stop loss question

guys,
i need some clarification from you regarding limit price and stop loss for entering an intra day short position.

for instance - if a stock is trading at 100 and i am expecting it to fall to 96 - can i place a short sell limit order at 104 with a stop loss of 98.5 so that it does not sell above 104 or below 98.5 ? Is this the right way to go about it given my intention and will it be accepted by the system and executed as stated above?

In effect it should convert into a market order immediately after i place it as its currently trading at 100 but it should not execute beyond the limit price and stop loss.

btw i trade with sharekhan.

any help appreciated...
thank u

This is to inform you that a Stop Limit order is made if you want to minimize losses.

For e.g. If you have built up position, and the prices of these shares start falling you would want a safety value to unload your stocks. What you can do in such cases is place a stop loss order. A stop loss order is independent of any existing orders that you may have.

A Stop Limit order can be a limit or a market order. Such an order gets released to the exchange once the trigger rate is reached.

Trigger Rate:

Trigger rate is the rate at which you want to activate your Stop Limit order. Till the time trigger rate is reached, your order is stored in Special Attribute Order Book & once the same is reached, your limit or market order is generated into the Regular Lot Book.

Kindly note that there are two types of order books i.e. Regular Lot order book & Special Attribute order book.
Regular Lot order book stores all normal Limit & Market orders, while in Special Attribute order book all orders with special attributes like Disclosed Quantity, Stop Limits are stored.

For e.g. If you have bought 100 shares of Reliance industries @ Rs.300/- & you want to cut down your losses to the extent of Rs.270/- i.e. if Reliance industries reaches Rs.270/- you want to sell them off.

In this case you have to place orders in the following manners:

1. Click Stop Limit Order Box.
2. In the trigger rate specify Rs.275/-.
3. At the same time you have to place a limit rate of Rs 270/-

OR

2. In the trigger rate specify Rs 270.
3. Instead of specifying limit you can select market.


Execution:

If you have specified a limit rate, & once the trigger of Rs 275 is reached, your limit order will be generated into the Regular Lot order book & your trade will be executed at any rate between Rs 275 to Rs 270.

If you have specified a market rate & once the trigger of Rs.270/- is reached, your market order will be generated into the Regular Lot order book.

So what happens if i set the trigger on Rs. 270 and the price of the stock falls straight from 276 to 269. Will the sell still be activated?

Your system will show Sell at 270 pending, and the market can continue to slide! You will have to manually edit the Sell order to sell it at CMP! This happens a lot of times. You can set the Trigger to 270 and limit the Sell to say 269, the moment stock trades at 270, your Sell order comes into the sytem to Sell at 269, if market is say 269.50, it gets sold at that rate, however if market jumps down to 268.9, your order remains pending and will sell only at 269.

In case you give a Trigger rate at 270 and sell rate at market, still at times your Order can remain unexecuted. It so happens, when the stock sells at 270, the market we expect it to be 270, but it may not be true always, as the Buyer at 270 exhausts his quantity and next buyer is at say 269, so your order enters the market to sell at 269, however here if someone already has order to sell at 269 prior to your Sell getting activated, his order is Sold and if after that there are no buyers at 269, your Order remains pending, as it owuld not change to 268.90 automatically, you have to intervene manualy to change it!

Sorry... cannot do better in writing, weak in english!!.. may try to reply specific query!!

Metatrader, Trigger just means that, it will trigger a sale. When a stock reaches the trigger price, the sale order is given. Sell price says at what price to sell.

Let me give you an example with a big difference between sell and trigger prices just to make it clear. If the trigger price is 100 and the sell price is 90, the sale will be triggered when the price reaches 100 but the sale will not be executed if the price drops to 89.

E.g. Lets say at the point in time when your sell order was triggered, Pending BUY orders placed by different buyers at NSE for this stock are as follows:
100 shares for 91
50 shares for 94
1000 shares for 89

When your Sell order is triggered, 150 shares will sell, the rest will be pending waiting for the price to come up to 90.

Hope I havent caused more confusion