Introduction to Trading Terminal

-Karthik Rangappa

-Partner, Prakar Capital

-http://www.prakarcapital.com

Contact details

You can meet me on Tuesdays and Thursdays

Time : 8.30AM to 4.30 PM

Email : Karthik.rangappa@prakarcapital.com

Learning Pathway

At the end of this presentation you should be able to…

Understand the market eco system

Setup a market watch – load preferred securities

Understand variables of trade –Volume, ATP, VWAP etc..

Place different types of orders – Limit, SL, market etc

Extract live information from the markets – as and

when the market moves

Export data to excel

Bloomberg Professional – Most

Preferred by IB’s

What is a Trading Terminal?

Interface to access the market - Facilitates to get quotes, place buy and sell orders, run a market enquiry etc.

A trading terminal can be set up to access any market be it equity, commodity, forex or fixed income markets.

Why do we need a Trading Terminal ?

Performs all the functions of a traditional broker.

TT eliminates the need for you to call a broker – Broker mayhave a biased opinion on a stock. The broker may also have avested interest in a particular stock. Hence a TT keeps youaway from your worst enemy in the market.

Gives you access to important news and corporate actions ona real time basis

Gives your charting options to visualize the historical pricebehavior.

As long as you have a reliable internet connection, TT allowsyou to trade from any remote place – it could even be from a

remote shack in Goa!!

Types of Trading Terminals

Web Based – A typical online application where you login to your broker’s website and access the markets.

Designed for not-so-frequent trader.

Has a restriction on the number of stocks you can load under your watch list

Speed can be an issue

Is not very robust.

Types of Trading Terminal contd…

Software Based - Here you need to download a software from your brokers server.

This software resides in your system

Whenever you login to this software, you get access to seamless data from the markets

Is very robust, lets you load upto 200 stocks in your watch list

Can integrate various markets – NSE, MCX etc

Has advanced features such as position conversion, order modification, online charting, panic withdrawal etc.

Popular software in India – NSE’s NOW and FT’s ODIN

Visualizing the TT

Markets – NSE, BSE, MCX, NCDEX etc

MOSL BMASharekhan

Your Broker

(ICICI)TT

Your

Comp

uter

Users Users Users

Getting to know the Trading

Terminal

The login Screen

Each client is given a unique login ID which the client has to use in order to login to the terminal

Ex of a typical login ID : 85300043 – here the first 3 digits represents the branch ID, and the last 5 digits represents the client code.

As per the SEBI’s mandate the password has to be an alpha numeric combination.

SEBI has made it mandatory for users to change the password once in every 14 trading days.

It is essential to check the required market fields in the login screen to update the latest stock listing, FNO margins, lot sizes etc.

Setting up the market watch (MW)

A market watch is simply the list of securities you wish to track.

BSE and NSE together has over 7000 listed securities. Hence a market watch makes your job simpler by displaying the latest traded price along with other information for only the stocks you are interested in.

You can have multiple watch list – For example a market watch for only large cap securities, a MW for mid cap stocks and a MW for indexes.

Loading the MW…

A new market watch has to be loaded with securities.

A security is identified by it’s NSE code. For example SBI’s code is SBIN, Tata Consultancy Services’s code is TCS etc.

Besides the NSE’s code for the company, each broker may wish to identify the same securities with their own code.

If you are uncertain about the code, you can search for the company’s code using the Trading Terminal’s search option

Loading the MW Contd…

Once the security’s code is identified, we have to specify the series..

A series is nothing but the market segment. For example EQ stands for Equity market segment, AU for Auction Market segment etc..

Further, we load the market watch with all the essential ingredients that are required for decision making which will eventually boil down to either a Buy or a Sell.

Open-High-Low-Close (OHLC)

The first set of information a seasoned trader wouldseek from his MW would be the price details of open,high, low and close

Open Price is the price at which the first order matchinghappens and a trade is struck. For a Nifty 50 stocks,there is a pre open session which starts at 9.00AM andend at 9.08AM. For all other stocks, Open is at 9.15AM

High price is the highest price point at which the tradehas happened for the day

Low is the lowest price point at which the trade hashappened for the day

Close is the closing price at which the stock has closedfor the day.

Closing Prices…a bit in detail

Unlike the closing prices, open, high and low prices are printed on a real time basis.

NSE takes the last 30 minutes trade details to arrive at the closing price of the day. This is to ensure that the stock price is not subjected to manipulation.

NSE takes the last 30 minutes (between 3.00PM to 3.30PM) weighted average to arrive at the closing prices.

Last traded price ( LTP)

Last Traded price is the most recent price at which the security has been traded in the market.

For highly liquid stocks or commodities, LTP changes every second.

Volume weighted average traded

price (VWAP) This is perhaps one of the most crucial price

information for a trader. Gives the trader a sense of trading action that is spanning out on a real time basis

VWAP is calculated on a running basis, and is got by dividing the total traded value by the volumes.

