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HOW TO SELL A STOCK WHICH IS HITTING CONTINUOUS LOWER CIRCUITS?

Trader Peter Tuchman works on the floor of the New York Stock Exchange, Friday, Dec. 28, 2018. Stocks are opening higher Friday as U.S. markets try to maintain the momentum from a late-day rally on Thursday. (AP Photo/Richard Drew)

There are various instances when we purchase a stock for short-term gains but instead, it starts hitting lower circuits. Today this post will inform you how to sell lower circuit stock.

The best way to sell a stock that is hitting continuous LC is by placing an order during the pre-open session. As soon as the pre-opening session is closed orders start executing.

First, let us understand about Upper and Lower Circuit Limits.

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WHAT HAPPENS TO ORDERS DURING CIRCUIT LIMITS?

If a particular stock hits the upper or lower circuits, trading is halted and you cannot place orders until the trading re-opens.

If you have pending orders with the broker at the time of circuit breakers, such orders can be modified or canceled only once the trading re-opens.

Upper circuit: When there are only buyers and no sellers in the market for a particular index or stock

Lower circuit: When there are only sellers and no buyers in the market for a particular index or stock

CIRCUIT LIMITS FOR INDIVIDUAL STOCKS

Stock specific circuit filters are applied on both BSE and NSE exchange. The percentage for circuit filter limit is 2%, 5%, 10%, 20%.
These circuit limits are not applicable to stocks in Futures and options segment For newly listed companies, there is a circuit limit of 20% from the issue price.

Why Your Order Still Pending After Trading Session?

If your order still in the pending state after the starting of the normal trading session, do not panic, keep your order open. When a stock hit in Upper Circuit or Lower Circuit after some time trading resumes. Then there are high chances that your order could be executed when trading resumes.

When there is a lot of panic in a particular stock, and you are sure that stock will hit LC, then it is advisable to place an AMO (After Market Order). AMO will ensure that your order placed as soon as the market pre-open starts.

On Zerodha, you easily place AMO under More Options. If you not sure how to place AMO on your trading platform, please contact them asap.

SELLING LOWER CIRCUIT STOCK

It is advisable that you should not buy stock on some random recommendations. There are a lot of companies that try to trick and manipulate stock prices.

Don’t create same mistake again, avoid investing in manipulated stocks.

How to Identify Garbage Stocks?

Read: How many shares you need to buy to increase the share prices?

Money-control list of only sellers

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Important Concepts

YOUR STOCK TANKED 10%, DO NOT AVERAGE OUT

 

Buying a stock is easy but to remain invested in the same for a long time is very difficult. That is the basic reason not everyone is able to create wealth from the stock market. Today in this post we will understand why averaging out a stock is not a good idea.

Why does an investor think that once he has purchased a stock it should always go up?

The stock market does not care whether Ambani has bought shares or you. It all works on demand and supply concept.

Averaging out the stock: Averaging out means buying an equal number of stocks when a stock falls below your purchase price thereby reducing your average buy price.

Every investor has a different way of investing. Some think when prices go down, it is always an opportunity to add up. Whereas some investors say it is wise to start booking profits when prices go up.

If every investor does research properly then there will not be a much demand-supply gap in the market.

What will you do when your purchased stock starts falling below your buying price?

Will you buy more or sell at a loss?

Most of the new investors have a tendency to buy more stocks when its prices go down, in order to decrease the buying price. But foremost an investor should understand why the stock price has corrected/fallen so much.

Investors seldom think deep about the business of the company in which they are investing their hard earned money. Novice investors are happy investing in any stock as long as it increases in price. But the moment it starts going below for their purchase price, it became worrisome for them. An investor should know why he entered or bought in the first place. If an investor knows the idea and moat behind his investment they obviously he can reap a lot of profits without worrying about its future.

Read: Why stock prices change?

Some of the reasons for the decrease in stock price

  1. Some negative sentiments against the company are being spread which could be temporary.
  2. The company may be facing a tough time in managing its business.
  3. Raw material prices have been fluctuating in the market. The aviation sector is very susceptible to crude oil prices.
  4. You have entered at very high valuation and stock may go through a consolidation phase.

If nothing wrong with the company then also you should not go and buy the moment the stock fall below you purchased price. As an investor should let the prices settle down before making any hasty decision. In some case, there may be some news which is not out in public and some people are trying to manipulate the stock prices.

Averaging out could be very deadly if your prediction is wrong about the company. If stock prices start falling again then you will lose double of the previous invested amount.

Read: Why long-term investment creates wealth?

An investor should always know the answer to this question:  why he purchased this particular stock at first place?

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