Zerodha i3 – Execution based Algorithms

June 3, 2013
Zerodha i3

Introduction

Overview

Algo trading have become such a common feature in the trading landscape that it is unthinkable for a broker not to offer them to their clients because that is what clients demand. These algorithms analyze every quote and trade in the stock market, identify liquidity opportunities and turn the information into intelligent trading decisions.

So far only Buy side Institutions, Hedge funds and sell side proprietary traders had the privilege of using the algorithms for trading purpose and had an advantage when compared to those who didn’t . But with the introduction of ” Zerodha Nest I3″ the scenario will be changed immensely. Zerodha Nest i3 will give equal advantage to both institutional traders as well as retail traders .

Why opt for Zerodha Nest i3?

Traders who are first to innovate can get significant advantage over their competitors, especially when the algorithms address unique strategies. This is what ” Zerodha Nest i3″ serves to their clients. Zerodha has always been at the fore front of providing its customers both retail and institutions, the cutting edge of technology innovations. “Zerodha Nest i3” is one more milestone in this journey and we are confident that by using this unique tool you will be able to configure and roll out a wide range of sophisticated algorithms with ease and in quick time.

Zerodha Nest i3 aids traders by breaking their large orders into smaller chunks using a pool of algorithms made available to them . Hence it allows the clients to disguise their orders and participate in a stock’s trading volume across an entire day or for a few hours. The selection of algorithms depends on the traders objective, how aggressive they want to be and constraints such as order size, order price , order type, liquidity and volatility of the stock .

What is Zerodha Nest i3?

Zerodha Nest i3 is a comprehensive tool with a predefined set of highly sophisticated and comprehensive algorithms. The core idea behind Zerodha Nest i3 is to provide a pool of already predefined algorithms which suits the customer’s requirements. He/she can then choose from these wide variety of algorithms that suits their requirement to execute their orders with ease and in the most efficient manner, in short span of time .

Advantages of Zerodha Nest i3?

  1. Wide variety of Complex algorithms are provided which include algorithms like Iceberg, TWAP, Scale, Percentage of Volume etc.
  2. Highly sophisticated and comprehensive algorithms
  3. Low cost of ownership
  4. Less time to market

 

Zerodha Nest i3 algorithms – What and When to use it ?

Iceberg:

The iceberg algorithm is ideal for trading large order quantities in illiquid instruments where time duration is of no importance. Iceberg algorithm posts small orders into the market while holding the balance to optimize price and size of various orders while keeping in synchronization with each tick in the market.

For ex: if the users wants to buy 10000 shares of Nestle, a scrip which is very illiquid. In thisScenario iceberg algo would be the best suited algo to be used. The user can enter the display size as 100. The algo will then place only 100 shares in the market at any point and only once these 100 shares are traded, it will then send the next 100 shares to the market till the entire quantity is completed.

Volume Based Participation:

The Volume Based participation algorithm is best suited for liquid situation, where trading volumes are in line with the market activity.

For ex: if the users wants to buy 10000 shares of ICICI Bank, a scrip which is liquid but would never want to place quantities more than 20% of the volume happening in the market at any given point. Then volume based participation algorithm is the one. The user can mention the percentage = 20%, whenever there is a volume change say 10,000 volume happened in the market. Then the algo will place 2000 qty at once.This goes on until the whole order quantity is placed.

Time Based Order Slicing:

The Time Based Order Slicing algorithm is useful for trading an order over a set time and trades at a constant rate over the specified duration, slicing the order into smaller portions spread over the defined duration. Limit and volume caps can be applied to minimize impact. TWAP algos are best suited when there is liquidity in the market, when the user wants give aneven exposure over a chosen period and when the volume patterns are uncertain.

For ex: if the users wants to buy 10000 shares of SBI, a scrip which is liquid but would want to place orders evenly over a specified period say 1 hour to ensure better average price then, TWAP algo would be the best suited algo to be used. The user can enter the start time = 10:00 AM and the end time = 11:00 AM. The algo will then slice the quantity based on the period specified and will make sure that even quantities are placed in the market at any given point. TWAP ensures that all the quantities are placed within the time frame mentioned and meanwhile maintain a better average price.

Sweep-to-Fill:

The Sweep-to-Fill algorithm is ideal for illiquid instruments .The algorithm removes portions of liquidity as and when it is available in the market. The algorithm is a liquidity capturing algorithm which in turn gives precedence to speed of execution over price.

For ex: if the users wants to buy 1000 shares of Aditya Birla Money, a scrip which is illiquid. The user wants to grab whatever opportunity is available in the market as and when it comes. In such scenarios Sweep to fill will be the best algo to be used. If there is any liquidity available say 500 qty , the algo will go and fetch 500 qty at once. Hence giving an advantage to those whose use sweep to fill when compared to others who don’t. This goes on until the whole 1000 shares have been filled.

Scale:

The scale algorithm is ideally used when the user wants to scale large orders into smaller portions based on the input parameters specified by the trader. Hence ensuring larger sized trades from increasingly deteriorating prices.

For ex: The user wants to buy 10000 shares of BHEL, but within the scale of 101.00(Limit Price) and 100.00 (base Price) and with a spread of 50 paisa. In such scenario the best algo to be used is Scale Algo. The algo will scale the orders into 2 components of 5000 qty each.The first orders for 5000 qty will be placed at the limit price i.e: 101.00 RS and the second order for 5000 qty will be submitted at 0.50 Rs lower i.e: at 100.50 Rs. Both these orders will be submitted at once in the market.

Active Relative:

The Active Relative algorithm is ideal for users who seek a more aggressive price than the best bid and offer price . The algorithm slices the order into smaller portions spread over the defined duration.The algorithm makes sure that the order price is automatically adjusted as the market moves to keep the order more aggressive.

For ex: If the users wants to buy 10000 shares of Reliance, a scrip which is liquid but would want to place orders evenly over a specified period say 1 hour to ensure better average price and be aggressive at the same time then, Active Relative algo would be the best choice for such users.The user can enter the start time= 10:00 AM, end time = 11:00 AM and the offset=5 paisa(active). The algo will then slice the quantity based on the period specified and will make sure that even quantities are placed in the market at any given point at best bid price +offset.Active Relative ensures that all the quantities are placed within the time frame mentioned and meanwhile maintain a better average price.

