If you are tired of placing separate orders while trading in equities or the F&O segment, then here is a solution: Basket Orders. You can place multiple orders in one by using them.
After reading this article, you’ll get your answer on what is Basket Order and how to use it. You’ll also learn how Basket Order works and the benefits and risks of using it while online trading.
What is Basket Order?
A Basket Order is a type of order that allows you to add multiple scrips into a basket and place the order in one go.
Say your strategy includes placing an order for 24 scrips. Instead of placing an order for every one of the 24 scrips, you simply add them to a basket and place the order. This saves you time and effort.
Think of Basket Orders as a shopping cart, where you add different products and get all of them billed in one go.
Within a single basket, you can add both the buy and sell orders which will make the entire process time-saving and efficient.
You can use this order type to place an order in equities, derivatives, commodity, and currency segments.
Oh, and one more thing. You can get a “Hedge Benefit” when placing a Basket Order, which is the risk reduction achieved by spreading your capital across a variety of scrips. This is specially useful for options trading.
How do Basket Orders Work?
Basket Order trading starts when you add a scrip. After that, you are supposed to choose from the buy or sell position and market or limit order.
The created basket is sent to the stockbroker, who executes the respective transactions according to the specified details.
On Dhan, you have the option to rearrange the scrips in your basket and select the sequence of order execution.
The broker will execute the market orders immediately at the current price. On the other hand, the broker will execute the limit orders when it touches the specified price.
In step by step manner, this is what the working of a Basket Order will look like:
- Scrip Selection: Start by adding the securities (scrips) to the basket
- Order Parameters: Choose the buy or sell position for each scrip, and specify whether it’s a market or limit order
- Submission to Broker: Submit the Basket Order to your stockbroker
- Broker Execution: The stockbroker executes the transactions based on the details provided
By the way, you can also place Basket Orders from charts or automate them using algo trading.
The Concept of Bulk Trading
In bulk trading, you will trade more than 0.5% of the company’s total equity. In Basket Orders, you can buy and sell the stocks of a single company at different prices.
You can add the quantity and prices in different baskets which will help you customize the total order with other stocks as well.
To simplify the process, you can even repeat the previous Basket Order and continue doing your bulk trading with full customization in terms of pricing and quantity.
Basket Order Use Cases in Trading
You can place a Basket Order in the equities, F&O, and ETFs. Here is a simple example of how you can place a Basket Order:
The first one is a market order and hence it will be executed at the current market price of ABC Bank.
The other two are the limit orders and hence they are executed when the respective stocks touch the specified market price. You can place these trades in one go with Basket Order.
Benefits of Basket Orders
Placing a Basket Order is a hassle-free process that can make your trading journey a smooth ride. So, choosing to place a Basket Order over multiple orders comes with several benefits, which are as follows:
1. Simple and Saves Time
You can place multiple orders with a single click which will help in saving time. You can even create a customized options strategy by adding multiple options contracts within a basket. In this way, you can save time on analyzing every contract and then placing them separately.
2. Less Margin Requirement
It’s not just time that can be saved in Basket Order, it’s also money because you can save on the margins. With the selection of multiple options to hedge the position, the margin amount is calculated on the basis of the total order and hence it can be reduced.
3. Create Basket Order Drafts
You can create a Basket Order and save it like a draft which you can place when the market opens on the next trading day or any other time.
It will help you place the orders with better research and you can avoid the hassle of searching the stocks at the end moment.
P.S. Draft Orders are only available on Dhan.
Risks of Basket Orders
After learning in detail what is Basket Order, you need to know its limitations as well which are as follows:
1. Wrong Placement of Orders
Sometimes while placing Basket Orders, you can lose the opportunity to analyze a single order. If certain stocks cannot be executed, then it will hamper your total Basket Order and your estimated profitability.
2. Market Risk
The overall performance of a basket order is subject to market movements. If the market experiences a significant adverse movement, it can impact all the assets in the basket simultaneously, leading to substantial losses.
3. Liquidity Risk
The liquidity of individual assets within the basket can vary. If one or more assets have low liquidity, executing orders for those assets may be more challenging, potentially resulting in higher transaction costs or delayed executions.
4. Execution Risk
Basket orders involve multiple transactions, and the execution of each component depends on market conditions. Variations in the execution of individual orders, especially in fast-moving markets, can lead to slippage, where the actual execution price differs from the expected price, impacting overall performance.
Dhan Basket Orders
You can place Basket Orders on Dhan App and Dhan Web in the stocks, F&O, and ETFs segments.
In Dhan Basket Order, you can pool the different securities into a single basket and can even know the real-time margins required for placing the order.
You can customize your basket by simply dragging and dropping the required securities. You can give an intimation to place all the orders at once or to place them one by one.
You can also repeat the previous Basket Order using the duplicate feature.
As there is a maximum limit for the number of orders to be added to one basket, you can repeat the same order to save time.
You can also view three margins upfront when placing Basket Orders on Dhan:
- Overall Margin: The total margin required for each leg of the basket, which is also the minimum margin you must have in your account
- Final Margin: This is the margin eventually blocked once the order is executed
- Hedge Benefit: The difference between the overall margin & final margin
That’s not all. You can place Basket Orders directly from TradingView Charts on Dhan!
A Basket Order is a functionality that helps you place different buy and sell orders within a single click.
You can create a customized basket where you can choose between the market order and the limit order.
It also helps you save time and allows you to better hedge your positions, especially while trading options.
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