Concept of Stop Loss and Limit price

speedmetal78 · #1 1st March 2008, 12:44 AM

Hi,

This is my first post. I did look around to check if this was already answered before posting..

On ICICI direct I see this concept of Stop loss and Limit price. When placing margin plus orders (day trading) they ask for a Stop loss price (that has to be lower than last traded price for BUY and Higher for SELL orders) and a limit price that has to be at least 5% lower/higher than stop loss.

Once the scrip hits the stop loss, they happily sell at the trigger price (and pocket the balance)..

Let me give you an example:

Few days back, I bought 100 Reliance Capital at 1932 (expecting it to go up). I set the stop loss of 1920. For 1920, a 5% lower limit price comes to 1920 - (1920 * 5/100) = 1824. I have to place a limit at 1824 or lower.

BUY = 1932
SLTP = 1920
Limit = 1824

Now it so happened the stock hit the SLTP, the order got executed and they sold my stocks at 1824!!!!!!

While my original motive of setting SLTP of 1920 was to take a max of Rs. 12 loss on the stock, I ended up with Rs. 108 loss per stock.. or overall loss of 10,800 :- (

What I was hoping is that stop loss gets triggered and the order is squared off at the next available market price. The Reliance capital never went anywhere close to 1800 range that day..

I am sure there must be a reason for this concept of Limit price and stop loss trigger (maybe to limit your losses if market is crashing very fast ?). But even in most cases (like my example) I stand to loose more than gain by setting Limit price (and that too 5%)..

Can someone explain this please. I have spent over 2 hours with ICICI phone desk but they are not able to explain the reason for the limit price..

cheers!

neomustdie · #2 1st March 2008, 07:24 AM

what can i say its your pure bad luck......

i found the service to be flawed and hence not using it.... it buy at market price and sells at stoploss triggered hit..... Margin order gives much more flexibility..... only problem is you have to place order and coverup order two times to complete both sides of intraday deal.....

What Marginplus ensures is that your loss is always near about 5% than stoploss and no more...... use Margin type to play around.... it is more flexible....

raghav1366 · #3 1st March 2008, 06:23 PM

Quote:

Originally Posted by speedmetal78

Hi,

This is my first post. I did look around to check if this was already answered before posting..

On ICICI direct I see this concept of Stop loss and Limit price. When placing margin plus orders (day trading) they ask for a Stop loss price (that has to be lower than last traded price for BUY and Higher for SELL orders) and a limit price that has to be at least 5% lower/higher than stop loss.

Once the scrip hits the stop loss, they happily sell at the trigger price (and pocket the balance)..

Let me give you an example:

Few days back, I bought 100 Reliance Capital at 1932 (expecting it to go up). I set the stop loss of 1920. For 1920, a 5% lower limit price comes to 1920 - (1920 * 5/100) = 1824. I have to place a limit at 1824 or lower.

BUY = 1932
SLTP = 1920
Limit = 1824

Now it so happened the stock hit the SLTP, the order got executed and they sold my stocks at 1824!!!!!!

While my original motive of setting SLTP of 1920 was to take a max of Rs. 12 loss on the stock, I ended up with Rs. 108 loss per stock.. or overall loss of 10,800 :- (

What I was hoping is that stop loss gets triggered and the order is squared off at the next available market price. The Reliance capital never went anywhere close to 1800 range that day..

I am sure there must be a reason for this concept of Limit price and stop loss trigger (maybe to limit your losses if market is crashing very fast ?). But even in most cases (like my example) I stand to loose more than gain by setting Limit price (and that too 5%)..

Can someone explain this please. I have spent over 2 hours with ICICI phone desk but they are not able to explain the reason for the limit price..

cheers!

i do not understand why you have given so much differ in price between
1920 & 1824. i believe you could decide sltp which is very near to your expected sale price when the market fall. in this case it should be around 1900/1910. both sltp and limit price is carried forward to the exchange and hence the price difference could only be Rs.10/15. anyhow trading in icicidirect is always dangerous because we cannot access the site at regular intervals and our orders in crucial market hours betw 2.30 &3.00 the orders get queed rather than going ordered to exchange.
beware of icicidirect. better to fix good online vendor - as icici is interested only in investor type share traders. all the very best for future trading.
regards

raghavan.

fast_rizwaan · #4 1st March 2008, 07:53 PM

I never tried margin trading with icicidirect after seeing that it only allows "Market Order" for buying. which is a good way of losing money. icicidirect want it's customers to lose money.

as with your case, your limit order will be sent to exchange when the stoploss trigger is executed. the other who have placed market buy order will get your "limit order." no wonder icicidirect put you in a loss (or they themselves have bought your shares) at the cheapest price to gain a quick advantage.

icicidirect is not good for intraday or swing trading.. you'll be feeding them 2% of your money.

and remember, more than 3% loss, is a sure recipe for financial disaster. please get a good broker with decent brokerage and fast trading platform for intraday trading.

wc2007 · #5 1st March 2008, 08:18 PM

If you have the money to hold. Never go for Stop Loss

oxusmorouz · #6 1st March 2008, 08:21 PM

Quote:

Originally Posted by wc2007

If you have the money to hold. Never go for Stop Loss

Justify please.

ratan jain · #7 1st March 2008, 08:30 PM

Quote:

Originally Posted by wc2007

If you have the money to hold. Never go for Stop Loss

Yeah sure.......

As you say

krishna23 · #8 1st March 2008, 09:19 PM

somebody STOP me...hehehe

neomustdie · #9 1st March 2008, 09:20 PM

@wc2007 : thnx... i am sitting on a pile of cash.... and i cant figure out how to lose it faster than i can imagine...... going without stoploss would be a great idea...... why didnt i think of it before.... he he...

myvineet · #10 1st March 2008, 09:49 PM

Quote:

Originally Posted by fast_rizwaan

I never tried margin trading with icicidirect after seeing that it only allows "Market Order" for buying. which is a good way of losing money. icicidirect want it's customers to lose money.

as with your case, your limit order will be sent to exchange when the stoploss trigger is executed. the other who have placed market buy order will get your "limit order." no wonder icicidirect put you in a loss (or they themselves have bought your shares) at the cheapest price to gain a quick advantage.

icicidirect is not good for intraday or swing trading.. you'll be feeding them 2% of your money.

and remember, more than 3% loss, is a sure recipe for financial disaster. please get a good broker with decent brokerage and fast trading platform for intraday trading.

I am using ICICI for margin trading & always do it with limit order.the service is not good at all . now I am thinking about religare.