Passive Relative:

The Passive Relative algorithm is ideal for users who seek a less aggressive price than the best bid and offer price . The algorithm slices the order into smaller portions spread over the defined duration. The algorithm makes sure that the order price is automatically adjusted as the market moves to keep the order less aggressive.

For ex: If the users wants to buy 10000 shares of Infosys, a scrip which is liquid but would want to place orders evenly over a specified period say 1 hour to ensure better average price and be less aggressive/passive at the same time then, Passive Relative algo would be the best choice for such users. The user can enter the start time= 11:00 AM, end time = 12:00 PM and an offset= 5 paisa(Passive). The algo will then slice the quantity based on the period specified and will make sure that even quantities are placed in the market at any given point at best bid price – offset price.Passive Relative ensures that all the quantities are placed within the time frame mentioned and meanwhile maintain a better average price.

Pegged to Market:

The Pegged to Market algorithm is suitable for passive and low-impact trading, when there is no urgency in executing the order. The algorithm follows market movements, pegging orders to bid or offer based on the user input parameters, there by facilitating passive executions.

For ex: If the users wants to buy 1000 shares of Aditya Birla Money, a scrip which is less liquid . The user wants to grab whatever opportunity is available in the market as and when it comes by placing limit order. In such scenarios Pegged to Market will be the best algo to be used, if there is any liquidity available say 500 qty is available in the market, the algo will go and fetch 500 qty at once. If 400 qty got fetched and 100 is still remaining, then the algo will continuously modify the order to the best ask price until the order gets filled and cancelled.

Midpoint Match:

The Midpoint Match algorithm is ideal for users who would want to execute the orders at the midpoint price . The algorithm slices the order into smaller portions spread over the defined duration.

For ex: If the users wants to buy 10000 shares of DLF, a scrip which is liquid but would want to place orders evenly over a specified period say 1 hour and wants to execute the orders at the Mid Point price. In such case Midpoint Match algorithm would be the best choice for users. The user can enter the start time= 11:00 AM, end time = 12:00.The algo will then slice the quantity based on the period specified and will make sure that even quantities are placed in the market at any given point at Mid Point price.Midpoint Match algorithm ensures that all the quantities are placed within the time frame mentioned and meanwhile maintain a better average price.

Market-if-Touched:

A Market if Touched algorithm allows users to purchase or sell a security at a desired value,without actively monitoring the market. It’s a conditional order that becomes a market order when a security reaches a specified price. A buy market if touched order looks for the price of a security to fall and vice versa. In case of Market touched order if the price is touched, the order becomes a market order and the order will get filled.

For ex: A trader places an Market If Touched order to sell 100 qty of Reliance at 100.00 Rs.The trader feels that the market could reverse quickly at this price. Once the market trades up to 100.00 Rs the market if touched orders is activated and it is filled at the current market price.

Limit-if-Touched:

The Limit-if-touched algorithm is used by the traders to buy the scrips when the prices fall or sell when the prices rise to the given touch prices .The algorithm holds the orders until the trigger price is touched, only then the algorithm will send out the orders as a Limit order.

For ex: A trader places an Limit If Touched order to sell 100 qty of Reliance at 100.00 Rs.he trader feels that the market could reverse quickly at this price.Once the market trades up to 100.00 Rs the limit if touched orders is activated and places a limit order for 100 qty at the limit price mentioned i.e: 100.00 Rs.

Discretionary Order:

The Discretionary Order algorithm is ideal for aggressive liquidity taking executions where sizable liquidity appears sporadically. The Discretionary strategy submits a passive limit order in the market with an aggressive component that captures liquidity to the Discretion percentage mentioned. The Discretionary strategy is a passive strategy that turns aggressive if sufficient volume exists within a specified price range from the limit price.

For ex: If the users wants to buy 1000 shares of TCS with a discretion percentage of 10%,and the user wants to grab whatever opportunity is available in the market within the”discretionary range” thus calculated based on the discretion percentage and the limit price mentioned by the user say 100.0 Rs. . In such scenarios Discretionary Order will be the best algo to be used ,i.e:if there is any liquidity available in the market for 500 qty at 101.00 which is within the discretion range of 100.00 to 101.00 ,the algo will go and fetch these 500qty at once by placing a Limit IOC order at the same time the algo will place an order at the bid side at the best bid price( the qty placed will be 20% of the total order qty mentioned by the user) .Hence the discretion order algo will place 2 orders, one limit order at the bid side at the best bid price for qty same as 20 % of the total order qty and the second order will be limit IOC for Qty same as that of the liquidity available against best ask price. The algo keeps on placing orders whenever the liquidity is available until the whole 1000 shares have been filled.

Bracket Order:

Bracket Orders are designed for the traders who want to limit their loss as well as lock in profit at the same time . Bracket Order Algorithm are best suited for such type of traders. The Bracket order algorithm will limit loss and lock in profit by “bracketing” an order with two opposite-side orders.

For ex: If the user wants to manage his risk and lock in a profit on an order that has yet to execute in and effective manner then he can go for Bracket orders.Suppose In this example, user want to buy 100 shares of Reliance at 100.00 . The user wants to make 5 tick profit and suffer no more than a 5 tick loss. Once the buy order for 100 qty is filled or partially filled , a limit order to sell at 100.25 will be placed along with a stop loss sell order at 99.75. If one of those orders is filled, then the other order is automatically cancelled.

Trailing Stop (Limit) Order:

Trailing Stop Limit order algorithm allows the user to let profits run while cutting losses at the same time. Trailing stop limit order algorithm will place two orders. The first order will be a “limit order” and the second order will be an opposite order.

