How does a stop loss trigger work?

GOMZO · #61 3rd April 2010, 04:20 PM

thanks anurag,

but still remains bit confusing as you described..

gunavadhi · #62 3rd April 2010, 05:44 PM

Quote:

Originally Posted by GOMZO

thanks anurag,

but still remains bit confusing as you described..

why all this mess even after many explained about SL?you do one thing.select a good stock which trades in huge volumes.buy or sell 1 repeat ONE share.try all these types of sl there.you can see what the difference is...EASY.NA?

GOMZO · #63 3rd April 2010, 10:16 PM

ok... lets c.. thanks..
just tell one thing

i observed some days ago that
i placed an buy order for 100 Y share on limit price of rs 10/-. the LTP price came to rs 10/- but the order still remained pending. could you tell me why ? can it be happened on sale of share?

thanks

GOMZO · #64 4th April 2010, 10:04 PM

hi..

what a_anoop1 had asked in page 4 , that answered by no one.. so if someone can answer that will be helpful for me too... once again i am mentioning his question

if for share "A " present market price is Rs.100. suppose the price of A is decreasing and it reached 99 . the price is going on decreasing..now i want to buy the share A at price 95.in ordinary case i will give a limit order at 95 and buy order will be executed once price of A reaches 95.
now suppose i have opted for stop loss option for buying.price of A is 100 and its decreasing.i have given limit price as 95 and trigger price as 93.will it do any help?i mean still order gets executed (bought)at 95 right? or ,if the price of A is still falling and suppose it fell till 90(not a sudden fall straight to 90).so will the share be bought at 93?or will the share be bought at Rs.95 and sold at Rs.93 since price of A is going down?
also if price of A has fallen till 94 and then it started rising.and for the whole day its price has never come down below 94.so will the buy order gets executed at 94?

also similar doubt i have in selling the share also.

suppose i bought share A at 95 rupees.if the price is still going down and i dont want to make a huge loss. if i want to sell the share at any price between 91 and 92.so i will give limit price as 91 and trigger price as 92 right?

alsoif i bought share A at 95 and suppose the present market price of A is 105 and its going on increasing.now i want to sell it when it reaches 110 or more?so giving a stop loss order with limit price 110 and trigger price 113 will do any help ?i mean if price of A has increased till 115,then will my shares get sold at Rs113 or still at 110 only? also if price has reached only till 111 and after that it started decreasing and the whole day it never has gone above 111.since my limit price is 110 and trigger price is 113 ,will the shares get sold at 111 ?

thanks in advance..

murthymsr · #65 4th April 2010, 10:11 PM

Quote:

Originally Posted by GOMZO

ok... lets c.. thanks..
just tell one thing

i observed some days ago that
i placed an buy order for 100 Y share on limit price of rs 10/-. the LTP price came to rs 10/- but the order still remained pending. could you tell me why ? can it be happened on sale of share?

thanks

The order matching priority takes into consideration:

- Market orders

- Limit orders

- Time of placement of the limit order

It is likely that the LTP is on account of a market order or a limit order placed earlier than yours. Also the quantity available (offered) for sale at that price may not be sufficient to to cover upto your order by seniority.

Refer NSE web site for more detailed information.

sanjay1876 · #66 5th April 2010, 11:43 AM

What is Stop Loss Order?

Definition as on ICICIDIRECT.com:

A Stop loss order allows the client to place an order which gets activated only when the market price of the relevant security reaches or crosses a threshold price specified by the investor in the form of 'Stop Loss Trigger Price'. When a stop loss trigger price (SLTP) is specified in a limit order, the order becomes one which is conditional on the market price of the stock crossing the specified SLTP. The order remains passive (i.e. not eligible for execution) till the condition is satisfied. Once the last traded price of the stock reaches or surpasses the SLTP, the order becomes activated (i.e. eligible for execution by being taken up in the matching process of the exchange) and then on behaves like a normal limit order. It is used as a tool to limit the maximum loss on a position.

Please read the last line carefully. "It is used as a tool to limit the maximum loss on a position". If you do not have any positions it is of no use. You can still buy/sell setting SLTP just for heck of it(unless you are using charts and looking for breakout).

Many novice trader i've seen get confused because they think they'll be able to automatically sell the shares they buy by setting SLTP. There is no way to do it. There must always be a sell order to sell the shares, and it is where SLTP is needed.(and vice versa if you have short positions)

Maybe this helps.

riaz · #67 12th April 2010, 07:12 PM

Dear Members, I'm new to trading. Can anyone please explain the details asked in stop loss order placing window in GoTX software from Karvy. It asks like - validity, fill type, Dissc Qty, Trigg Price, Protect %... can you please help me in this aspect. Thanks a million in advance.

kaushikbanerjee · #68 2nd June 2010, 02:27 PM

Quote:

Originally Posted by dominicsp

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.
Regards
Dominic

I think u have not given stop loss correctly. Otherwise it would have been executed at 123 or slightly below it.

