🔸 A lot of traders (especially intraday) look at a stock’s market depth table to determine the upcoming moves and accordingly take their BUY / SELL decisions.
🔸 Read below how market depth data can sometimes be misleading and lead to losses
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Here's how most traders read the market depth:
🟢 If there are higher number of buyers (bids) means the stock is in demand and will go up.
🔴 If there are higher number of sellers (offers) means the stock is in supply and will go down.
But that is not how it works.
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🔸 Let’s say, for a given stock the market depth shows as below (1 qty):
- Total Buyers: 50,000
- Total Sellers: 2,000
🔸 Many will interpret this as a high demand stock & expect it to go up.
🔸 But still sometimes the stock rapidly goes down despite more buyers.
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🔸 This is because, it takes just a single big SELL order (from big players like institutions, HNIs, etc.) that can absorb the buying pressure.
🔸 In above case, if a big player puts in a 100000 sell order at market rate, all the buying pressure gets absorbed in one go.
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🔸 And now suddenly you see a drastic change in the market depth. Suddenly, buyers are very less and sellers are many more.
🔸 Retailers who had put in small BUY orders got their orders eaten up and the stock starts to fall down further.
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🔸 So, never ever rely on just the market depth data to take your buy / sell decision.
🔸 Most important of all, always think from the high level perspective.
🔸 Try to think of how the big players in the market would think. It will give you a much clearer picture.
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But that T+2 days cycle leaves a possibility of you transferring those shares to someone on Tuesday i.e. before the shares are debited from your demat on Wednesday.
This creates a short delivery settlement risk.
Brokers already have systems in place to avoid this.
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But still this might happen for about 5% of the times whereas 95% of the times the settlement is done correctly.
Now, SEBI's new rules will make sure that those 5% cases are also taken care of and the risk is completely avoided.
1⃣ As per new SEBI rules, buying and selling of shares will require upfront margin.
Eg: If you want to buy shares worth ₹1 lakh then you must have ₹20K margin cash in your trading account & the balance of ₹80K to be paid within 2 days.
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2⃣ If you want to sell ₹1 lakh worth of shares from your holdings then too you must have minimum ₹20K margin cash in your account, failing which penalties will be levied.
You can keep extra cash / or can pledge your other holdings for the stipulated margin required.
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3⃣ Buy Today Sell Tomorrow (BTST) closed.
Shares bought today cannot be sold tomorrow.
Eg: If you bought shares on Monday then you can sell those shares only after recieving the delivery of shares in your demat account i.e. you can sell on T+2 day, Wednesday.