Module 1   Introduction to Stock MarketsChapter 9

The Trading Terminal

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Ch-9-title

9.1 – Overview

When a market participant wants to transact in the market, he can do so by opting one of the options:

  1. Call the stockbroker, and trade, usually called “Call & Trade.”
  2. Use a web application and the mobile application like Zerodha Kite on a computer browser to access the markets
  3. Use the trading software like Pi

Each of the above methods is a gateway to the exchanges. The gateway allows you to do multiple things such as transacting in shares, tracking your Profit & Loss, tracking market movements, following the news, managing your funds, viewing stock charts, accessing trading tools, etc. This chapter aims to familiarize you with the Kite(or a similar platform) and its interface.

You can access the trading terminal(TT) by simply entering the URL on your browser.  For Zerodha Kite, it is kite.zerodha.com. It is quite a user-friendly interface, as most of its functionalities are menu-driven. To access the trading terminal, you need to have a trading account with your broker.

A good trading terminal offers you numerous useful features. We will start by understanding a few basic features. To keep this chapter as practical as possible, let us set two basic tasks using the trading terminal.

  1. Buy 1 share of ITC, and
  2. Track the price of Infosys

While we achieve the above two tasks, we will also learn about all the relevant concepts. For this chapter, we will be using Zerodha’s web platform ‘Kite.’

9.2 – The login process

The trading terminal is quite sensitive as it contains all your trading account information. To ensure adequate security, brokers usually follow a stringent login process. The process involves entering your password and answering a secret 6-digit PIN for 2 Factor Authentication. Alternatively, you can set a T-OTP for enhanced security. The snapshot below shows this process.

 

9.3 – The Market watch

Once you login to the platform you will have to populate the ‘market watch’ with the stocks you are interested in. Think about the market watch as a blank slate. Once the stock is loaded on the market watch, you can easily transact and query information about it. A blank market watch looks like this (this is also the screen that you see once you log in)

Keeping the first task in mind, we will load ITC Ltd onto the market watch. To do this, we simply have to type in the stock symbol ITC in the search bar, and the drop-down will show the stock in different exchanges(NSE/BSE)

Click on the Add symbol to add the stock to the Market Watch

The Marketwatch will display last traded price, a percentage change of the stock

  • The last traded price of the stock (LTP) – This gives us a sense of how much the stock is trading at the very moment
  • Percentage change – This indicates the percentage points the LTP is varying concerning the previous day close

Some basic information that will be needed at this point would be:

  • The previous day close – At what price did the stock closed the previous day
  • OHLC – Open, High, Low and Close gives us a sense of the range within which the stock is trading during the day
  • Volumes – Gives a sense of how many shares are being traded at a particular point of time

You can find this information under Market Depth. If you hover over the stock name, you will find Buy, Sell, Market Depth and Stock Information. If you click on Marketdepth, you will find the above information and the best bid and ask price ladder. We will be covering Bid and Ask price in the latter part of the Chapter.

As you can see, the last traded price of ITC is Rs.262.25, and it is trading -0.40% lower than the previous day close, which is Rs.263.30. The open for the day was at Rs.265.90, the highest price and the lowest price at which the stock traded for the day was Rs.265.90 and Rs.262.15 respectively. The volume for the day is close to 27 lakh shares.

9.4 – Buying stock through the trading terminal

Our goal is to buy 1 share of ITC. We now have ITC in our trading terminal, and we are convinced that buying ITC at Rs.261, which is roughly Rs.1.25 lesser than the last traded price is a great idea.

The first step for this process would be to invoke what is called a buy order form.

  • Hover over the stock you want to Buy and click on the Buy Icon(B)
  • This will invoke the Buy. When the buy order form is invoked, the following order form will appear on your screen.

The order form is pre-populated with some information like the price and quantity. We need to modify this as per our requirement. Let us begin by the first drop-down option on the top. By default, the exchange specified would be NSE.

The next entry is the ‘order type’. By clicking on the drop-down menu, you will see the following four options:

  • Limit
  • Market
  • SL
  • SL-Market

Let us understand what these options actually mean.

