Knowledge Centre

  • Knowledge is power
  • Information is liberating
  • Education is the premise of progress, in every society
Equity | February 08
What is Stop- Loss and How it works?

What is Stop-Loss and How it works?

Before we start talking about stop loss, let’s have a brief about what is trading as  "Stop Loss" order is related to trading. As you all know trading is buying and selling of goods and services.

In stock market, trading means buying or selling of stocks, currencies etc. There are few ruleswhich a trader must follow in stock market to be a successful trader. A Trader must have a vision about his trade like what is the target price where he will exit or if he is losingmoney,where he will book the losses.

Now let’s talk about our topic “What is Stop Loss”.

In simple terms, stop-loss is an automatic order given by the investor to buy or sell a financial instrument once its price reaches a specified level. In otherwords, the investor will book losses and square- off the trade. This specific price is also known as “the stop price.”

This order is executed automatically, which means you don’t have to monitor your deals constantly. Stop-loss also depends the upon the risk appetite of an investor or trader. Trader mostly prefer short stop losses as trading is their day to day activity , whereas short term investors are ready to wait on their stocks and  prefer deep stop losses which depends upon their conviction on the stock .

“Stop Loss” not only saves your time but also protects you against excessive losses. More than that, it enables you to pay attention to the other things in life.

What are the Advantages and Disadvantages of Stop-Loss Orders?

Stop-loss orders help you minimize your risk. You can decide what amount you are willing to risk. They also enable you to monitor multiple deals at the same time, enhancing the entire process of monitoring of deals.

Talking about disadvantages,your losses get booked but to be a successful trader stop loss is a part of trading discipline which every trader must follow.

How Stop-Loss orders work?

Suppose that you have 1000 shares of a company’s stock, which you purchased at the rate of INR 105 per share. Now you expect the stock prices to hit INR 120 per share in the near future. But you are afraid of having to bear huge losses if things don’t turn out to be the way you’re assuming.

In such a case, you can instruct your broker to fix a stop-loss order at INR 100 in your account. This means if the value of the stock falls to INR 100, the trading system will automatically sell your shares.

However, if the stock prices go up as per your expectation, you will make good profits.

Basically, a stop-loss order helps you manage your deals and funds effectively while restricting your losses to a certain specified level.

If you still have doubts about stop-loss orders, you can connect with our financial experts at helpdesk@myfindoc.com.

COMMENTS

No Comments Found

Contact Us

img
img
img
img
img
img
img

Important Message The information contained in this file is provided for informational purposes only, and should not be construed as legal advice on any matter. The content and interpretation of the law addressed herein is subject to revision. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this file to the fullest extent permitted by law. Every effort is made to avoid errors. In spite of that, errors and discrepancies may creep in. It is expressly stated that neither Findoc Investmart Private Limited nor any of the contributors of updates will be responsible for any damage to anybody on the basis of this document. Readers are, therefore, requested to cross check with the original sources e.g. Government publications, Orders, Judgments etc., before taking any action or making any decision. These services are being provided through our group companies Findoc Capital Mart Pvt Ltd and Findoc Finvest Private Limited

Attention Investors
  • 1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.
  • 2. Update your mobile number & email Id with your stock broker/depository participant and receive OTP directly from depository on your email id and/or mobile number to create pledge.
  • 3. Pay 20% upfront margin of the transaction value to trade in cash market segment.
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries forrefund as the money remains in investor's account."
Prevent Unauthorized Transactions in your demat account --> Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactionsin your demat account directly from NSDLon thesame day......................issued in the interest of investors."

Findoc Commodities Pvt. Ltd.

Registered Office :

4th Floor.Kartar Bhawan. Near PAU
Gate No.l. Ferozepur Road, Ludhiana -141001.

FINDOC INVESTMART PVT. LTD./FINDOC FINVEST PVT LTD.

Registered Office :

SCO 210-211, Sector 34-A Chandigarh-160022

Corporate Office :

4th Floor, Kartar Bhawan, Near PAU Gate No.1, Ferozepur Road Ludhiana -141001.