For ex: If the user wants to cut loss and lets profit run then Trailing stop (limit) order is the best choice . Suppose in this example user want to buy 100 shares of Reliance at 100.00 . and does not want to suffer loss no more than 5 ticks, hence cut loss by placing an opposite Trailing stop loss sell order with trigger price 5 (tick) i.e 99.75 with trailing offset as 1(tick).Once the buy limit order for 100 qty is filled or partially filled , a trailing stop loss sell order is placed at the trigger price of 99.75. Whenever the LTP of the corresponding scrip increases the trigger price is also increased by the same amount. When the trigger price is hit , the algo will then place a limit order with order price as the Last traded price.

Trailing Stop (Market) Order:

Trailing Stop Market order algorithm allows the user to let profits run while cutting losses at the same time. Trailing stop market order algorithm will place two orders the first order will be a ” market order” and the second order will be an opposite order.

For ex: If the user wants to cut loss and lets profit run then Trailing stop (Market) order is the best choice . Suppose in this example user want to buy 100 shares of Reliance at 100.00 .and does not want to suffer loss no more than 5 ticks, hence cut loss by placing an opposite Trailing stop loss sell order with trigger price 5 (tick) i.e 99.75 with trailing offset as 1(tick). Once the buy market order for 100 qty is filled or partially filled , a trailing stop loss sell order is placed at the trigger price of 99.75. Whenever the LTP of the corresponding scrip increases the trigger price is also increased by the same amount.When the trigger price is hit , the algo will then place a limit order with order price as the Last traded price.

 

Brief Description on Strategies of Zerodha Nest i3

Segments: These strategies are applicable in Cash (NSE), Futures and Options (NFO) and Currency Derivative segment (CDS).

Iceberg

Iceberg algorithm posts small orders into market while holding the balance to optimize price and size of various orders while keeping in synchronization with each tick in the market.Once the previous posted orders are executed they are replaced with the next chunk of orders of the same size as that of the previous one. The iceberg algorithm is suitable for trading large order quantities where duration is of no importance. The below screenshot will get displayed for placing the “Iceberg” Algorithm.

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Iceberg User Interface

Example

Buy 10000 Nestle Industries at 120.00 showing 100 at a time, good for the day.

The iceberg will place one order with 100 quantity in the market, once all these quantities are traded only then next child order for the same quantity i.e: 100 will be placed in the market.This goes on till all the 10000 quantity has been traded.

Volume Based Participation

Volume based participation executes in line with prevailing volume at a target participation rate until the order is completed. The algorithm is used to trade up to the order quantity using a rate of execution that is in proportion to the actual volume trading in the market. If the trader wants to trade not more than one third of the market volume, then Volume based participation is the ideal algorithm to be used. The below screenshot will get displayed for placing “Volume based participation” Algorithm.

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Volume Based Participation User Interface

Example

Buy 10000 Nestle Industries at 120.00 and not more than that, participating at 20% of themarket volume.

The Volume Based Participation tracks the real time market volume and tries to match thetarget participation rate given by the user in this case its 20%.When ever there is a volume change for example 10000 quantity the Volume Based Participation will place 20 %of the market volume i.e: 20 % of 10000 = 2000 qty in the market at once . So on and so forthuntil all the 10000 quantities has been filled.

Time Based Order Slicing

Timer based order slicing algorithm executes an order using time linear slicing. Timer based order slicing slices the orders in equal proportions across the specified time frame.Hence this algorithm will define the slice fixed quantity of order over a specified period of time which algorithm will place in the market.The below screenshot get displayed to the user for placing “timer based order slicing”.

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Time Based Order Slicing User Interface

Example

User buys 10000 quantities of SBI Industries at 120.00 between 10:00 am and 11:00 am.

The Time Based Order Slicing will slice the order quantity given i.e. 10000 quantitiesequally between the start time given 10:00 am and the end time given 11:00 am.The Time Based Order Slicing will place 359 orders from 10:00 am to 11:00 am , each orderwill have 27 or 28 qty each. Hence the algo will evenly distribute the order qty across thespecified time frame.

Sweep-to-Fill

Sweep-to-Fill algorithm is a liquidity capturing algorithm which in turn gives precedence to speed of execution over price. The algorithm removes portions of liquidity as and when it is available in the market i.e.: it identifies the best price available in the market and the quantity available against that price and sends out the exact portion of the order for immediate execution.The below screenshot will get displays the user for placing the”Sweep to Fill” Algorithm.

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Sweep to Fill User Interface

Example

User buys 10000 quantities of Aditya Birla Money Industries at 120.00.

The Sweep to Fill will continuously hit the market with the order quantity same as thequantity available against the best ask price. This process goes on until the whole orderquantity mentioned is filled or cancelled.

Scale

Scale algorithm uses price, upper limit and lower limit specified to automatically scale largeorders into smaller portions and send these as limit orders. The algorithm will slice theorders to be placed based on the spread difference. Once the quantity to be placed has been calculatedit will place all the orders as limit orders at once. Hence ensures that larger sizedtrades are not subject to increasingly deteriorating prices. The below screenshot will getdisplays to the user interface for placing the “Scale” Algorithm.

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Scale User Interface

Example

User Buy 10000 BHEL at the Limit Price = 101.00 or better, base price = 100.00 and pricespread = 50 paisa (0.50), Day order.

The Scale will place two orders as limit orders with 5000 quantity each with the pricedifference of 50 paisa as shown below.

5000 @ 101.00

5000 @ 100.50

Note: Both the orders will be placed at once with a difference of 50 paisa each.

Active Relative

Active Relative algorithm is used when the user seeks a more aggressive price than the best bid and offer price. The algorithm slices the orders based on time linear slicing and while placing the orders the algorithm will place more aggressive bids and offers than the current best bids and offers.The order price is automatically adjusted as the market moves to keep the orders more aggressive.The below screenshot will get displays the user for placing the”Active Relative” algorithm.

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Active Relative User Interface

Example

Buy 100 TCS Industries at 120.00 between 10:00 am and 15:00 am, with the offset given as10 paisa.