You can opt for a ‘Limit’ order when you are very particular about the price you want to pay for a stock. In our case, the last traded price of ITC is Rs.262.25 but say we want to limit our buy price to Rs.261. In such a situation where we are particular about the price we want to transact in, we can limit order price. If the price does not fall to Rs.261, then you will not get the shares. This is one of the drawbacks of a limit order.

You can also opt for a market order when you intend to buy at market available prices instead of a concrete price that you have in mind. So if you were to place a market order, as long as there are sellers available, your order would go through, and ITC will be bought in the vicinity of Rs.262.25. Suppose the price goes up to Rs.265 coinciding with your market order placement, then you will get ITC at Rs.265. When you place a market order, you will never be sure of the price at which you would transact, which could be quite a dangerous situation if you are an active trader.

A stop-loss order protects you from an adverse movement in the market after initiating a position. Suppose you buy ITC at Rs.262.25 with an expectation that ITC will hit Rs.275 shortly. But instead, what if the price of ITC starts going down? We can first protect ourselves by defining the worst possible loss you are willing to take. For instance, in the example let us assume you don’t want to take a loss beyond Rs.255

This means you have gone long on ITC at Rs.262.25 and the maximum loss you are willing to take on this trade is Rs.6 (255). If the stock price drops down to Rs.255, the stop loss order gets active and hits the exchange, and you will be out of the loss-making position. As long as the price is above 255, the stop-loss order will be dormant.

A stop-loss order is a passive order. To activate it, we need to enter a trigger price. A trigger price, usually above the stop-loss price acts as a price threshold and only after crossing this price the stop-loss order transitions from a passive order to an active order.

Going with the above example:

We are long at Rs.261. In case the trade goes bad, we would want to get rid of the position at Rs.255. Therefore 255 is the stop-loss price. The trigger price is specified so that the stop-loss order would transition from passive to an active order. The trigger price has to be higher/equal than the stop-loss price. We can set this to Rs.255 or higher.  If the price drops below 255, the stop loss order gets active.

Going back to the main buy order entry form, we now move directly to the quantity once the order type is selected. Remember the task is to buy 1 share of ITC; hence we enter 1 in the quantity box. We ignore the trigger price and disclosed quantity for now. The next thing to select would be the product type.

Select CNC for delivery trades. If you intend to buy and hold the shares for multiple days/months/years, you need to ensure the shares reside in your Demat account. Selecting CNC is your way of communicating this to your broker.

Select NRML or MIS if you want to trade intraday. MIS is a margin product; we will understand more about this when we take up the derivatives module.

Once these details are filled in your order form, the order is good to hit the markets. The order gets transmitted to the exchange as soon as you press the submit button on the order form. A unique order ticket number is generated against your order.

Once the order is sent to the exchange, it will not get executed unless the price hits Rs.261. As soon as the price drops to Rs.261 (and assuming sellers are willing to sell 1 share) your order gets through and is eventually executed. As soon as your order is executed, you will own 1 share of ITC.

9.5 – The order book and Trade book

The order book and trade book are two online registers within the trading terminal. The order book keeps track of all the orders you have sent to the exchange, and the trade book tracks all the trades that you have transacted during the day.

The order book has all the details regarding your order. You can navigate to the order book by clicking the Orders tab.

The order book provides the details of the orders you have placed. You should access the order book to:

  • Double-check the order details – quantity, price, order type, product type
  • Modify the orders – For example, if you want to modify the buy order from 332 to 333, you can do so from the order book.
  • Check Status – After you have placed the order, you can check the status of the same. The status would state open if the order is completed partially, it would state completed if the order has been completed, and it would state rejected if your order has been rejected. You can also see the details of the rejection in the order book.

If you notice, there is an open order to buy 1 share of ITC at Rs.261.

If you hover over the pending orders, you can find the option to modify or cancel the order.

By clicking ‘modify’ the order form will be invoked, and you can make the desired changes to the order.

Once the order has been processed, and the trade has been executed, the trade details will be available in the trade book. You can find the trade book just below the order book.

Here is a snapshot of the trade book:

The trade book confirms that the user executed an order to buy 1 share of ITC at Rs 262.2. Also notice a unique exchange order number is generated for the trade.

