What is the trigger price in stop loss order?

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There are many technical terms in the field of stock broking that need to be mastered to accrue desired profits. Among various technical terms being used in stock trading scenario, one is stop loss order and its trigger price. This is why it is often said to choose from the top 10 stock brokers in India who can understand your investment objectives and create a custom stock portfolio just for you. Whether you are new to stock investing or have been doing it for years, it is necessary for you to have the complete knowledge about the trigger price in stop loss order.

In this article we have mentioned all aspects related to trigger price and stop loss So, let’s find out the same in the following post.

What is a stop loss order?

A stop-loss order simply refers that you provide commands via a trading platform. that the system must automatically sell your stocks when the price reduces to or below a certain level. In case of short placements (when you seek profit from the reduction in price), the stop-loss comes into action when the price goes up at a pre-set stage.

You can understand stop loss order via an example that we have listed below –

This pre-defined level can refer to a price or a fraction amount. If it’s a price number which means it’s the price you want your stop loss to be performed. If it’s a percentage figure then it emerges from the percentage amount of your buying/selling price. Whether you are ready for stock investing or have been doing it for years, it is necessary to understand the trigger price in stop loss order.

For more understanding, consider the following example.

You purchase the share of Apple for INR 300 and you don’t want to lose more than 10% of this amount. 10% of INR 300 goes to $20. You reduce this amount from the buying price of $300 which is $270. This simply means you can choose to sell your Apple share if the share price touches INR 270. This refers to your stop-loss price.

What does the trigger price mean in a stop-loss order?

The trigger price refers to the price level at which you want your stop loss to be carried out. It is also known as the stop-loss price, typically measured as the percentage of the original buying/selling price.

According to the best demat account provider in India, “a number of trading platforms enable stock investors and traders to define this as a percentage (10% in the given example), while many other trading platforms enable investors to put in the precise price figure (INR 270 in the given example).”

What is the difference between stop-loss and stop-limit?

Most stock traders will sometimes enter stop orders to restrict their possible losses or to seize profits on price changes. These kinds of orders are pretty much common in stocks and particularly in forex trading where small changes can lead to significant gains for stock traders, but are also useful to a typical investor with stock, forex or option trades.

  • Stop orders are primarily employed by traders to restrict weak losses, where a sell-stop order safeguards long locations by instigating a market sell order if the price drops below a specific level.
  • Stop-limit orders are a kind of stop-loss, but when it reaches the stop price, the order is turned into a limit order rather than a market order, only performing at the limit value or better.
  • The only downside of a stop-limit is that the stop may be activated but the limit is not, leading to no execution.

This kind of order, given the limit price entered, could lead to being instigated but then not fulfilled. It is totally practical that the price could go through the limit price before the submission of the entire order making the trader left with other shares at a much bigger loss than expected.

You may also like to read: Want to Invest? Find out If You Really Need to with These 6 Ways

FAQs about trigger price in stop loss order

Can market drivers notice stop-loss order?

Your broker can act as the market driver too and in such a scenario, they would surely be able to see your stop loss. More often stock brokers sell this information to high-frequency traders.

Can other traders check my stop-loss?

No. Neither you would be able to see other trader’s stop-loss not they would be able to see yours across different exchanges.

Should long term investors utilize stop-loss order?

Long term investors typically don’t make the use of stop-loss order as they remain less influenced in short term price variations.



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Sunday, 03th July 2022
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