Mail: How to make market volatility a friend

Monday, March 8, 2010

How to make market volatility a friend

Dear Kundapur Govardhana Kini,

If this is the feeling you get when you login to your ICICIdirect.com account, then this e-mail is just for you.

Let us say the market have gone up 200 points. Now you are looking at good buy opportunity, but still you feel uncertain what if the markets fall suddenly.

Now this is precisely where MarginPlus and "iCLICK-2-GAIN" come in.

With MarginPlus you get a leverage of 15 to 25 times on your allocated funds, where you can take a position at market price and also place a cover order specifying the 'Stop loss trigger price' and 'limit price', to protect your loss. Also with our research calls at "iCLICK-2-GAIN" you can now look forward to making the right decision. Let me explain how exactly you can do this.

When you login to your account, the "iCLICK-2-GAIN" link appears on the right hand side of the screen. Just click on it and you would see our live research calls.

Now let us take the example of a Margin call at 10:22 a.m. of HCL Technologies at "iCLICK-2-GAIN". You will get a CMP (Current Market Price) which is the market price at the time we recommended, Target Price - the price we expect the stock to touch and the Stop Loss Trigger Price - which is the price at which you would want the order to get triggered to protect your loss.

To place the order, click on "MarginPlus Order". In the Stock Name box type "HCLTEC". Action "Buy". Now let us assume that you have allocated Rs. 5,000/- for trading; then your leverage selection can be approximately up to 20 times i.e. Rs 1 lakh (subject to the value of the limit price). For "Quantity", mention 300 stocks. The order will reflect as shown below.

In the Stop Loss Trigger Price mention the price specified by us. We know that in case of a buy order, Limit Price has to be lower than the Stop Loss Trigger Price by the specified minimum difference % for the Stock which you can find by clicking on the Stock List. In case of a sell order, limit price has to be higher than the Stop Loss Trigger Price by the specified minimum difference % for the Stock.
Now let us look at the two possible scenarios:
	Market goes up and HCL also goes up to Rs. 363/-. You bought the stock at Rs.355/-.
	Your profit is Rs. 8/- per stock* 300 stocks = Rs. 2,400/-
	If HCL goes down, your stop loss will get triggered at Rs. 352/-. You bought the stock
	at Rs. 355/-. Your loss is Rs. 3/- per stock * 300 stocks = Rs. 900/-