By the end of the day, the value is reset to zero, the next trading day has a new VWAP running…although we can have a historical VWAP running.

Volumes…

The number of shares or contracts traded in a security or an entiremarket during a given period of time. It is simply the amount ofshares that trade hands from sellers to buyers as a measure ofactivity.

If a buyer of a stock purchases 100 shares from a seller, then thevolume for that period increases by 100 shares based on thattransaction.

Volume is an important indicator in technical analysis as it is usedto measure the worth of a market move. If the markets have madestrong price move either up or down the perceived strength of thatmove depends on the volume for that period. The higher thevolume during that price move the more significant the move.

Last updated time…

In markets…5 seconds is long period!!

For a highly liquid counter, the prices get updated every second.

Usually, there is a 5 sec delay from the brokers server to your computer , this delay is called the refresh rate

Great trading opportunities can be identified if you have the infrastructure to access markets with a lower refresh rate.

Hedge Funds pay huge amounts to exchanges just to place their servers next to the exchange’s server in order to have a lower refresh rate…this is called Co-location.

Previous day close..

Previous day close is simply the previous trading sessions close price.

Gives you a perspective on whether the market or the stock has gone up or down with respect to the previous day’s price action

Percentage change

Percentage change is the percentage change in the stock/market with respect to the previous day’s close.

A positive percentage indicates that the stock has added positive gains for the day

A negative percentage indicates that the market/stock has generated negative returns for the day

MW for derivative contracts

When loading the derivatives contracts, we need specify the following…

Expiry date for both options and futures

Option type – Call option and Put option

Fair value

Strike price of the option contract

Open Interest

Open Interest…a bit in detail

Open Interest is the total number of outstanding contracts that are held by market participants at a particular point of time.

It can also be defined as the total number of futures contracts or option contracts that have not yet been exercised (squared off), expired, or fulfilled by delivery.

Open interest applies primarily to the futures market. Open interest, or the total number of open contracts on a security, is often used to confirm trends and trend reversals for futures and options contracts.

For each seller of a futures contract there must be a buyer of that contract. Thus a seller and a buyer combine to create only one contract.

Therefore, to determine the total open interest for any given market we need only to know the totals from one side or the other, buyers or sellers, not the sum of both.

Buy Order (F1)

To buy a security (also called as ‘Going Long’) we can either right click on the highlighted security and opt for the Buy option or simply press F1 on the highlighted security.

Either of the above choices would lead us to a “Buy Order Form” –usually colored in blue.

Since the security has been highlighted, by default, the security name and series would be filled in the order form

In the Buy order form, we have to fill out the following details for the order to go through..

Price

Quantity

Disclosed quantity

Product type – Delivery or Intraday

Order type – SL, market order, limit order, IOC

Client type – Pro/Cli

Disclosed Quantity

Disclosed Quantity allows the Investor to disclose only a part of his order quantity to the market.

For example, an order of 1000 with a disclosed quantity condition of 200 will mean that only 200 is displayed to the market at a time. After this is traded, another 200 is automatically released and so on till the full order is executed. Exchange may set minimum disclosed quantity criteria from time to time.

Product Type

Delivery – Suppose you wish to take the delivery of the stock, then you need to specify the ‘Delivery’ option under the product type.

A delivery trade takes T+2 days to settle.

Even if you opt to do a BTST trade, the product type should be specified as Delivery.

If you have intraday trade in perspective, then you need to opt for ‘Intraday or Margin’ in your product type.

Please note, if you forget to square off your intraday position then all intraday trades will be auto squared off by your broker anytime between 2.50 pm to 3.15 pm.

Types of Order

Market Order - An order to buy or sell a stock immediately at thebest available current price. A market order is sometimes referredto as an "unrestricted order". A market order guaranteesexecution, however if you place a market order on illiquid stocks,you may end up paying a price for it.

Limit Order - An order placed with a brokerage to buy or sell a setnumber of shares at a specified price or better. Limit orders arebeneficial because when the trade goes through, investors get thespecified purchase or sell price. Limit orders are especially usefulon a low-volume or highly volatile stock. However, unlike a market

order there is no execution guarantee.

Types of Order contd…

Stop Loss order - An order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor's loss or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.

Stops are not a 100% guarantee of getting the desired entry/exit points. For instance, if a stock gaps down, the trader's stop order will be triggered (or filled) at a price significantly lower than expected.

Immediate or cancel (IOC) - An order to buy or sell a security or derivative,usually in large quantities, in which investors have a short period of timeto partially or completely fulfill the order before it is cancelled. An IOC maybe considered the opposite of a good 'til cancelled (GTC) order; it differsfrom a fill-or-kill (FOK) order because an IOC may only be partially filled,while an FOK must be entirely filled or the whole offer is void. An IOC isconsidered a type of day order, but has a much shorter time frame.