So with this, our first task is complete!

You now officially own 1 share of ITC. This share will reside in our DEMAT account until you decide to sell it.

The next task is to track the price of Infosys. The first step would be to add Infosys to the market watch. We can do this by searching for Infosys in the search box.

The trading symbol for Infosys is Infy. Once we select Infy, we press Add to add it to the market watch.

We can now track some live information about Infosys. The last trade price is Rs.1014.75; the stock is down -0.11% from its previous days close of Rs.1015.85. Infosys opened the day at Rs.1014.80 made a low of Rs.998.40 and a high of Rs.1028.95. The volumes were 3.6 million shares.

Please note, while the open price will be fixed at Rs. 1014.80 the high and low prices change as and when the price of Infosys changes. For example, if Infosys moves from Rs.1014.2 to Rs.1050, the high price will reflect Rs. 1050 as the new high.

Notice that the LTP of Infosys is highlighted in green and ITC in red. If the current LTP is more than the previous LTP, the cell is highlighted in green else in red.

Have a look at the snapshot below:

The price of Infosys moved from 1014.20 to 1020.80, and the colour changed to red from blue.

Besides the basic information about the LTP, OHLC, and volume, we can also dig deeper to understand the real-time market participation. To see this, we need to invoke what is called a ‘Market Depth’ window also referred to as the snap quote window. As you can see, there is a lot of information in the snap quote window. I specifically want to draw your attention to the blue, and red numbers called the Bid and Ask prices.

You can use a Kite by Zerodha more effectively by going through its user manual.

9.6 – The Bid and Ask Price

If you want to buy a share, you obviously need to buy it from a seller. The seller will sell the shares at a price that he thinks is fair enough. The price that the sellers ask you is called the ‘Ask Price’. The asking price is highlighted in red. Let us analyze this in a bit more detail.

Sl No Ask Price Ask Quantity Number of Sellers
01 3294.80 2 2
02 3294.85 4 2
03 3295.00 8 2
04 3296.20 25 1
05 3296.25 5 1

By default, the snap quote window displays the top 5 bid and asks prices. In the table above we have the top 5 ask prices.

The first ask price is Rs.3294.80. At this particular moment, this is the best price to buy Infosys, and there are only 2 shares available at this price being offered by 2 different sellers (both of them are selling 1 share each). The next best price is Rs.3294.85. At this price, there are 4 shares available being offered by 2 different sellers. The third best price is Rs.3295, at which 8 shares are available, and two sellers offer this price. So on and so forth.

As you notice, the higher the asking price, the lower is the priority. For example, a 5th position is an asking price of Rs.3296.25 for 5 shares. This is because the stock exchanges prioritise sellers willing to sell their shares at the least possible price.

Notice even if you want to buy 10 shares at Rs.3294.8, you can only buy 2 shares because only 2 shares are being offered at Rs.3294.8. However, if you are not particular about the price (aka limit price), you can place a market order. When you place a market order at this stage, this is what happens:

  • 2 shares are bought @ Rs.3294.8
  • 4 shares are bought @ Rs.3294.85
  • 4 shares are bought @ Rs.3295.00

The 10 shares will be bought at three different prices. Also in the process, the LTP of Infosys will jump to Rs.3295 from Rs.3294.8

If you want to sell a share, you obviously need to sell it to a buyer willing to buy it from you. The buyer will buy the shares at a price that he thinks is fair enough. The price that the buyer demands is called the ‘bid price’. The bid price is highlighted in blue. Let us analyze this part in a bit more detail:

Sl No Bid Price Bid Quantity Number of Buyers
01 3294.75 10 5
02 3294.20 6 1
03 3294.15 1 1
04 3293.85 6 1
05 3293.75 125 1

Again by default, the snap quote window displays the top five bid prices. Notice the best price at which you can sell shares is at Rs.3294.75, and at this price you can only sell 10 shares as only 5 buyers are willing to buy from you.

If you were to sell 20 Infosys shares at market price, the following would be the execution pattern :

  • 10 shares sold @ Rs.3294.75
  • 6 shares sold @ Rs.3294.20
  • 1 share sold @ Rs.3294.15
  • 3 shares sold @ Rs.3293.85

So in essence, the bid and ask prices give you information about the top 5 prices at which the buyers and sellers are stacked up. You need to understand how the buyers and sellers place their trades, especially if you are an intraday trader.

