Online (Internet) Share Trading and Mobile Share Trading

by Gopal Gidwani on November 1, 2010 · 3 comments

in Others,Stock Markets Guide,Uncategorized

Introduction
Over the last few years since 2003 the stock markets have boomed like never before. The Sensex rallied from a low of 3000 in 2003 to 21000 in 2008 only to fall back to 8000 in 2008 and bounce back to 20,000 in 2010. During these 6 years with the boom in stock markets, saw the growth of broking firms and there was exponential growth in the number of retail share trading accounts also.

Apart from the traditional ways of placing orders from a broker’s office or calling up the broker on phone and placing orders, new ways of trade execution have emerged in the form of internet trading and mobile trading. Lot of people still follow the old process of calling the broker and placing their buy and sell orders.

Naresh is a retail investor who has recently opened a share trading account. The broker has given him an online trading platform along with the facility of placing orders through the phone. Naresh does not know how to place buy and sell orders through the internet. At the same time whenever he call’s his broker’s office most of the time the phone lines are busy (engaged). Also when he calls up the Toll Free Call Center, he has to go through the lengthy automated (IVR) process which is time consuming and at times irritating. Many a time due to the time taken to place the order Naresh ends up buying shares at a higher price than he wanted to and some times he ends up selling shares at a lower price than he wanted to. Do you also find frequently yourself in such a situation? Then don’t worry in this article we will teach you how to place share buy and sell orders through the internet trading screen or the mobile trading screen so that from next time onwards you can manage your trading on your own and you will no longer be dependent on the broker.

Internet Trading Screen
Everybody who has been trading in stocks does know for a fact that the timing an order gets executed is very important. Naresh is a new investor in the markets who is concerned about his Trade Execution skills on the internet. In order to avoid keep continuing in a similar fashion Naresh has decided to look into better Trade Execution through the internet. So let us look at the step-by-step process of share trading on the internet.

  • Account Login: As a first step you need to login into your internet share trading account. For that you need to go to your broker’s website. You need to enter your login id (also known as Client ID) and your password.

Share Trading Login Screen

  • Trading Screen: Once you login, you can start trading i.e. buying and selling of shares. Here is how a sample trading screen will look like.

Sample Trade Execution Screen:
Share Trade Execution Screen
Let us assume that you want to BUY 100 shares of Infosys Technologies. Through this example let us take some time to understand each and every field in this screen:

  1. EXCHANGE: This refers to the Exchange on which you wish to trade. Typical choices would be NSE (National Stock Exchange), BSE (Bombay Stock Exchange).
  2. PRODUCT TYPE: The options here can be CASH / INTRADAY. If you select intraday then the shares that you have bought, you will have to sell them on the same day itself. If you select cash, then you can take delivery of shares in your demat account and sell them whenever you wish to.
  3. SCRIP CODE / SCRIP NAME: This refers to the stock / shares (name of the company) which you would like to buy / sell. Each stock is identified by a unique code on the exchange referred to as Scrip Code. The Scrip Code for Infosys Technologies is INFOSYSTCH.
  4. QUANTITY: This refers to the number of shares that you want to buy or sell. In this example we will enter 100 as we want to BUY 100 shares of Infosys Technologies.
  5. BUY / SELL: This refers to whether you want to BUY the shares of the specific company or whether you want to SELL the shares of the specific company. In this case we will select BUY.
  6. ORDER TYPE: The options in this field are LIMIT / MARKET. In case you select market then the shares will be bought at the nearest price to the last traded price. In case you select LIMIT, then you can put a price at which you want to BUY the shares of the particular company. For example let’s say that shares of Infosys are trading at Rs 3005 in the market. You want to BUY the shares at Rs 3000, then you can select the ORDER TYPE as LIMIT and specify the price as Rs 3000. This order will get executed as a trade as soon as the system finds a seller who is willing to sell the shares of Infosys at Rs 3000. Else the order will remain in the system unexecuted till the end of the day. At the end of the day the unexecuted orders get cancelled automatically.
  7. GTD / IOC: GTD stands for Good Till Day. If you select this option and you have specified a price and the system does not find that price then the order will remain in the system till the end of the day or till it gets a match. IOC stands for Immediate or Cancel. If you select this option and you have specified a price, then if the system finds that price the order will be executed or else the order will get cancelled immediately. So in case of IOC option either the order will get executed immediately or it will get cancelled immediately.
  8. CONFIRM / CLEAR ORDER: After filling all the details on the screen you are ready to place the order. To place the order you have to select CONFIRM. In case you want to reset the screen or clear the screen you have to select CLEAR ORDER.

Why is Trade Execution Important?
The process of getting into a trade either using Market/Limit orders and clicking the Confirm Order button is referred to as Trade Execution and Execution Skills refers to the precession with which it is done. Market Orders as we know are executed the fastest with the closest possible match. This often causes “SLIPPAGE” which means paying more on a buy order and getting less on a sell order. This could lead to steady accumulation of Losses of Thousands for a regular day trader. Also if one regularly punches Limit Orders he could easily loose out on a rally since the Limit Order price might not be reached or jumped upon. This is the main reason why Smart Trade Execution is important.

Factors Affecting Trade Execution:
The following factors affect Trade Execution and should be considered before punching a trade:

  1. STOCK VOLATILITY: A volatile stock offers significant movement in a short span of time and hence would be an ideal candidate to punch in Market Orders if one is looking to cash in on the volatility.
  2. STOCK LIQUIDITY: At any given point of time the amount of orders executed for a stock determine the amount of liquidity the stock offers. The more the orders executed, the more liquid the stock. Limit Orders for these kinds of stocks make more sense.
  3. TIME OF THE TRADE: Generally the liquid stocks are the most volatile during market opening and closing times. Market Orders during these times should be avoided as they could lead to greater slippage.
  4. ORDER SIZE: The greater the order size, the higher the slippage. It is always advisable to break a large order into smaller chunks if possible.

Conclusion:
We have now seen the Trade Execution process and the parameters associated with it. Ideally we would like to suggest Market Orders for a Runaway Market and Limit Orders in Flat/Non Volatile Market. Armed with all this information hopefully people like Naresh will be better positioned to place trade orders on their own. So now you are no more dependent on your broker to place orders for you and also you don’t have to wait impatiently to get through the busy phone lines or slow IVR process to execute your orders. Through the power of the Internet and Mobile Trading you are now ready to take control of your trading. So till the next article Happy Independent Trading !!!!!

Tha above article has been contributed by Devesh Salunke. Please let us know your comments on the article by commenting in the section below or writing to us at gopal_gidwani@yahoo.com

{ 3 comments… read them below or add one }

prachi November 24, 2010 at 1:33 pm

Baba tax guru Gopal maharaj ki jai ho 🙂

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Thani December 5, 2010 at 2:04 pm

I was having difficulty understanding these jargons. Very nicely written. Thank you.

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Gopal Gidwani December 6, 2010 at 11:48 am

Hi Thank,

Thank you for the compliment. It was nice to know that the article was helpful to you in understanding online trading

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