BEWARE OF INVESTING TRADE
IT IS SAID THAT WALLS ALSO HAVE EARS! NOWADAYS, WHEN TRADING IS PERFORMED USING COMPUTER SYSTEMS, YOUR INTRADAY POSITION CAN BE EASILY VIEWED ON THE SCREEN OF YOUR ONLINE TRADING SERVICE PROVIDER. EVEN YOU MAY EASILY WATCH ORDERS CURRENTLY AVAILABLE IN THE MARKET ON THE MARKET DEPTH SCREEN.
THUS, THE POSITION YOU HAVE TAKEN, WHETHER YOU HAVE TAKEN MARGIN POSITION OR CASH AND CARRY POSITION, ALL THIS CAN DEFINITELY BE WATCHED BY YOUR ONLINE TRADING SERVICE PROVIDER. IN ADDITION TO THAT, IT IS DIFFICULT TO SAY WHO ALL LIKE YOUR BROKER, SUB-BROKER, TRADING MEMBER AND OTHERS MAY ALSO WATCH YOUR POSITION, AND IN THIS COMPUTER AGE. IT'S NOT IMPOSSIBLE ALSO.
YOU MAY BE THINKING HOW DOES IT AFFECT YOU EVEN IF SOMEBODY IS ABLE TO SEE YOUR ORDER OR YOUR TRADING POSITION?
HAVE YOU EVER PLAYED CARDS?
DO YOU ALLOW OTHER PLAYERS TO SEE YOUR CARDS?
HOW DOES IF AFFECT YOU IN THAT CARD GAME WHEN SOME OPPONENT PLAYERS ARE ABLE TO SEE YOUR CARDS?
I, THE AUTHOR OF THIS CHAPTER, AM NOT 100% SURE WILL ALL MAY BE ABLE TO WATCH YOUR INTRADAY OR MARGIN POSITION AND WHAT ARE THE POSSIBILITIES OF THE SAME BEING MISUSED.
HOWEVER, IF THERE IS EVEN 1% POSSIBILITY OF THE SAME, YOU ARE IN DANGER. MY WIFE HAD EVEN RECEIVED A PHONE CALL FROM ONE OF THE ONLINE TRADING PLATFORMS. SOME LADY WAS SAYING, "SEEMAJI, I AM OBSERVING THAT YOU GENERALLY KEEP A VERY SMALL STOP-LOSS THAT GETS TRIGGERED QUITE OFTEN. WHEN I ASKED WHO SHE WAS, SHE SAID, I AM TRADING MANAGER FOR SEEMAJI, I ASKED HER, WHAT RIGHT HAVE YOU GOT TO WATCH OUR POSITION AND STOP-LOSS DETAILS?
SHE EXPLAINED, "MY COMPANY HAS APPOINTED RELATIONSHIP MANAGERS FOR EACH AND EVERY CUSTOMER SO THAT WE MAY GUIDE OUR CUSTOMERS IN MAKING MONEY FROM TRADING. SEEMAJI'S TRADING ID HAS BEEN ASSIGNED TO ME AND, HENCE, I AM ABLE TO VIEW ALL HER TRADES, PROFIT BOOKINGS OR LOSS BOOKINGS AND STOP-LOSS".
NOW, SUPPOSE YOU HAVE BOUGHT ON MARGIN, STOCKS OF RELIANCE AT THE RATE OF $ 1,043 PER STOCK. NOW YOU KEEP A TARGET OF $1,048 AND STOP-LOSS AT #1,038. A BIG OPERATOR IS WATCHING YOUR POSITION. HE KNOWS WHAT ALL ORDERS ARE THERE IN THE MARKET AT DIFFERENT RATES. HE CAN SEE THAT YOUR STOP-LOSS WILL BE HIT IF HE SELLS HIS 5,000 STOCKS, AS, WHEN HE SELLS 5,000 STOCKS AT A TIME, THE RATE WOULD GRADUALLY FALL FROM 1,043 AND WOULD REACH A LEVEL OF $1,035 SOON AND YOUR STOP-LOSS OF $1,038 WOULD BE HIT. AT THAT VERY MOMENT, HE WOULD ALSO BUY 5,000 STOCKS BACK.
