Can you explain the types of Stop Loss orders and its significance?
Sign Up to our stock-market-based Q&A Platform to ask questions, answer people’s questions, and connect with other people.
Login to IndianStox.com (Q&A Engine) to ask questions, answer people's questions & connect with other people.
Lost your password? Please enter your email address. You will receive a link and will create a new password via email.
There are two types of stop loss orders
Stop Loss Limit Order (SL):
Stop loss is nothing but the opposite order of your position. For instance if you have placed a buy order, then the stop loss order will be the sell order and vice versa.
Stop Loss Limit Order is the order which executes between given price and trigger price.
Ex: You have sold Reliance share for 2100 Rupees. Now your stop loss order will be buy order. Let’s assume your trigger price is 2110 and the sell order value is 2115.
From the above example, you are giving an instruction to the system that if the share value hits 2110, then buy the share between 2110 and 2115.
In this case, the system will not buy the share if it crosses the price 2115.
Stop Loss Market Order (SL-M):
In this case you will give only trigger price, there is no upper limit. If the share value hits the trigger price, then the system will buy the share at current market value.
Let’s say your trigger price for the Reliance share is 2110, the system may buy at 2110, 2115 or 3000. After hitting the trigger price, it immediately execute the order with the current market price of that particular share.
So, in this case there is a chance of losing money more than you expected.