What is a CO (Cover Order)? Trading related!

What is a 'CO' in trading?

What are the features?

What are its benefits, and when to use it? 

CO means ‘Cover Order’. (This is strictly MIS - INTRADAY)

This is very useful when you are fairly sure of the movement of a stock.

Let us learn from an example:

Suppose a stock is currently trading at 100. You are fairly certain that the stock will move upwards, and will hit 110 during the day.

You have 5000 rupees in your trading account. With this money you would be able to buy only 50 shares. But if you place a CO order, you will be able to buy a lot more of these shares. So this is the extra leverage you get.

To use this you must specify a Stop Loss (SL) while placing the order. This will make it easier to ascertain your total risk.

Meaning, you can place a CO with a Stop Loss of 95. So you may in this case be allowed to trade with 200 quantities (remember you could have only traded 50 shares!) because you have cleared that your risk is 5 per share. So you may hold more number of shares, and decide to book profits when the price hits 110 which was your target, or even before that!

Therefore because Zerodha (stock broker) knew that the total risk was 200 x 5 = 1000 rupees (and you have 5000 in your account). If the price hits 95, your position will be squared off.

What you need to clarify is your Stop Loss while placing the CO order. Thus your broker (in this case Zerodha) will know the limited risk.

Conclusion:

Due to this CO feature you are able to trade in more quantities. This applies to trading in futures too.

Hope this helped!

Cheers!

The stock markets -How to start? What money should be brought into share market?

What should I do?

 Hello!

So, often I am asked this question: "I wish to start trading in stocks, but I do not have any money right now. Should I take a loan and start?"

I bet you know a lot of people who would have faced the same situation. Maybe you were in such a conundrum yourself.


Let us deal with the topic then -


This one question leads to many other questions such as -

1. What would be a sufficient amount?
2. How to acquire that amount?
3. Will I be able to arrange it?
4. Where to open the trading account?
5. Should I start with a small amount or a lump sum amount?

  Let us start with all of these one by one - 

Q.1 Should I take a loan? 

Answer: NO. NOT AT ALL. 

Q.2 Should I start with a lump sum amount?

Answer: NO. You should start with a small amount (a thousand rupees even). Remember that gaining experience, knowledge is critical when you begin your stock market journey. 

Keep in mind that 1,00,000 - 1,00,000 is ZERO, but so is 1000 - 1000 !! 

In fact, with 1000, you could try a 100 times if you have a lakh of rupees!

Q.3 How to arrange for this amount?

Answer: I am going to recommend four simple ways to arrange for the capital.

   1. STOP wasting money on flop movies!  

   

     

 

    OK, now I'm not saying you shouldn't watch movies at all, but you should avoid splurging!

The movie tickets, the popcorn tubs, the water bottle costs...you know that!

2. STOP throwing unnecessary parties!

 "Hey....the Sun still rises in the east!" 😆

 Again, I am not saying that you should stop celebrating success. But avoid unnecessary expenditure.

3. STOP the unwanted shopping!

 

There are so many things/products that we buy only to regret later. You can save this money and use it wisely. 

4. Quit bad habits/addictions!

 

Actually, this one is the easiest thing to do. This is important for a dual benefit. If you quit your addictions/bad habits you will gain wealth and health!

Q.4 Where should I open the trading and demat account?

Answer: Any broker authorized by SEBI will do. (in India)

 

There are two types of brokers - a) Full broker  and  b) Discount broker

a) Full brokers - 

 They have higher brokerage charges because they can be easily approached. They have their offices in all the big suburbs. They can even assign a personal manager for you sometimes.

Examples: 

(I do not have any vested interests. These are only examples. You should make your own choice.)

 

b) Discount brokers - 

 They have lesser brokerage because they do not have shops/offices all over. They simply provide you with a trading platform. You can open an account with them once you have gathered enough experience. 

  

Examples: Again, make your own choice. I have an account with Zerodha.

               

Q.5 Will I be able to do it? 

Answer: Yes. You can! Let me quote my own example. I had no one in my family who was into the stock market. In fact, I come from a background where even the word 'stock market' was looked upon very suspiciously. So, if I can, so can you!

As I said - Go steadily. Have a positive approach. Try to learn. Start with a small sum.

You will surely succeed!

Hope you liked the detailed explanation.

Leave a comment.

Cheers!

 

Is share market just gambling?

Hi guys!

So is share market just gambling?

To answer this, we must first ask- what is 'gambling'?

In my opinion, any act done without knowledge, without study, without experience, and without practice can be termed as gambling.

For instance, what if someone took you to the cockpit and suddenly asked you to fly the plane...

The result ...?

Now you will have understood my simple definition of gambling stated above. In this situation if you attempt to fly the plane, it is gambling!

The reverse of that is also true. Any act done with proper knowledge, with proper study, with enough experience, and with regular practice will not and cannot become gambling!

(Just like when mom is cooking in the kitchen - fine! But when dad enters the kitchen for the very first time and attempts...!! Risky!) 😆


Another example: Let's consider a situation where you need to go someplace. There are two people who offer you 'a lift'. One is Mintoo, and the other is Pintoo.
                 

        

        Mintoo

    Pintoo

1. Mintoo has a driving licence                              1. Pintoo does not have a driving licence

2. Mintoo drives regularly                                      2. Pintoo has no regular driving experience
3. Mintoo is a teetotaller                                         3. Pintoo is a barfly
                                                                                4. Pintoo has only seen others drive!


Whose offer should you accept?

Well, going with Mintoo is a better decision, and as per my definition accepting Pintoo's offer is a gamble - a risk of life!

Does it mean that when you're with Mintoo there is NO RISK?

There is always a risk, but at least if you go with Mintoo, the risk is what is called - 'a calculated risk'!!

Do watch this video (it is in Marathi)!

Hope this helped!
Do leave a comment.

Cheers!