What is Stop Loss Order?
Fixing the loss during any trade is known as stop loss. While trading the stock, index, currency and commodity you can fix a loss and place the order which is called as stop loss orders.
Consider, for example, you bought a lot in the nifty future for 6000 and decided to sell that lot if nifty future decreases to 5900 i.e. (Nifty lot size is 50 *100 = 5000). Now you can place sell stop order with price 5895 and trigger price as 5899. Your order will not be sold even if the nifty future trades at 5900. If the nifty future trades at 5899 then your order will be sold between 5899 – 5895. The difference between the price and trigger price can be defined as per your wish. As per sell stop order the selling price should be low and the trigger price should be high.
Select Nifty Future > Press F2 > Change Order Type to SL > Change Price 5895 > TrPrice 5899 > submit
Explains of Buy Stop Loss Order?
Suppose if the investors assumed that the market will come down and if they go for short sell of nifty future 6000 then you can place the stop loss order as defined below. If an investor decides loss is 5000 rupees, then they should place the order with price as 6105 and trigger price as 6101. As per buy stop loss order buying price should be high and trigger price should be low. If the nifty future trades above 6101 then your order will be concluded between 6101–6105. The amount of loss or profit has to be decided by you. According to that stop loss order and book profit order can be placed.
Select Nifty Future > Press F1 > Change Order Type to SL > Change Price 6105 > TrPrice 6101> submit
Why should trade with Stop Loss?
Stop loss plays an important role in trading. Investors may gain or may not, but definitely everyone should avoid the loss and for that stop loss is an essential thing. A good trader will definitely use stop losses, because all the profits gained slowly will go in a single trade. In trading whether we may be calculating the profit or not we need to know the amount of loss we could face. That is the correct way of trading.
Benefit for Stop Loss?
After placing stop loss there is no need to panic. If you place stop loss it will make you to trade low volume, which gives ample time to think and decide. Your capital will not decrease immediately and for minimum loss you have to place a stop loss. Due to this you can gain maximum profit and minimum loss.
Stop Loss Not Triggered?
Stop loss not triggered is not a major issue, but many traders are not aware of this completely. For example, if an investor buys 1000 ITC stocks for rupees 305 and place a stop loss order for 301 and the ITC stock gradually decreases from 305 to 304, 303,302 and to 301.50 and at that time if a trader sell 1, 00,000 ITC stocks at a price of 300 then the stop loss placed at 301 will not be triggered. Again, when ITC stocks return to 301 the order will be sold as if it decreases below 300 then the loss amount will be huge. In order to avoid this try to give ample space between the price and the trigger price.
Why Stop Loss is not triggered?
While placing the stop loss in index, stocks and commodities based on the volume and volatile the gap between the price and trigger price is decided. We may increase or decrease the gap depending on this. The stop losses have to be handled efficiently when there are election results or some financial data announcements. Mostly during this time the stop loss will not get triggered.