A stop loss (SL) order is a buy or sell order, but what makes it different is that it can help you limit the risk in your trade. For example, if you have purchased a stock for Rs. 200 and you want to limit the losses at Rs. 190, you can place an order in the app to sell the stock as soon as the stock price comes down to Rs. 190. In simple words, what you are doing is putting end to further losses.
There are two types of stop loss orders.
- 1. SL order (Stop-Loss Limit) = Price + Trigger Price
- 2. SL-M order (Stop-Loss Market) = Only Trigger Price
Scenario 1 – If you have a buy position, then you will keep a sell SL.
Scenario 2 – If you have a sell position, then you will keep a buy SL.
In Scenario 1, if you have a buy position at 200 and you wish to place an SL at 195.
SL order type – You will place a Sell SL order with price and trigger price. Since your order needs to be triggered first, the (trigger price is greater or equal to price.) Here, this order type gives you a range of the stop loss.
SL-M order type – You will place a Sell SL-M order with trigger price of Rs.195. When the price of Rs. 195 is triggered, a sell market order will be sent to the exchange and your position will be squared off at market price.
In Scenario 2, if you have a sell position at 200 and you want to place a stop loss at 205.
SL order type – You will place a buy stop loss order with price and trigger price. Since your order requires to be triggered first, (the trigger price is greater or equal to price.) Here, this order type gives you a range of the stop loss.
SL-M order type – You will place a buy SL-M order with trigger price of Rs.205. Here, when the price of Rs. 205 is triggered, a buy market order will be sent to the exchange and your position will be squared off at the market price.
Here's a video explaining how you can place stop loss orders in the Kotak Neo app.