Maximizing Profits and Scalability: The Best Bulk Deal Strategy

In the stock market, a bulk deal/block trade refers to a transaction involving the purchase or sale of a significant quantity of shares of a particular company in a single trade. These deals typically involve institutional investors, such as mutual funds, insurance companies, banks, or other financial institutions. Unlike regular retail trades, which involve smaller quantities of shares, bulk deals involve large blocks of shares being bought or sold at once. Today, we’ll be shedding light on an important aspect of the market known as “bulk deal strategy.”

Bulk Deal Strategy :

Block trades/Bulk deals are very important because large investors or promoters are involved in it. Through these kinds of deals the investors or promoters sell from a range of 0.5%-5% stake in the companies. Largely it is about buying the rumor and selling on the news. Under the bulk deal strategy we are generally looking for an induced swing trade opportunity where there is an opportunity due to the news created by the block trade/bulk deal activity.

Create Watchlist :

The best part of block trade strategy is that here you don’t need to create a watchlist. Here you don’t need to do research for hours. This is because bulk deals always happen in different companies and these block deals are to be announced in advance. Block trades are to be notified to the exchanges earlier than the day of trade. So, you can pick the stocks from exchanges’ websites and use them rather than making a list by thorough research.

Market Trend :

Basically we have learned that trend is your friend. But in this strategy you don’t need to focus on the trend so much. Even if a market is consolidating or in Neutral trend you can use this strategy. But only if you have properly learned it. In the downtrend we should use it cautiously otherwise if the market is constant or in uptrend and the stock is good then we can use the bulk deal strategy and make maximum use of it.

Entry :

Now when we have stock in focus and trend has been understood then the question arises that when to enter in the stock. So, your entry point should be near the price of block trade. It should not be more than 1% above the block trade price. If you get it at the same price or below that then it is an advantage for you. But if it has rallied before your purchase then you should avoid it.

Target :

In general block deals happen at 4%-6% below the current market price of the stock. So, we should make our target according to that. In intraday as a safe trader you can make 2% target but if the stock has picked up a good move then you can put the target up to 3%. If you want to take it as a swing trade then definitely for the next 3–5 days you can put its target of about 5–6%. If you see a fundamental strong share then you can book half and trail the rest according to your own strategy.

Stop Loss :

Stop Loss, the very important part. It is usually seen that under the strategy when we are trading bulk deals the stop loss is not triggered as once the pressure of the bulk deal is lifted and the stock starts showing in an upward move. But keeping stop loss is always necessary. Stop loss will be 2% below the bulk deal price for the traders who are doing swing trade. It should be 1% below the bulk deal price for the intraday traders.

Exit :

If the stock is maintaining its Average Traded Price then holding it is not a bad idea. But generally swing traders can hold it for 3–5 days or more if the stock has strength of fundamentals and volumes in trading. Also as a safe trader if your target or stop loss whichever hits first then also you can take exit from the stock. Don’t play a hoping game with the stock. Most of the time we see that the stock generates target returns on the day of bulk deals itself.

Position Sizing :

Position sizing here means how much you should invest in a particular stock or strategy. So, for that we should never invest more than 10% of our capital in any single stock. Also don’t invest more than 25% of your portfolio in a single strategy. You should keep in mind that you will not lose more than 0.5%-1.0% of your capital in one trade.

Examples :

Star Health had a bulk deal on 12 Jul 23 at Rs. 612. It made a low of 610 and bounced well. It made a high of 636 that day and was given 4% the same day after the bounce.

The HCC bulk deal happened at 19.28 and stock traded near this price till 13:30. And after that shoots up in the last 2 hours more than 10%.

Conclusion :

So, finally if we come to conclude our Bulk Deals Strategy then we should always use it after learning it properly and also back testing it. Without being backtest the strategy doesn’t invest large amounts in any stock or trade. If you are a beginner and just started the stock market journey then you should learn the strategy properly and trade with very small amounts and have conviction on strategy in your own way.

There is no such thing as a 100% success ratio. The strategy can fail and your stop loss can hit. We shared it just for educational purpose. Consult your financial advisor before investing or do your own research and analysis before applying the stock. We have used it also but remember that it is only used in stocks where big block trade happens and it happens at a discount price of 4–6%.

Pro Tip :

If the bulk deal is happening very near to its current market price then we should try to avoid it because returns will not be in your favor at that time. Also if a block trade is happening at a good discount but in opening you can’t see discount on stock then also try to avoid it. Avoid deals of fundamentally poor stocks. We request you to not put your big capital in this one strategy, especially without back testing it properly.

Learn More :

Thank you for reading Buffett Money’s guide on the Bulk Deal/Block Deal strategy. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

• Penny Stock
• High Growth Stocks
• Dividend Yield Stocks
• False Breakout Stocks
• Fundamentally strong stocks
• AI impact on Algo Trading
• 5 Best Stocks
• Averaging Down Strategy
• Moving Average Strategy
• Methods of Stock Market Prediction
• 5 Best Stocks for July

Thank You

Happy Investing