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!
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!
