Stop Loss

By Research Desk
about 7 months ago
1

Stop Loss is a type of order which is placed by a trader with his broker when the trader wants to restrict the downside / loss on the buy trade. The order will get executed only once the price is triggered. While it is usually placed on orders in which a trader has a long position to limit the loss incase of a negative movement on the stock price, it can also be placed on a short position by a trader to buy shares if the price moves upwards after a trade.

For example: A trader has bought 1000 shares of Coal India at Rs.250 per share on 1st April 2019. He puts a stop loss order at Rs.240 making to make sure that the loss is limited to Rs.10,000 [(250-240)*1000] in case the prices fall from his buying price.

Due to the nature of the stop loss being short term, this is recommended for traders and not on investments.

Popular Comments

No comment posted for this article.