BLOCK TRADING 

What is Block trading and how to make profits through Block trading?

In addition to our normal trading, there is a another trading method called 'BLOCK TRADING'. Block trading refers to transactions with large trading volume in the primary market. It usually involves the buying and selling of large quantities of stock or other securities.

Block trading is typically executed by large institutional investors, fund managers or experienced traders. These institutions and individuals often have extensive market experience and expertise.  The purpose of participating in Block Trading is typically to meet specific investment strategies or requirements.

Block Trading is different from regular trading method.  First, its trading time is usually within one or two hours after the market closes on same day, rather than during trading hours.

Second, its trading method is typically over-the-counter (OTC) rather than open market trading. The parties to the transaction can negotiate the price and terms of the transaction before the transaction takes place and the transaction volume is typically large. The price of block trading is typically determined through negotiation.

Some people might ask whether ordinary investors can use ordinary demat accounts to conduct Block trading.

The answer is yes, but you must first have at least 20 million rupees in capital and have access to block trading resource information. Therefore, it is difficult for ordinary investors to participate.

Why is there this Block trading trading method?

When a major shareholder of a company wants to cash out in a short period of time, they must choose this Block trading method.

1. If he chooses to sell the stock through ordinary trading, there will be a large number of sell orders in the trading market, which will definitely lower the stock price in a short time, causing great losses for other companies.

 2. Since he wants to cash out and exit the market in a short period of time, but the market liquidity is insufficient, there is not enough trading volume, that is, there are not enough buyers, so it is difficult to complete the transaction in a short period of time.

 3. To ensure the smooth execution of the transaction and maintain market fairness, the other party to the transaction must be a major institutional investor or an investor who meets certain standards.

Block trading plays an important role in the capital market, providing flexible trading methods for major institutional investors to meet investment needs and strategies. In addition, block trades may have an impact on the market, particularly the price and liquidity of the stocks or securities involved.

 How is the trading price of Block trading determined?

The price is determined through negotiation between the buyer and seller. Generally, the price range is 85% to 95% of the closing price on the day of the transaction, and the transaction is conducted as a Block trading.

E.G. to better understand: Suppose a stock has a closing price of 100 rupees on the day of trading, and a block trade of 1 million shares is conducted after the market closes at a price of 90%, or 90 rupees per share. In this case, the buyer can purchase 10 million rupees worth of shares for only 9 million rupees, while the seller can complete the entire transaction and receive 9 million rupees in funds within an hour.

 In regular trading, when the stock price is 100 rupees, a 5% increase in the stock price will result in a profit of 5 rupees per share.

However, by purchasing the stock through block trading at a price of 90 rupees or even lower, you can immediately earn a 10% profit upon purchase. This means that by the time the stock starts trading the next day, you have already made a profit of 10 rupees. When the stock continues to rise by 5%, your profit will increase to 15 rupees.

Overall, Block trading plays a significant role in the capital market, providing both institutional and individual investors with a flexible trading mechanism to meet their specific investment needs and strategies. It is a win-win trading approach.

 If we have the opportunity to purchase a block of shares through block trading during the after-hours trading session, we will immediately make a profit, regardless of whether the stock price rises or falls when the market opens the next day. If the stock price rises the next day, our profit will be even greater. Even if the stock price falls, we will only lose a portion of our profit.

Therefore, this is the secret to why Block trading can be 100% profitable.