Managing risk is a cornerstone of successful trading, and one of the most effective tools at your disposal is the stop loss order. Whether you're a beginner or an experienced investor, understanding how to properly use stop loss (SL) orders can help protect your capital and improve your overall trading strategy. This guide will walk you through everything you need to know about stop loss orders — from basic definitions to practical examples and real-world applications.
What Is a Stop Loss Order?
A stop loss order is a type of conditional trade instruction that automatically triggers a market or limit order when a stock reaches a predetermined price, known as the SL trigger price. The primary purpose of this tool is to minimize losses or lock in profits by exiting a position once the market moves against you beyond a certain point.
Unlike regular market or limit orders that are placed directly into the market book, stop loss orders reside in a separate stop-loss book until the trigger price is hit. Once the live market price reaches the specified trigger level, the order activates and moves into the market book for execution.
This automation removes emotional decision-making during volatile market swings and ensures discipline in your trading approach.
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Where to Find the Stop Loss Feature
Most modern trading platforms include a stop loss option under Advanced Order Settings. Here’s how you typically access it:
- Select the stock you want to trade.
- Enter the quantity and choose your order type (buy/sell).
- Click on "Advanced Options".
- Choose "SL - Stop Loss Order".
- Set your SL trigger price and, if applicable, your limit price.
Once configured, the system monitors the stock’s price in real time and executes the order when conditions are met.
Applying Stop Loss to Delivery Orders
For delivery-based trades:
- Select the stock and input the desired quantity.
- Tap the settings icon and choose "SL Order".
- Enter the trigger price and confirm with "Continue".
Using Stop Loss in Intraday Trading
There are two common ways to apply stop loss in intraday trading:
From the Order Card
- Open the stock’s trading window.
- Input quantity and navigate to the Sell Order section.
- Fill in the stop loss field with your desired trigger price.
- Select SL Order to activate.
Adding Stop Loss to an Existing Position
If you already hold a position, you can edit it to add a stop loss:
- Go to your open positions.
- Select the relevant trade.
- Add SL parameters: trigger price and limit price (for limit-type SL orders).
Understanding Market Orders with Stop Loss
A market order executes immediately at the best available current price. When combined with a stop loss, it becomes a market stop loss order, which waits for the trigger price before becoming active.
Buy Order Example
Suppose a stock is trading at ₹100, but you only want to buy if it rises to ₹110 (perhaps indicating upward momentum).
Instead of placing a regular market order (which would execute now), set a market SL trigger at ₹110. When the price hits ₹110, your order activates and fills at the next available market price.
Sell Order Example
You own shares bought at ₹100 and want to exit if the price drops to ₹95.
Set a market SL trigger at ₹95. Once the market touches this level, your sell order executes immediately at the prevailing market rate.
⚠️ Note: Since market orders fill instantly after triggering, there’s no guarantee of exact price during high volatility.
Using Limit Orders with Stop Loss
A limit order allows you to specify the exact price at which you’re willing to buy or sell. Combined with stop loss, it becomes a limit SL order, offering more control over execution price.
Buy Order Scenario
Stock price: ₹100
You want to buy only if it reaches ₹110 — not earlier.
But a standard limit buy at ₹110 might execute below that (e.g., at ₹100), defeating your intent.
Solution:
Set a limit SL order with:
- Trigger price: ₹109.50
- Limit price: ₹110
When the market hits ₹109.50, the order activates and tries to buy at ₹110 or better.
Sell Order Scenario
Stock price: ₹100
You wish to sell only when it drops to ₹90.
A plain limit sell at ₹90 would execute immediately (since market price is higher).
Fix:
Use a limit SL order with:
- Trigger price: ₹90.50
- Limit price: ₹90
Once the price falls to ₹90.50, the order activates and attempts to sell at ₹90 or higher.
When Should You Use a Stop Loss Trigger Order?
Stop loss trigger orders are ideal in two key scenarios:
- Entering a Trade at a Specific Level
You can use SL orders not just for exiting, but also for entering positions when certain technical levels are breached — such as breakouts or breakdowns. - Risk Management and Loss Limitation
Protecting your portfolio from sharp downturns is crucial. A well-placed stop loss caps potential losses before they spiral.
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Practical Use Cases
Case 1: Long Position Protection
You bought a stock at ₹100 and don’t want to lose more than 5%.
Set up:
- Sell order
- Stop Loss (Advanced Options)
- For Market SL: Trigger = ₹95.10
- For Limit SL: Trigger = ₹95.10, Limit = ₹95.00
If the stock drops, your position closes near your threshold.
Case 2: Short Position Coverage
You shorted a stock at ₹100 and fear a rebound above ₹105.
Set up:
- Buy order
- Stop Loss (Advanced Options)
- For Market SL: Trigger = ₹104.90
- For Limit SL: Trigger = ₹104.90, Limit = ₹105.00
This limits your upside risk if the market surges.
Frequently Asked Questions (FAQ)
What’s the difference between SL and SL-M orders?
SL requires both a trigger price and a limit price, giving you control over execution. SL-M (Stop Loss Market) uses only a trigger price — once hit, it becomes a market order with immediate execution at current rates.
Can I modify or cancel a stop loss order?
Yes, as long as it hasn’t been triggered, you can edit or cancel your stop loss order anytime through your trading platform.
Does a stop loss guarantee execution at the set price?
Not always. During fast-moving or gapped markets, slippage may occur — especially with market-type SL orders — meaning execution happens at a different (often worse) price than expected.
Is stop loss suitable for long-term investors?
Absolutely. Even long-term holders can benefit by protecting gains or limiting downside during corrections without constant monitoring.
Why didn’t my stop loss execute even though the price touched my level?
Sometimes, intraday lows/highs briefly touch your trigger but reverse quickly. Also, some platforms require sustained price movement or use last traded price vs. best bid/ask, causing delays.
Can I use stop loss for all types of securities?
Most equity stocks, futures, options, and even crypto assets support stop loss orders on major platforms — though availability depends on exchange rules and broker offerings.
Using stop loss orders wisely enhances your trading discipline and safeguards your investments. Whether you're managing short-term trades or securing long-term holdings, integrating this tool into your strategy brings structure and confidence.
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