Anyway, let's say u bought stock ABC @ 100.
U like to sell it either at 120 (your target) or 95 (your stoploss).
U give two sell orders.
First sell order at limit price 120.
Second sell order at trigger price = 95 and limit price = 94.

But beware, if one order gets executed, cancel the other order.
Otherwise both orders may get executed if market turns in opposite direction.

kaushikbanerjee · #69 2nd June 2010, 03:02 PM

Quote:

Originally Posted by riaz

Dear Members, I'm new to trading. Can anyone please explain the details asked in stop loss order placing window in GoTX software from Karvy. It asks like - validity, fill type, Dissc Qty, Trigg Price, Protect %... can you please help me in this aspect. Thanks a million in advance.

Validity = Validity period for your order to remain in the exchange (Generally it is the current day)

Trigger Price = usually used as stoploss price.
Suppose u bought a stock at 100. If price falls u want to sell it at 95 not holding anymore.
Let the stock is now trading around 99. Now if u give sell order at 95 it will be immediately executed at current price of 99. So u have to give sell order with Trigger Price = 95 and Limit Price = 94 (or anything below 95).
Then your order to sell will be triggered in the exchange only if the price falls to 95.

For other terms see : http://www.traderji.com/beginners-gu...losed-qty.html

kaushikbanerjee · #70 7th June 2010, 12:42 PM

[QUOTE=marcus;148063]

Quote:

Originally Posted by arjunbhand

Arjun,

I am unable to understand how you placed a limit buy order of 126.50 with a stop loss trigger of 123? It has no meaning you should have placed a limit sell order not a buy order

The stop loss trigger is between the limit price and the LTP otherwise the system doesn't accept the order.

Anyway to explain the concept we will consider a buying example.

A limit buy price is the maximum price you are willing to pay, for example lets say "A" is trading at 100 and you place a limit buy at 95, this means 95 is the maximum price you are willing to pay for A.

Now lets suppose A LTP comes down to 99, you order will not be executed, after a while it comes down 98, your order will still not be executed, next the LTP suddenly drops to 95.50 your order will still not be executed, then it goes up a bit to 97 but your order will still not be executed. After this it suddenly drops to 95, at this point your order will be queued for execution and if liquidity is good it will be executed for 95.

On the other hand if it drops from LTP 97 to LTP 93 with no offers in between your order should be executed at 93 (or lower if liquidity is poor).

So a limit buy is the max price you are willing to pay for A it could even be a better price than the lmit but not "more" than the limit.

Reverse the above explanation for a limit sell order, so for a limit sell order it is the "minimum" price you are willing to sell for.

Now coming to the stop loss trigger price.

As I said it is to be between the limit price and the LTP, all it does is keep the limit order inactive till the trigger price is reached.

In the above example let us suppose you have purchased A at 95 and want to lmit your loss at 90 in other words you want to sell should the price go below 90, although it is cutrrently above 90. Now if you give a lmit sell order at 90 what will happen?

A will be sold immediately at 95 why? Because in a limit sell order the lmit price is the minimum price you will sell at, so it means you are willing to sell at a minimum of 95 or better, hence it will be sold at 95

Now if you want to protect your loss what you should do is issue a limit sell order at 90 with a stop loss trigger price at say 91. When you issue this order what will happen.?

Initially the order will remain inactive as the LTP is 95 and the trigger is 91, when and if the LTP reached 93 the order will still be inactive. Now lets suppose the LTP reaches 91, which is also the trigger so according to the definition of trigger I gave you above what will happen your order will become an active limit sell order at 90 which means 90 is the minimum you are willign to pay for A so A will be sold at 91 or 90.90 or 90.85 or any available price upto 90.

In case the LTP rapidly drops from 95 to 88 your order will be queued as a limit sell orer at 90 and your share will not be sold till the price reaches a min of 90, so u c it is not foolproof you have to monitor whats happening.

Now that you have read this you tell me what sort of order and what values you should put in if u 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

lets say "A" is trading at 100 and you place a limit buy at 95...... if it drops from LTP 97 to LTP 93 with no offers in between your order should be executed at 93 (or lower if liquidity is poor).
If u place a limit buy at 95 & that is accepted at the exchange, then the price cannot fall to 93 without executing your order first. your offer is in between 97 & 93. If 95 is trigger price, then it may not be executed.

so u c it is not foolproof you have to monitor whats happening.
If there is liquidity in the counter and u keep a little more gap between your trigger price & limit price, then such chance is negligible.

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The Following User Says Thank You to murthymsr For This Useful Post:
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riaz (21st June 2010)