Client Type

Prop – All proprietary trading, under the books of the broker has to be specified to the exchange by choosing ‘Pro’.

All client orders, has to be specified by choosing ‘Cli’.

Sell order – F2

To sell a security (also called as ‘Going short’) we can either right click on the highlighted security and opt for the sell option or simply press F2 on the highlighted security.

Either of the above choices would lead us to a “Sell Order Form” – usually colored in red.

Since the security has already been highlighted, by default, the security name and series would be filled in

the order form

Market Depth (F6)

Market Depth helps in understanding the depth of aparticular scrip in terms of the following…

Best 5 Buy orders with respect to the quantity and price (Bid).

Best 5 Sell Orders with respect to the quantity and price (Ask)

Total Traded Quantity,

Last Traded Quantity,

Last Traded Price,

Total Traded Value, etc.

A market Depth window can be invoked by doubleclicking on the Market Watch window or by Pressing F6.

Bid

An offer made by an investor, a trader or a dealer to buy a security.The bid will stipulate both the price at which the buyer is willing topurchase the security and the quantity to be purchased.

An example of a bid in the market would be to buy NilkamalIndustries Ltd at Rs.417 x 1,000, which means that an investor iswilling to purchase 1,000 shares at the price of Rs.417/- .

If a seller in the market is willing to sell that amount for that price,then the transaction is completed.

A market depth window displays the best 5 bids for the givensecurity.

Ask

The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price.

This is the opposite of bid, which is the price a buyer is willing to pay for a security, and the ask will always be higher than the bid.

An example of an ask in the stock market would be to sell Nilkamal Industries Ltd at Rs.422 x 1,000 which means that someone is offering to sell 1,000 shares for Rs.422/-.

The market watch window displays the best 5 Ask price for the specified security.

Market Depth … other details

Total Traded Quantity (volume)– Gives a picture on the number of stocks being traded. For a futures contracts, we would get the total number of contracts being traded at that instance.

Total Traded value – Gives the total value of the stock being traded. This is the product of the last traded price and the total traded quantity

52 week high and low – Gives information on the yearly high and low prices.

OHLC – Gives the OHLC details on a intra day basis

Order Book (F3)

An order book lets you view all the orders in the system that are pending or executed.

We can review the pending order - check for price, quantity, product type, order type etc using the order book

We can right click on the pending order and select ‘modify’ to change the order if we wish to. Further we can also select the cancel option if we wish to cancel any pending order.

The orders are color coded. For example a pending order is colored brown and once it is executed, the color changes to red.

Trade Book (F8)

A trade book lets you review all the trades done for the given day

We can get to see the exchange reference number for the trade that has been executed

If the order type is ‘Market’, there is always a possibility for the order to get split into several orders based on the liquidity

In such a situation, we can view ‘how many shares at what price’ has been traded.

If the trade has been split up, we can also see the average traded price of the specific buy/sell order.

Open Positions (Alt+F6)

If you are active trader and have several positions running, you can check for open positions by pressing Alt+F6

Gives you the net long and net short details

Gives you the P&L figure on a per trade basis

Gives you the P&L figure of the trade book ( inclusive of net long and short positions)

Bulk Order

There are two type of bulk order – Multiple clients and multiple stocks

In multiple client bulk order, you choose the same security and buy/sell different quantities of the security across different clients. You have the option to set the order type etc.

In a multiple stock bulk order you can buy different securities for the same client at the press of button.

In either cases, you need to prepare a bulk order file and upload it on to the software.

Panic Withdrawal (Ctrl+Z)

In case of a steep market fall or rise, we can use the option of panic withdrawal to square off all the orders.

We can invoke the panic withdrawal by pressing crtl+z.

Once we opt for panic withdrawal, all order would by default go as a market order

We do have a risk of getting very low prices if we are selling and high prices if we are buying.

Is very useful in a state of panic in the market

Refresh Broadcast

In case of an interest snag, the software may hang and the quote can stop streaming

We can identify this situation by monitoring the last updated time

We have the option to re link to the brokers

server by clicking on ‘Refresh broadcast’

Setting Alerts

We may be interested in a particular stock at a particular price

The TT lets you set an alert when a particular price event is triggered

A typical price event could be a breech of a 200 day moving average, a breach above a resistance zone.

However, these price points are to be entered by the user as the TT wont be able to recognize events.

Based on the alert, you can either choose to buy or sell a stock.

Intraday Charting

Most of the TT allows you to watch the intraday chart of the given security or index

All chart types are available – candlesticks, line chart and bar chart

Basic technical indicators can be plotted

Various time scale is available – tick chart, 5 minute, 10 mins etc..

However, intraday studies cant be saved at the end of day

Right click and select the intraday chart to see the intraday chart.

Thank you!

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