Placing orders on the trading system
For both the futures and the options market, while entering orders on the trading system, members are required to identify orders as being proprietary or client orders. Proprietary orders should be identified as ‘Pro’ and those of clients should be identified as ‘Cli’. Apart from this, in the case of ‘Cli’ trades, the client account number should also be provided.
Limit Order: A limit order is an order to buy or sell a security at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. Example: An investor wants to purchase shares of ABC stock for not more than Rs.25.00 The investor could submit a limit order for this amount and this order will only execute if the price of ABC stock is Rs. 25.00 or lower
Market Order: A market order is an order to buy or sell a security immediately. This type of order guarantees that the order will be executed, but does not guarantee the execution price. A market order generally will execute at or near the current bid (for a sell order) or ask (for a buy order) price. However, it is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed.
Stop Loss order, also referred to as a stop order is an order to buy or sell a stock once the price of the stock reaches the specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order.
Stop loss buy order is entered at a stop price above the current market price. Investors generally use a buy stop order to limit a loss or protect a profit on a stock that they have sold short. A stop loss sell order is entered at a stop price below the current market price. Investors generally use a sell stop order to limit a loss or protect a profit on a stock they own.
The futures market is a zero sum game i.e. the total number of long in any contract always equals the total number of short in any contract. The total number of outstanding contracts in a particular counter or index (long/short) at any point in time is called the “Open interest”. This Open interest figure is a good indicator of the liquidity in every contract. Based on studies carried out in international exchanges, it is found that open interest is maximum in near month expiry contracts compare to far month contract.
AS Chakravarthy NCFM Hyderabad : Stock Market Training Institute