InvestorQ : What are some methods of effectively executing orders in the market place?
Nisha Chandani made post

What are some methods of effectively executing orders in the market place?

Nisha Chandani answered.
3 years ago

There is nothing like what is a good execution, but what we can do is to look some examples of bad execution. If you can avoid such bad execution practices then you are better off in placing your trades. Here are three such things you must avoid while placing orders.

Firstly, avoid placing market orders blindly without looking at the market and the volatility in the market. You have a full day to get the best price, then why hurry to execute at the market price. Market prices on screen can be elusive and misleading, especially when automated strategies are at work. You can get the best by setting your required price and putting a limit order.

Secondly, avoid the temptation to overtrade in the market. You may not realise but it has a huge cost attached to it. Over-trading impacts your returns in two ways. Each time you enter and exit, you miss out on the secular movement of a stock. Secondly, brokerage, STT and other statutory costs have to be paid on each leg. You will be surprised that the impact cost and the transaction cost can wipe away a big chunk of your profits. We are not even looking at the tax angle.

You set a stop loss to protect you loss so let it not be so close that even a little bit of volatility triggers the stop loss. A stop loss should not be just based on technical levels. It should also depend on the volatility in the market. If you place close stop losses in volatile stocks, you are likely to end up with your stop losses triggered. The answer is that you must play the game only when all the factors are in your favour. At least that is what the great trader Jesse Livermore has always said about markets.