Should traders have stop losses? How do they work?

#1
I have an Icicidirect.com account. When I want to buy a scrip AT Icicidirect(and go to the BUY page), I see two columns at the bottom: DISCLOSED QUANTITY and STOP LOSS TRIGGER PRICE. Now what are these columns for?

I watch CNBC news and go ahead from there(and also tradersedgeindia picks). Most of the times, I hear someone say "buy xxx company shares, for yyy price, with a zzz STOP LOSS". The first two things are ok, but I am not sure about how stop loss concept works. If I decide to have a stoploss on infosys at 1550, then what I thought till now is that I should keep tracking live market price and if I witness a fall below 1550, then I should MANUALLY sell the scrip below the stop loss price(1550). But recently I read that stop loss price triggers selling automatically (without me selling it manually) after its level is breached. Now what does this mean? Does Icicidirect sell the scrip for me AUTOMATICALLY if the scrip falls below stop loss price?

Can someone tell me the exact working of this stop loss concept? It will be a real life saver and this information will certainly help new traders like me(I started in June this year).
 
#2
hi,
Stop loss is a risk management tool.Whenever u enter a position you must know what would be the risk you wish to take in the trade.For example,If you buy Oriental bank at Rs238, for day trading, then u may fix the stop loss at Rs.235 which means u lose only 1 percent of your capital and you must know that the trend has changed and that's why you have been stopped out.
Next talking about ur online trading, if you place the stoploss trigger price in the stoploss column of ur screen it means that you have placed an order to sell the shares at the price u have fixed.Therefore if the last traded price is at or below ur trigger price the order gets executed.Hence your trade gets stopped out.
As far as position trading is concerned (delivery based trading) whwn the pre determined stop loss has been breached you make close the trade manually.ie,If the price closes below thw stop loss level you may sell it on your own.
Thus stop loss protects you from huge draw downs of your capital.
I think i have briefed it to my ability.If you still have query direct it to the moderator.
Bye,
 
#3
Suppose I buy Reliance share at Rs.430 in September. The share falls to Rs.390 in October. I have a stop loss at Rs.400

Now my question is:

If I have ICICIdirect account and while buying the share, I fill the STOP LOSS TRIGGER PRICE column with Rs.400 (my stop loss price), then will the share be AUTOMATICALLY sold out(by ICICIdirect) or should I sell it MANUALLY? (after the price falls below Rs.400)

I am NOT talking about day trading.
 
#4
Yes you have to FILL in the stoploss trigger price and also the limit price.

I guess you have to do this every day.
 
#5
Neal said:
Yes you have to FILL in the stoploss trigger price and also the limit price.

I guess you have to do this every day.
Everyday? No. I am NOT talking about Day Trading. I am talking about short term trading (1 to 4 months), or simply trend trading.

1] Suppose I buy Reliance shares at Rs.430, in August. My stop loss in mind is at Rs.400. While buying the shares, I enter Rs.400 in the STOP LOSS TRIGGER PRICE column.

Now in November, the price falls to Rs.390. So will my shares be AUTOMATICALLY sold by icicidirect? Or still am I supposed to sell my shares MANUALLY?

2] My concern is that if something like september9/11 or harshad mehta/ketan parekh scam, occurs then the prices fall STEEPLY. Now if I am travelling or busy for a few weeks and am not able to login to my icicidirect account(or maybe not able to track the market prices), then how can I minimize my losses? Will stop loss trigger price help?

Your comments will be helpful. Thanks in advance.


3] PS: What is this "Disclosed Price" column that we see while buying at icicidirect?
 
#6
onlinetrader said:
Everyday? No. I am NOT talking about Day Trading. I am talking about short term trading (1 to 4 months), or simply trend trading.

1] Suppose I buy Reliance shares at Rs.430, in August. My stop loss in mind is at Rs.400. While buying the shares, I enter Rs.400 in the STOP LOSS TRIGGER PRICE column.

Now in November, the price falls to Rs.390. So will my shares be AUTOMATICALLY sold by icicidirect? Or still am I supposed to sell my shares MANUALLY?
As far as I know the stoploss order is only good for the day. If you want it for a longer period you will have to enter a "Good Till Cancelled" order. Please check with icici if they offer this feature.

3] PS: What is this "Disclosed Price" column that we see while buying at icicidirect?
This is actually "Disclosed Quantity" and not as you mention. It is the amount of shares you would like to disclose on the trading terminal. You can set this figure to be the same as the quantity figure.
 
#7
1] Suppose I buy Reliance shares at Rs.430, in August. My stop loss in mind is at Rs.400. While buying the shares, I enter Rs.400 in the STOP LOSS TRIGGER PRICE column.

Now in November, the price falls to Rs.390. So will my shares be AUTOMATICALLY sold by icicidirect? Or still am I supposed to sell my shares MANUALLY?
You have to enter the STOPLOSS price everyday.The reason being that it essentially is the order which gets executed the momemt trigger price is reached for that day otherwise the stoploss order gets expired with day closing . Hence you need to put your stoploss order everyday.

2] My concern is that if something like september9/11 or harshad mehta/ketan parekh scam, occurs then the prices fall STEEPLY. Now if I am travelling or busy for a few weeks and am not able to login to my icicidirect account(or maybe not able to track the market prices), then how can I minimize my losses? Will stop loss trigger price help?
There is no way (as far as my understanding goes) to acheive this goal of yours.
However this could be a very good idea for all the ONLINE broking site so that they could provide us a facility where stoploss is entered on the weekly basis .The biggest problem I see in this that it involves lot of overwork considering the fact that the broker needs to place the order on your behalf everyday.(The BORKER can provide this for a charge though?what say guys?)
 

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