to Not get tempted by the margin offered by your broker. To reiterate, margin is a concept invented by cunning brokers to trap novice retail investors to throw away their hard earned money. I would even go on record to say that margin trading is not suitable to even advanced traders and as such margin can be utilized by only intraday traders and I am certainly not one. I am yet to see a trader who doesn’t follow Risk management in trading and is still consistently profitable.
Market order or Limit Order?
I am a swing trader and by virtue of that I determine areas of supply & demand on multiple time frames and wait for price to reach these pre determined levels. If the particular stock is trading at these very levels, I enter positions at the ‘Market Price’ but then if these levels are slightly away from the current market price, I generally place pending orders(Limit order).
I strongly believe that traders can definitely take emotions out of trading by implementing trades with a ‘Set and Forget’ strategy. After I analyze the charts and determine that I want to take a position, the orders to get in and out of these trades is almost always an automated process with my positions being triggered by a Limit order for buying, stop loss & profit booking. Since my style of trading is short term positional or swing trading, I always take delivery of shares and since I would have already set up stop loss and profit target in the trading software, I allow the market to do its thing and let the trade either trigger the stop loss or profit target. Once you have identified a good trade set up with a healthy risk reward ratio and the correct position size, letting trades close out on their own is the best way to keep emotions out of trading.
My sincere hope is for the trading community to realize the truths in the world of equity trading and internalize these very important concepts and by way of today’s article only hope for a better yearly trading performance. My long term ambition is to contribute to your trading positively.