The Active Relative will slice the order quantity given i.e.: 100 quantity equally between thestart time given 10:00 am and the end time given 15:00 am. But while placing the ordersthe Active relative will consider the best bid price available in the market at that momentand will add the offset mentioned by the user to the best bid price available.I.e say if the best bid price is 100.00 and the offset given is 10 paisa, and then the Active Relative will

place the sliced order at 100.10 paisa making it the best bidder.

Note: Vice versa for the sell order (that is for the sell order the offset will be subtractedfrom the best ask price)

Passive Relative

Passive Relative algorithm is used when the user seeks a less aggressive price than the best bid and offer price. The algorithm slices the orders based on time linear slicing and while placing the orders the algorithm will keep these orders pegged to the best bid for buy order or ask price for sell order respectively.The order price is automatically adjusted as the market moves to keep the order less aggressive.Passive relative algorithm subtracts the offset specified from the Depth.The below screenshot will get displays to user for placing the “Passive Relative” Algorithm.

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Passive Relative User Interface

Example

Buy 100 TCS Industries at 120.00 between 10:00 am and 15:00 am, with the offset given as10 paisa.

The Passive Relative will slice the order quantity given i.e. 100 quantity given equallybetween the start time given 10:00 am and the end time given 15:00 am.

But while placing the sliced orders the Passive relative will consider the best bid price availablein the market at that moment and will subtract the offset mentioned by the user from the best bid priceavailable. I.e say if the best bid price is 100.00 and the offset given is 10 paisa, and then thePassive Relative will place the sliced order at 99.90 paisa.

Note: Vice versa for the sell order. (i.e. for sell order the offset will be added to the best askprice)

Pegged to Market

The Peg algorithm is used to peg the limit order price to the best available ask/bid price.This algorithm continuously modifies an unexecuted order’s limit price to the best available ask/bid price until the order gets filled. The below screenshot will get displayed to user for placing the “Pegged to Market” Algorithm.

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Pegged to Market User Interface

Example

Buy 100 Aditya Birla Money Industries at 120.00.

The Pegged to Market will continuously hit the market with the order quantity same as thequantity available against the best ask price/bid price based on the order type selected.The pegged to Market will modify any unexecuted order’s limit price to the best availableask/bid price until the order gets filled.

Midpoint Match

Midpoint Match algorithm executes the orders at the midpoint price i.e: the midpoint of the best bid and best ask price. The algorithm slices the orders based on time linear slicing and while placing the orders the algorithm will place these orders at the midpoint price calculated. The below screenshot will displays to the user for placing the “Midpoint Match”Algorithm.

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Midpoint Match User Interface

Example

Buy 100 TCS Industries at 120.00 between 10:00 am and 15:00 am.

The Mid Point Match will slice the order quantity given i.e.: 100 quantity equally betweenthe start time given 10:00 am and the end time given 15:00 am. But while placing the slicedorders the Mid Point Match will place orders at the midpoint price i.e. the average of Bestbid price and best Ask Price available in the market at that moment.

Market-if-Touched

Market if Touched algorithm places buy /sell order above or below the market. The algorithm holds the orders until the trigger price is touched, only then the algorithm will send out the orders as a market order. The below screenshot will get displays to the user for placing the “Market if Touched Match” Algorithm.

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Market if Touched User Interface

Example

Buy 100 TCS Industries at 100.00.

The Market if Touched holds the orders until the trigger price is touched. As soon as theLTP or the CMP reaches the trigger price mentioned, the Market if Touched algorithm willsend out the orders as a market order at the CMP.

Note: The trigger price is nothing but the price mentioned by the user in the given examplei.e: 100.00.

Limit-if-Touched

Limit if Touched algorithm places buy /sell order at a specified price or better, above or below the market. The algorithm holds the orders until the trigger price is touched, only then the algorithm will send out the orders as a Limit order. The algorithm will make sure that the orders are executed at the limit price mentioned or better. The below screenshot be display to the user for placing the “Limit if Touched Match” Algorithm.

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Limit if Touched User Interface

Example

Buy 100 TCS Industries at 100.00.

The Limit if Touched holds the orders until the trigger price is touched. As soon as the LTPor the CMP reaches the trigger price mentioned, the Limit if Touched algorithm will sendout the orders as Limit order at the price mentioned by the user i.e. at 100.

Note: The trigger price is nothing but the price mentioned by the user in the given example

i.e: 100.00.

Discretionary Order

Discretionary algorithm is used to increase the price range within which the orders are eligible to execute. While placing the orders a “discretionary percentage” needs to be specified based on which the “discretionary price” is determined. The algorithm then stands at the best bid/ask price with a predefined percentage of the order quantity.Whenever a price comes on the offer side/ bid side which is within our discretionary price the algo will fetch the same.Once all the quantity at bid/ ask side gets filled,the next chunk for same size will go and stand as the best bid/best ask so on and so forth until all the quantities has been traded. The below screenshot will get displayed to user for placing the “Discretionary Order” Algorithm.

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Discretionary Order User Interface

Example

Buy Total order quantity= 1000 TCS at the Limit Price = 100.00 or better with the

Discretion (%) = 10%.

BID SIDE ASK SIDE

100 @ 96.00 [email protected] 101

99 @ 95.00 [email protected] 102

The Discretionary order algorithm will form a range calculated based on the Discretion(%)= 10% and the Limit Price = 100.00 mentioned. Hence the range will be in between100.00 to 110.00.

The Discretionary Order algorithm will keep checking the bid side and the ask side, Theinitial child order will be placed for 200 quantity at Rs 96.00 ( the best bid price available),Hence the algo stands at the best bid with a pre-defined percentage set of theorder quantity (Note: the orders placed at the best bid price will not breach the limit pricementioned i.e:100.00) “+ “96 quantity at Rs 101 .00 (the best ask price available) ,i.e: Whenever a price comes on the offer side which is within our range(100.00 to 110.00) thealgo will go and fetch it.

Once the bid quantity gets filled completely only then the next child order will be placed forthe same size as that of the previous child order and will go and stand as the best bid. Thisgoes on until the Total order quantity has been placed.