9.7 – Conclusion

The trading terminal is your gateway to markets. The trading terminal has many features that are useful to traders. We will explore these features as we progress through the various learning modules. For now, you should be in a position to understand how to set up a market watch, transact (buy and sell) in stocks, view the order and trade book, and understand the market depth window.


Key takeaways from this chapter

  1. A trading terminal is your gateway to markets. You must know the operations of a trading terminal if you aspire to become an active trader.
  2. You can load the stock you are interested in on the market watch to track all the relevant information.
  3. Some of the basic information on a market watch is – LTP, % change, OHLC, and volumes.
  4. To buy a stock, you need to invoke a buy order form by pressing ‘B’ key. Likewise, to sell a stock you need to invoke a sell order form by pressing ‘S’ key.
  5. You choose a limit order type when you are keen on transacting at a particular price; else you can opt for a market order.
  6. You choose CNC as product type if you want to buy and hold the stock across multiple days. If you want to trade intraday, you choose NRML or MIS.
  7. An order book lets you track orders that are both open and completed. You can modify the open orders by clicking on the modify button at the order book’s bottom.
  8. Once the order is completed, you can view the trade details in the trade book. In the case of a market order, you can view the exact trade price by accessing the trade book.
  9. You can press the F6 key to invoke the market depth or snap quote window. The market watch enables you to see bid and ask prices.
  10. The bid & ask prices refer to the price at which you can transact. By default, the top 5 bid and ask prices are displayed in the market depth window at all times.

1,047 comments

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  1. Surya says:

    Suppose we decide the product type to be CNC while placing a bid and the trade gets executed. Can we sell the share during the same day if we want to?

  2. Tukka Guru says:

    Can you please expand the acronyms? What is CNC, MIS or NRML? Do other brokers also use these terms? I came to zerodha after using ICICIDIRECT and feel confused

    • Karthik Rangappa says:

      CNC = Cash and Carry. We use this order type when dealing with delivery trades.
      MIS = Margin order, used when the trader intends to do an intra day trade. Higher leverage is provided/
      NRML = Normal margin order, used when we want to carry forward a derivative trade
      BO = Bracket Order (Intra day order type), trader has to specify his target and stop loss price
      CO = Cover Order (Intra day order type), trader has to specify stop loss price

      All Intra day orders needs to be squared off by 3:20 PM.

      Almost all brokers provide these order types, however the naming convention may vary a bit. I’m sure you will get used to it soon 🙂

  3. Aravind says:

    When is the payment to be made? Is it after the trade or when I place the order?

    • Karthik Rangappa says:

      For the order to go through there has to be sufficient funds, so in a sense you need the funds before your trade can go through.

      • Aravind says:

        Suppose if I have adequate securities in my DP A/c, can I buy for delivery and pay on T plus 1 basis. ( Can I get exposure ?)

        • Karthik Rangappa says:

          I’m afraid that is not possible, at least with Zerodha.

          • tarujit nandy says:

            i know full service broker like reliance securities get leaverage delivery position upto 50 percent.. if i have 50k then i can buy 1 lakh share..upto till 5 days and then it will be cut of automatically or i can sell them or syestem sell them ,, so my question is why discount broker not get this advantage?

          • Karthik Rangappa says:

            Ah yes, this is T+5 settlement. Its been on our list of things to do. Hopefully sometime soon.

  4. prakashbabu says:

    Do I need to provide topless and trigger price when I trade in MIS and is it important to square off my position afterwards

    • Hanan Delvi says:

      Whenever you trade in MIS, you get additional leverage than what is normally provided which means that your positions cannot be carried forward to the next day. It would be nice for you to have a stoploss and/or target to avoid missing out, but it’s not necessary because all MIS positions will be squared off end of day.

  5. prakashbabu says:

    Kindly tell how to place a stpploss and trigger price when I trade in SL-Limit and in SL-Market. What is IOC and Day seen when I see in buying or selling screen.

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