How does a stop loss trigger work?

Agilent · #21 6th August 2006, 05:03 PM

Quote:

Originally Posted by cooltetra

Hi Agilent
PIB (Power India Bulls) is a trading terminal from Indiabulls. If you look at the image, you will find STOPLOSS in one of the field.
I have interpreted the STOPLOSS field in PIB to be the price that will trigger your order at MARKET price.
While placing the order at MARKET and mentioning STOPLOSS, the then market price should be less than STOPLOSS price in case of long position and more than STOPLOSS for short position.

Here the same STOPLOSS order can be used to initiate a new position as well as end an existing one.
May be this is interpretation only in case of PIB users.

I totally agree to you as far as the meaning of STOPLOSS is concerned.
However, for a PIB user, these serves the purpose of initiating a new order or cutting an old one.

By Buy Stop, I mean, a price at or above which I will like to enter a new long trade. A Sell Stop, means a price at or below which I will take a short position.

Hope I am clear.

Best Regards
Coool.

Thanks Coool, for clarifying so well. So obviously PIB's usage of this term is a misnomer .

But I wonder if the trading tactics implicit in this feature (i.e prompting a new long at a price higher than current level) will appeal to all traders. Any views on this ?

I mean ... what if the spurt which sets off such a trigger has been caused by (temporary or intraday) short covering .... this could imply altogether different technical trends rather than genuine breach (by fresh longs) of a resistance level. Latter is a bullish signal, but former isn't, am i right ?

My apologies to Trader07 for earlier critical words. If I had been familiar with PIB, I would have understood what he had been saying.

AGILENT

vince · #22 7th August 2006, 07:23 AM

Hi guys,

The concept of stoploss orders is universal and not confined to any specific broker software.

A buy stop order can be used to exit short positions or initiate fresh longs.

A sell stop can be used to exit longs or initiate fresh shorts.

For Agilents query, stops to initiate fresh positions are frequently used by traders to get into positions by placing the stop triggers above resistances for breakouts and below supports for breakdowns.

Short coverings are due to commonly used tactics used by buyers to squeeze out the sellers and drive the markets up. Whether it is temporary or not only time can tell. This however is a topic which should be taken up in another thread.

Agilent · #23 7th August 2006, 12:23 PM

Quote:

Originally Posted by vince

Hi guys,

The concept of stoploss orders is universal and not confined to any specific broker software.

A buy stop order can be used to exit short positions or initiate fresh longs.

A sell stop can be used to exit longs or initiate fresh longs.

For Agilents query, stops to initiate fresh positions are frequently used by traders to get into positions by placing the stop triggers above resistances for breakouts and below supports for breakdowns.

Short coverings are due to commonly used tactics used by buyers to squeeze out the sellers and drive the markets up. Whether it is temporary or not only time can tell. This however is a topic which should be taken up in another thread.

Thanks Vince... very well explained. Misnonmers will generally confuse everyone.

AGILENT

KoKloxKlon · #24 14th February 2007, 11:19 PM

Trader9 and Avinash,

Thank you for lessons on stoploss. I am new to this forum

I purchased Sasken at 525. Rightnow it is around. I want to sell it at around 550.

So can I do the following in ICICI Direct

Sell Sasken Stop loss trigger 549 Limit price 552
Sell Sasken Stop loss trigger 549.5 Limit price 551.5
Sell Sasken Stop loss trigger 550 Limit price 552

Is there any way I can avoid the sell if the price is rising from here and sell it only if it is going down from here

NAVEEVIa · #25 15th February 2007, 01:13 PM

I hv a query on the subject
Many times it happens that the stock moves so fast that after hitting the trigger price , it moves past the limit order without it getting executed & ur losses just mount.
So my question is does it matter hw much sperate i keep the limit price & trigger price
e.g.
say i bought shares at 100
put a stoploss with trigger 95 & lmit sell at 94
Now my question is if i put 93,92, 90 or even 80, does it matter
What i mean to say is that once my trigger gets hit i want the order to be a market oder to sell, Now the best way to achieve that is to give a very low sell limit say 90 so that order is executed.
Am i wrong in my reasoning
Seniors plz correct
Naveen

jnsunkersett · #26 7th March 2007, 03:33 PM

It seems "stop loss" trigger price makes sense only in case of a SELL transaction.
It seems meaningless in buy.

