Averaging

This is a strategy designed for Investors who would like to do Averaging when the market moves by specified points in the desired direction. If you have a view on the market and you want to reduce or increase your share price to overcome the volatility, then this strategy is for you.

When To Use?

Averaging can work in both rising and falling markets. If you purchase stocks in rising markets, averaging helps to accumulate more profits. Similarly, in falling markets, it helps in reducing the average purchase price.

TRADING STRATEGIES | WHAT Is Averaging Algorithm | How To Place Algo Order | ICICI Direct

What are the inputs required?

1. Action

This is the action you want to take (Buy/ Sell)

2. Product Type

In Cash: Select from Intraday/ Delivery

In F&O: Select from Intraday/ Normal

3. Start Time

This is the time when the algorithm will start executing

4. Direction

This is the desired direction in which you want the market to move

5. Averaging Start Price

At Market: the first order is executed on market level immediately

At Average Start: the first order goes only when the average start price is reached

6. Stock Name

This is the stock you want to buy or sell in Equity or F&O Segment

7. Total Quantity

This is the total quantity you want to buy/ sell

8. Averaging Quantity

This is the quantity that will be placed once the averaging conditions are met

9. End Time

This is the time when the algorithm will stop, even if the total quantity is not met

10. Average Entry Difference

This is the min drop/ rise in price wrt Averaging reference price to trigger orders

How does it work?

There are two ways in which the Algorithm will work based on Averaging Start Price selected

As soon as the Start Time is reached, the first order is placed on the basis of Averaging Start Price selected

• If At Market is selected, then the first order equal to the Averaging Quantity is placed immediately

• If At Average Start is selected, then Algo checks if the current market price is equal to the Averaging Start Price or in the same Direction as selected by the user. As soon as this condition is met, first order equal to the Averaging Quantity is placed

The Algorithm keeps checking the parameters mentioned by user. As soon as the below two conditions are met

• the Last Traded Price difference wrt last executed price is equal to or greater than the Average Entry Difference

• the Last Traded Price is in the same Direction as mentioned by the user

an order is placed equal to the Averaging Quantity

As soon as the Total Quantity is met or End Time is reached, the Algorithm stops

When not to use?

The stocks where the fundamentals of the company have worsened or potential of the company is in question, averaging down can bring excessive risk exposure too.

Also, averaging up in a market not backed by fundamentals can lead to huge losses, if there is a correction just after the averaging up. Thus, the script selection is an important step.

Disclaimer:

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. ( Member Code : 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Ms. Mamta Shetty, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The client shall not have any claim against I-Sec and/or its employees on account of any suspension, interruption, non-availability or malfunctioning of I-Sec system or service or non-execution of algo orders due to any link/system failure for any reason beyond I-Sec control. I-Sec reserves the right to pause, stop or call back any of the execution algos in case of any technical or mechanical exigency.