THUS HIS 5,000 STOCKS WERE SOLD AT RATES RANGING FROM $1,043 TO $1,035. MANY OF THE TRADERS LIKE YOU WOULD LIKE TO CLOSE THEIR POSITIONS BEARING THIS LOSS. THUS, HE WOULD BUY 5,000 STOCKS FROM THEM ON RATES RANGING FROM 1,035 TO 1,038 AND EARN A GOOD PROFIT. YOU WOULD INCUR A LOSS OF $5,000 AT THE RATE OF $5 PER STOCK BECAUSE OF YOUR STOP-LOSS GETTING HIT.
PRACTICAL EXERCISE
LOOK FOR A LOW-VOLUME STOCK IN THE MARKET. WATCH ITS MARKET DEPTH. I HAVE TOLD YOU ABOUT MARKET DEPTH. I HAVE TOLD YOU ABOUT MARKET DEPTH UNDER TIP NO. 3. THE MARKET DEPTHS THAT YOU WATCH ON NSE AND BSE WEBSITES ARE GENERALLY NOT REAL-TIME. THEY MAY HAVE A LAG OF FEW SECONDS, BUT MARKET DEPTH CAN BE WATCHED IN ALMOST REAL-TIME ON TRADING PLATFORMS LIKE ZERODHA-KITE.
SUPPOSE, THE STOCK PRICE IS CURRENTLY AT $16.10 AND YOU ARE ABLE TO SEE FOLLOWING IN MARKET-DEPTH:
BUY ORDERS
16.10 - 500 STOCKS
16.05 - 1 STOCK
16.00 - 5 STOCK
15.95 - 8 STOCK
15.90 - 1,000 STOCKS
SALE ORDERS
16.15 - 503 STOCKS
16.20 - 10 STOCKS
16.25 - 15 STOCKS
16.30 - 88 STOCKS
16.35 - 58 STOCKS
TO PERFORM THIS EXERCISE, YOU HAVE TO ENSURE THAT VOLUME IS LOW AND THE ORDERS ARE STANDING STILL FOR QUITE SOME TIME. NOW, IF YOU HAVE ENOUGH FUNS TO BUY @$16.35 ALL THE 674 STOCKS (503+10+15+88+58) AVAILABLE FOR SALE AT RATES RANGING FROM $16.15 TO $16.35, I.E., IF YOU HAVE $16000 AVAILABLE AS MARGIN, YOU MAY JUST PLACE AN ORDER TO BUY 1,000 STOCKS AT MARKET PRICE AND WATCH. YOU WOULD OBSERVE THAT ALL THE ABOVE SALE ORDERS GET TRIGGERED AND THE MARKET PRICE OF THE STOCK GOES UP TO SOMEWHERE AROUND $16.45.
THUS, THE STOCK PRICE CAN BE BROUGHT UP AND DOWN WITH THE HELP OF ANY BIG ORDER, AND THAT'S HOW, BIG TRADERS MAY TRIGGER YOUR STOP-LOSS IN JUST A MINUTE.
PLEASE BE WARNED HERE THAT WHILE DOING THIS EXERCISE, SOME BIG TRADER MAY GO FASTER THAN YOU AND BRING THE PRICE DOWN AGAIN IN SECONDS BY SELLING THEIR STOCKS, RESULTING IN A LOSS FOR YOU. HENCE, YOU SHOULD TAKE UP THIS EXERCISE ONLY WHEN YOU HAVE ENOUGH CAPITAL, YOU HAVE THE CAPACITY TO BEAR THE LOSS IN CASE YOU SUFFER A LOSS AND YOU SHOULD SELECT BEAR THE LOSS IN CASE YOU SUFFER A LOSS AND YOU SHOULD SELECT A STOCK THAT HAS A VERY LOW VOLUME.
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