Please correct my understanding.

~g1

vince · #27 7th March 2007, 06:57 PM

Quote:

Originally Posted by jnsunkersett

It seems "stop loss" trigger price makes sense only in case of a SELL transaction.
It seems meaningless in buy.

Please correct my understanding.

~g1

It seems that you have never been short before.

It is also used to enter long on the break of resistance levels.

Regds

RSI · #28 7th March 2007, 07:33 PM

Quote:

Originally Posted by NAVEEVIa

I hv a query on the subject
Many times it happens that the stock moves so fast that after hitting the trigger price , it moves past the limit order without it getting executed & ur losses just mount.
So my question is does it matter hw much sperate i keep the limit price & trigger price
e.g.
say i bought shares at 100
put a stoploss with trigger 95 & lmit sell at 94
Now my question is if i put 93,92, 90 or even 80, does it matter
What i mean to say is that once my trigger gets hit i want the order to be a market oder to sell, Now the best way to achieve that is to give a very low sell limit say 90 so that order is executed.
Am i wrong in my reasoning
Seniors plz correct
Naveen

Hi Naveen

I am not a senior member. But still, I feel that I must share whatever a little I know on the strategy advocated by you. Hope you do not mind it.

Firstly, be clear about the expression "execution price" and "trigger price". Execution price means (in the sale example quoted by you - in case of buy example it is just reverse) you are prepared to sell the share up to the price quoted by you as execution price. Say if you put the trigger price at Rs. 95/- and execution price as Rs. 91/-, that means, if the trigger price of Rs. 95/- is touched (this is the first and basic condition) you are prepared to sell the share if it quotes anywhere in between the trigger price and execution price. In your example Rs. 95 and Rs. 91.

Secondly, please note that this is a "stop loss" order. That means it should be placed depending upon your ability to take losses. If you place it at a wrong place, you may have to take bigger loss than what you originally planned.

In case of heavily traded stocks say reliance, rcom etc. the spread between the buy and sell are very very narrow. So, in case of heavily traded stock, even if you put theexecution price at 94 or 93, all in all probability, your order will be executed just below the trigger price.

In case of thinly traded stocks, there is a great danger in putting the execution price as described you. The buyer may be just at the execution price quoted by you. So if you put the execution price at Rs. 91/-, your share will be sold at Rs. 91/-. If you put the execution price at Rs. 80/- and if the immediate buyer is at Rs. 80/- or Rs. 81/-, your share will be sold at the price quoted by the buyer. On the other hand, if you put the execution price at Rs. 94/-, and the buyer is at Rs. 90/-, your shares will not be sold eventhough the price quoted by you as "trigger price" is triggered. Your order will be converted to market order only when the buyer comes to Rs. 94/-.

Hope this reply satisfies you.
Regards
R. S. Iyer

therockind · #29 17th April 2007, 08:25 AM

hi guys, i am new to trading i was confused with sl .

thanks guys for your info

arjunbhand · #30 21st January 2008, 04:46 PM

[quote=dominicsp;53473]Dear All,
I'm new to trading and I was wondering if someone could help me understand this concept of stop loss trigger.

Today I bought Inox leisure at a limit price of 126.50 with stop loss of 123. The price of the stock is 121 now. What was the stop loss suppose to do, sell my stocks at 123 or send me some kinda alert??

I had assumed that the broker would sell it at the stop loss defined by me

What do I do if I would like to buy a stock say at 100 and would like to sell it either when I get a 20% margin at 120 or I can bear a loss of 5% so 95.
Re

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