Bracket Order

Bracket Order algorithm is used to help the traders to limit their loss and to lock in on profit by “bracketing” an order with two opposite-side orders. i.e: A BUY order is bracketed by a high-side sell limit order and a low-side sell stop order. A SELL order is bracketed by a high-side buy stop order and a low side buy limit order. The order quantity for the high and low side bracket orders matches the original order quantity.

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Bracket Order UI

Example

Buy 100 Reliance Industries at 100.00 Rs.

Profit Offset = 5 (Note: The Profit offset is calculated based on = LTP + Ticks * Tick Size ,here Ticks is nothing but the Profit offset mentioned. The valued obtained is the price ofthe Profit booking order.)

Stop Loss Offset = 5 (Note: The Stop Loss Offset is calculated based on = LTP – Ticks * TickSize , here Ticks is nothing but the Stop Loss Offset mentioned. The valued obtained is theprice of the Stop loss order.)

Trailing Offset = 1 (Note: The Trailing Offset when mentioned is used to trail the Stoploss, i.e: whenever the LTP increases by 1 tick , the Stop Loss order price also increase by 1tick so on and so forth.)

The algo will place 1buy order as limit order at the limit price mentioned i.e: 100 Rs , oncethese are traded , the opposite orders are placed The profit booking sell order will be placed at 100.25 rs and the stop loss sell order will be placed 99.75 but the status of thesame will be trigger pending and the price by default will be shown as 0.00. If any one ofthe orders i.e: Profit booking order or stop loss order is traded the other order will becancelled automatically by the exchange.

Trailing Stop Order

Trailing Stop order allows the user to let profits run while cutting losses at the same time.Trailing stop order will place two orders the first order will be a limit/market order and the second order will be an opposite order.

Trailing Stop Limit Order:

If the first order placed is a limit buy order then the opposite order will be sell order. A sell trailing stop order sets the stop price at a fixed amount below the market price with a attached trailing offset amount. As the market price rises, the stop price rises by the trail amount, but if the stock price falls, the stop loss price doesn’t change and when the stop price is hit , the algo will submit a limit order at the CMP.

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Trailing Stop Limit Order – UI

Example

Buy 100 shares of Infosys Industries at 100.00 Rs.

Trigger Price = 5 (Note: The Trigger Price is calculated based on = LTP – Ticks * Tick Size ,here Ticks is nothing but the Trigger Price mentioned. The valued obtained is the Triggerprice of the Stop loss order placed.)

Trailing Offset = 1 (Note: The Trailing Offset is calculated is nothing but the number ofticks , i.e whenever the LTP increases by 1 tick then the stop loss trigger price will alsoincrease by the same amount. But if the LTP of the scrip decreases then the stop loss priceis not decreased. )

The Trailing stop Limit Order algo will place a buy order for 100 qty as limit order at thelimit price mentioned i.e: 100 Rs , once these are traded , the opposite stop loss order willbe placed with trigger price as 99.75 (i.e: 100 – 5*0.05) with status as trigger pending.Whenever the LTP of the scrip increases by 1 tick i.e; from 100.00 rs to 100.05 rs , thetrigger price of the trailing stop loss orders also increase from 99.75 rs to 99.80 rs. Thisgoes on until the LTP of the scrip increases and the status is “trigger pending”. Wheneverthe LTP decreases the trigger price is not adjusted.

Now when the LTP hits the trigger price or below , then the status of the Trailing stop losssell order will be changed from “trigger pending” to “open” , with order type as “Limit” andorder price as the LTP.

Trailing Stop Market Order:

If the first order placed is a market buy order then the opposite order will be sell order. A sell trailing stop order sets the stop price at a fixed amount below the market price with a attached trailing offset amount. As the market price rises, the stop price rises by the trail amount, but if the stock price falls, the stop loss price doesn’t change and when the stop price is hit , the algo will submit a limit order at the CMP.

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Trailing Stop Market Order – UI

Example

Buy 100 shares of Reliance Industries at 100.00 Rs.

Trigger Price = 5 (Note: The Trigger Price is calculated based on = LTP – Ticks * Tick Size ,here Ticks is nothing but the Trigger Price mentioned. The valued obtained is the Trigger price of the Stop loss order placed.)

Trailing Offset = 1 (Note: The Trailing Offset is calculated is nothing but the number of ticks , i.e whenever the LTP increases by 1 tick then the stop loss trigger price will also increase by the same amount. But if the LTP of the scrip decreases then the stop loss price is not decreased. )

The Trailing stop Market Order algo will place a buy order for 100 qty as market, once these are traded , the opposite stop loss order will be placed with trigger price as 99.75

(i.e: 100 – 5*0.05) with status as trigger pending. Whenever the LTP of the scrip increasesby 1 tick i.e; from 100.00 rs to 100.05 rs , the trigger price of the trailing stop loss ordersalso increases from 99.75 rs to 99.80 rs. This goes on until the LTP of the scrip increases and the status is “trigger pending”. Whenever the LTP decreases the trigger price is notadjusted by the algo.

Now when the LTP hits the trigger price or below , then the status of the Trailing stop losssell order will be changed from “trigger pending” to “open” , with order type as “Limit” andorder price as the Last Traded Price.

Monitoring Window

Monitor window can be used by the user to keep track on the orders that has been placed by him/her. It can also be used to get detailed information on the orders placed as well a scan perform several operations on the same.

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Monitor window

Once the orders were placed through “Zerodha Nest i3″,the same can be monitored from”Monitoring window” which in turn can be invoked from “Order Instruction ->Basket/Lines Manager or using shortcut key Shift+B”. Once invoked, the user can view all the orders placed in a window called “My lines” . This window aids the user to track the orders placed by “Zerodha Nest i3″,provides detailed information on the orders placed as well as allows users to perform several operations on these orders . The above screenshot shows the”Monitor window” which in turn displays all the orders placed through different options available in Zerodha Nest i3.

Monitor Window functions for Parent Orders

The user can perform several operation on the orders (Parent) placed from Zerodha Nest i3 option. The operation that can be performed on the orders (parent) are listed below.

Modify Parent Order

The user can modify the Quantity and the Price of the orders(parent) placed using Zerodha Nest i3 option . The user can invoke the “Modify Parent Order” option by right clicking on the parent order from “My lines window( or Monitor window)” and can then select the “modify Line” option or can use the shortcut key “Shift +F2”.The screen shot below shows the same.

ten7.jpg

Zerodha Nest i3

Once user select the “Modify Parent Order” option the below mentioned window for thesame gets displayed where in the user can modify the “Parent Order Quantity” and “Parent

Order Price”.

ten8.jpg

Modify Parent Order window

 

Suspend/Resume Parent Order

The user can Suspend or resume the parent orders placed using Zerodha Nest i3 option .This can be done by invoking the “Suspend/Resume Parent Order” option by right clicking on the parent order from “My lines window-( or Monitor window)”.The user can then select the “Suspend/Resume” option or can use the shortcut key “Alt + Shift + S” to do the same. The screen shot mentioned below shows the same.

ten9.jpg

Zerodha Nest i3

Once the corresponding parent order is selected the user can then right click on the same and then select the “Suspend” Option when done the below mentioned window i.e:”Suspend Window” will be displayed on the screen. Here the user is provided with the option to proceed with the suspension of the corresponding parent order by clicking on “yes” button or to reject the same by clicking on “No” button. Once the corresponding parent order is suspended the Nest i3 will stop executing any of the orders and if the user wants to resume these suspended orders then he/she can click on “Resume” option which can be invoked from “My lines window-( or Monitor window)” and can then select the”Resume” option or use short cut key “Ctrl+ Shift + S” to resume the same.

ten10.jpg

Suspend window

 

The below mentioned screenshot shows the window that will be displayed when user click on resume option.

a1.jpg

Resume Window

 

Cancel Parent Order

The user can cancel the orders (parent) placed using Zerodha Nest i3 option from “My lines window ( or Monitor window)”. The user can invoke the “Cancel Parent Order” option by right clicking on the parent order from “My lines window( or Monitor window)” and then select the “Cancel” option or can use the shortcut key “Delete”. The screen shot below shows the same.

a2.jpg

Zerodha Nest i3

Order Book

The user can perform several operation on the orders(child) placed from Zerodha Nest i3option i.e (for example) when we assign an order to an algo called “Iceberg” these parent orders can be seen in the “Monitor Window”. The iceberg algo will then slice these parentorders based on their logic and the corresponding child orders placed can be seen in”Order Book”. All the child orders are displayed in the order book which can be invoked

using the shortcut key “F3” .The operations that can be performed on these child ordersfrom “Order Book” are listed below.

a3.jpg

Order Book

Modify Child Order

The user can modify the child order using the “Modify” option present in Order Book window. When invoked the following window will be displayed from where the user can modify the quantity , price of the child order.

a4.jpg

Modify Order

Cancel Child Order

The user can cancel the child order using the “cancel” option present in Order Book window. The screenshot below show the same. An option called “Cancel” has been provided in the order book window. The user can select the child order that he/she wants to cancel and the click on “Cancel” button when done the same will get cancelled.

a6.jpg

Order Book

Trade Book

The Trade Book window displays the executed orders for all the Scrips/contracts. This window can be invoked by just pressing the F8 key from the market watch. It will display the trade details as shown in the below figure. It also displays the summary of the trades done for that scrip at the bottom-end of the window. The summary displays the Total Buy Quantity, Total Buy Value, Total Sell Value, Sell Quantity and the Net Amount. Pressing F8 twice will display all the trades across all the scrips/contracts (All Segments All Exchanges).

a7.jpg

Trade Book

Position Window

This window can be invoked using shortcut key ‘Alt+F6’ keys. The user can view the consolidated positions in the Net Positions Window. These positions can be further bifurcated according to the exchange/segment or according to the scrips/contracts for which the trade was made. This window also provides some vital information like the Net Position, Buy Quantity, Sell Quantity, Buy Amount, Sell Amount, MTM profit/loss, etc. for all the individual scrips.

NOTE:

  1. The Net Positions are updated automatically on real-time basis.
  2. Net Buy quantity, Buy Value Sell Value Sell Quantity, NET Amount, and NET MtoM values are displayed on the status bar of the same window.

Below is the screenshot for the Net Position:

a8.jpg

Net Position

 

Happy Trading,

Zerodha

Your friendly neighborhood discount brokerage

83 comments

  1. Siva says:

    Hi I want only Trailing Stop Limit Order and Bracket Order. how to activate it ?

    • Nithin Kamath says:

      Siva,

      i3 comes as a package and you need to have dealer terminal access to use them. To get a dealer terminal, you will need to be an authorized person with Zerodha on NSE and you will need to have cleared NISM certification for this..

    • Nithin Kamath says:

      Siva Jun 10 2013, 3:28 pm
      oh ok wen zerodha will give trailing stop loss and bracket order option to retail clients? I think sharekhan has started this feature 1 year ago for retail clients. If Zerodha also give us this option it will be very helpful for retail clients.

    • Nithin Kamath says:

      @Siva, yes Sharekhan is providing but only for equity segment. We are looking at approvals for these for the same…

  2. nesttrader says:

    Hi ,
    If am using GFDL plugin to semi-automate my orders , can this i3 be integrated in the parameters window of GFDL ?
    or
    How to use these algorithims if Orders are automated via GFDL plugin ?

    • Nithin Kamath says:

      this will not be possible through the plugin. Orders will have to placed separately on the platform..

    • nesttrader says:

      Is there any facility/option like i3 for high volume traders who have automated there orders through plugin ?
      Kindly suggest.

    • Nithin Kamath says:

      Presently i3 can’t be used to execute the automated order through the plugins. When you see an order being initiated, you will have to place it manually through i3.

      The next version of algoZ should have the ability to send the automated order on to i3. But orders through plugins still will have to be placed manually on i3

  3. rajancr says:

    i need a plugin
    i am a online trader not experienced in key board
    i can preset the trading password, qty, scripname, market/limit,and buttons for buy,sell,square off
    in one window, this is for fast order execution,

    • Nithin Kamath says:

      Rajan, didn’t get your question, what plugin do you want?

      When you are logged into the platform, transaction password is asked only once and from second time onwards it doesn’t require..

  4. DD0231 says:

    I am learner of AlgoZ Trading . Can anybody help me regarding this strategy.
    I want to

    Sell 5 Lots of Nifty 5800 29 August PE and 6 Lots Nifty 5500 PE 29 Aug PE within 26th August at some predefined value say Rs.450 and Rs.150 respectively.

    If it will not executed within that date @ 3.10 p.m , then it should be sold at the market value of that day after 3.10 p.m

    After the order executed then , within that money, I want buy some Lots of Nifty 5700 26 Sep CE s , investing maximum Rs. 1,00,000 @ market value within 26th August 3.29 p.m.

    Can anybody help me , what will be the script or commands , I will give ?

    My email is [email protected]

    D. Pal

    • Nithin Kamath says:

      Hi Pal,

      On algoZ you can basically run technical analysis strategies and not the conditions like what you have mentioned. This would presently not be possible.

      Cheers,

      Nithin

  5. karthikey_a says:

    Is it possible to call & place I3 Orders?

  6. rbtj says:

    Hey,

    I have just started to learn AlgoZ. Can we trade on BSE using algoz ??

  7. nitin barhate says:

    what is the cost of alogz installation and from I can get it

  8. Shanthi says:

    Sir,
    Is it possible to place buy or sell orders in Nifty option by keeping a certain Nifty Future Price as the trigger for that order.

    Say for example, I want to buy 150 qty of Nifty 6600 puts when Nifty Future touches 6400

    • Hanan says:

      Shanthi, this facility is not available. The only workaround for you is to set an alert for Nifty Futures so you can get informed when Nifty breaches that level. Once you receive the alert, you can place a manual order on the options you wish to trade. Yes, this is a longer way but the only way as of now.

  9. sahith says:

    hello, i am new to zerodha, i am trying to trade on nse equity using rsi and moving avgs, but i am not able to insert the no of shares i would like to buy at a given instance. plz, assit me how add share lots in the strategy

    thank you!
    sahith

  10. sachin03 says:

    What does it mean when you say we have to become an AP of zerodha to have a dealer terminal ?
    Does it cost something ?

    Also can you please explain the advantages of dealer terminal apart from using i3 in it ?

    TIA

    • Exchanges don’t allow retail to autotrade, so the option is register the client as an Authorized person on the exchange. One time cost of around Rs 4000 per exchange, and once registered the client is not treated as a retail, and hence can get a dealer terminal. To get a dealer terminal, the monthly rental is Rs 250/exhcange/segment, with a dealer terminal a person can automate hi trades completely, and also use tools like i3.

      Cheers,

  11. sachin03 says:

    Tried to activate stock alerts on mobile and zerodha platform .. but they dont seem to be working.. can you help ?

  12. sairam says:

    can i automate my trades using NEST API and C#, if so, could some one please guide me on this

    • Yes you can Sairam, we can give the C# API, but you will have to build your own UI and get the strategy and UI approved. This would also require you to become an authorized person with us on the exchange, and get NISM certification to get dealer terminal privileges. Can you send an email to [email protected] and [email protected] with your client ID and contact number.

      Cheers,

  13. Kamala says:

    Hi,
    When i contacted your helpdesk for charting software they informed me that algoz needs to be enabled which they did after a couple of days. (They informed me that algoz is chargeable and I agreed to pay the charges.).But this product does not have any of the standard features listed above like bracket Order, trailing stop , etc. When contacted , the helpdesk informed that these.strategies need to be programmed.
    Can you please guide me as to how to proceed ? Thank you

  14. traderbob says:

    6700 put: current price = Rs.27.40
    I want to buy it at Rs.29.40 with trailing stoploss at 27.40 and target at 35.40
    What is the procedure in NOW and NEST.

  15. rajatponia says:

    Hi Nithin sir,
    Which of the particular NISM certification do I have to take. There are whole lot of NISM series mentioned on NSE website. Request you to advise on his in detail, how to go about it so that I can follow and get certified and start using I3.

    • Rajat,

      http://www.nseindia.com/education/content/module_ncfm.htm you can take the derivative markets dealers module, but if you are looking at i3 for bracket and trailing SL, we have launched it for all our retail traders, you would not need a certification for this. Check this post.

      • rajatponia says:

        Thank you for the quick response sir. I was looking at I3 for the use of high volume trade and hence the query. I would be trading mainly in stocks only. The link provided above… Would that be the correct module for me it that case. Also do I have to take all three modules, i.e foundation, intermediate and advanced.
        Thank you

        • Derivative markets Dealers module is the one that you need to take.

          • rajatponia says:

            I got the call from Siva, on telling him that I would be only trading in stocks, I was advised that “Capital markets” dealers module is the one I need to take to be eligible for I3. My apologies, but this has become a bit confusing. Please help me with the correct module. Thank you

          • rajatponia says:

            Not a problem Sir. Thank you so much for taking time out to address my query. I also want to appreciate Siva. He was very patient with my queries and also helped me with another contact person if I have more queries on similar subject or others.
            He explained to me things in great detail and again forwarded me the relevant links.
            Thank you!!!!

  16. Rajatponia says:

    Nithin sir,
    It would be great if I could be directed to a person who could advise me on the certificate exam I need to take . I will call and speak to the person

  17. rajatponia says:

    Dear Sir,

    Could you help us with regards to Margin availability on I3. Would it be as per the list provided elsewhere, i.e as per Margin Equity margin calculator or as per Bracket & Cover orders margin calculator

    • Rajat, we presently don’t have set margin rules for other i3 products, we are still going easy on this.

      • nagesh says:

        Dear zerodha,
        This nagesh and ranganth, our id is RR2656 & RN0699.
        I have few queries please solve.
        Example: 1) In delivery trading, i brought vijaya bank @ 45 rs, 10000 shares, LTP is 46 rs. I don’t know, “LTP” might go upto 47rs or below 46 rs (say 45.95).
        I want to lock profit @ 46 rs, still want to book profit @ 47 rs. If the market goes down below 46 rs (say 45.95), I have to book the profit @ 46 rs only. How to achieve this in “ZERODHA NEST TRADER”. Please advice with stepwise. If you have any link please provide(videos or images related to my query).
        Sir, please please please advice me, i am in dark, show me some light of knowledge with your valuable kind advice.
        Warm regards,
        nagesh & ranganath

        • Nagesh, for delivery based trading you will have to place a limit selling order at 47 and a stop loss order at 45.95. so if it goes to 45.95 your stock is sold or if it goes to 47 your stock is sold The only issue with this is that when either one of them is executed, you will have to cancel the other manually.

          If this was for intraday trading, we have a very interesting product called as Bracket order, but that can’t be used for delivery based trades.

  18. TradeStar says:

    Hi Nithin,

    I was wondering … It will be really great if following order types can be added on this platform:
    – Bracket-If-Touched
    – Bracket-If-Touched with Trailing SL

    These will be very helpful.

  19. jimmy says:

    sir
    can i put trailing stop market order for positional trade or it is only for day trading

  20. I am using MAC for trading,but your software is not MACcompatible.Kindly help.

  21. karthik says:

    Hi Nithin,

    Are all the above described different type of orders available in Pi?

    Thanks

  22. chella says:

    Whether execution based alogrithms are no more available for clients? what is the future course of action?

  23. Anoop says:

    when will execution algos such as iceberg algo be available in Zerodha as other brokers (compositedge, indiainfoline) are providing it?

  24. Richi Sandil says:

    As is it possible to trade with Zerodha for cash future arbitrage using i3 .
    Do I have to program the software , or strategy will be available there !

    Like I will
    Buy cash sell future – RS 3 – Ask
    Again Buy future sell cash – RS -1 Bid

    Is it possible in i3 ?

  25. kanglei says:

    how to add Gann hi lo indicator , or how to code it in the pi , please help

  26. Mahesh says:

    plz improve Tools command by adding Fibonacci Extension, the levels like 127%,1414%,1618% in Fibonacci Retraicement tool, Advanced Pattern like Cypher , ABCD etc. This tools are very important in charting and without this we have to use other platform which makes a trading very difficult.

  27. […] Zerodha’s Execution based Algorithms can be found here. […]

  28. mahendra pawar says:

    Hi Nitin sir,
    I am very thankful to zerodha team for such a wonderful app kite and pi, but I want to know each and every aspect of expert advisory and alert system on PI in details. can u help me, I am a online parner of zerodha. I want to generate lots of clients by educating them with the knowledge client id ZG2588. [email protected]

    9970967139 mahendra pawar

  29. ZH3972 says:

    Hello everybody.
    I am kinda new here so my apologies if this is not the right place to post this.
    I know PI doesn’t support backtesting on RENKO charts so I tried applying the strategy as an Expert Advisor on a RENKO chart but that doesn’t seem to be working either. Any workarounds? Pls lemme know. Thanks.

  30. vikramdude745 says:

    Hi Nithin.
    I am using the Zerodha PI version as well as Zerodha Kite. I prefer Zerodha PI.

    I have few queries regarding putting an alert on the software.

    This is my first time I am going to be using the alert service provided by Zerodha on the PI version.

    I went through the code and added the code I feel most comfortable with. I have added the EMA crossover for nifty for going long or going short on the 5-minute timeframe.

    However, I am not able to find the code regarding exiting the position.

    Now, if I want to put a trailing stop loss what code would be most suitable for a moving average and can I add multiple codes depending on the indicators I want to combine together? In my instance 2 EMA’s and an RSI.

    Thanks

    Vikram

  31. Garima says:

    Hello Nitin!
    Why BO on Zerodha is still processed as multiple orders? I see you are aware of this anomaly from 2014 but nothing has been done to change the algorithm. Zerodha advertise 20Rs max brokerage per order but its never true. The worst part is sometimes a single share is bought in one order and I pay 20Rs for that share, which of course turns out pretty costly affair.
    Also, can I book partial profit in BO, eg. I buy 500 shares and decide to sell half at target 1 another half at target 2. Is that possible?

    Thanks,

    • Zerodha Social says:

      Garima, That is how brackets are, when you placed to buy 100 lots and assuming 75 get executed, whatever is executed we have to place a set of target and stoploss and can’t wait for the remaining 25 to be executed. So entry will always be one order, but exit could be multiple orders.

  32. Garima says:

    Thanks but I am still not clear about partial profit booking using BO. Say I buy 1000 shares and now I want to sell exactly 250 shares. How should I do it?
    If I go for exit option, it exits all 100 shares. otherwise I have to change trigger for multiple orders placed for the same stock and wait for trigger.

    Another query: some of the charts in Kite are not showing correct closing values. values are right but chart candles are wrong since 23rd Oct. please rectify.

  33. Ravi says:

    If I want to buy or sell say Nifty option , say 75000 quantity of 10500 CE. Can one ice berg order handle this ? Or is ice berg or any other algo subject to 7500 quantity freeze ?

  34. Ramnaresh Prajapati says:

    Dear Team
    I have already sent all the documents as you have told me and still have not done it right by my commodity account and my money has not been updated in the account of Rs.3000 / – I have a lot of trouble. Please update my account.

    RamNaresh Prajapati
    Vill. & Po. Kheda Mevada
    Teh. & Disst. Morena (M.P.) 476001
    Mob. No. 09977449197 (MP)
    07054747444 (UP)

  35. Rajkumarsingh says:

    Kaise use kare

  36. Anil says:

    Sir,
    Is it possible to place conditional(BO) order in form of percentage basis, like suppose I want an automatic order place Long or Short stock as soon as it breaks 1.5% of either side from previous day close any time during market timing with take profit and SL.

    • Faisal says:

      Anil, this is not possible in Bracket order. You will have to place the Stoploss in absolute terms. A major flaw with this is the percentages not rounding up to the tick size of Rs 0.05.

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