The SL (Stop Loss) Order, also referred to as the Trigger Order, refers to a method of placing orders that are executed only when the price crosses above (or below) the SL or Trigger price.
It is one of the safest and most profitable ordering systems that can help you buy, sell, or short stocks once they cross above or below your pivot or Fibonacci or any other levels.
When Is SL Order Most Effective?
- The SL order for buys or sells is most effective on trend days. On bullish days, a BUY SL ORDER can work magic while a SELL SL ORDER can get you good returns when the trend is bearish.
- A BUY or SELL SL ORDER can also work very well when the market has fallen or risen substantially. When markets fall or rise rapidly, profit booking kicks in and there is usually some reaction, either in the form of profit booking or short covering. The SL Order can help traders take advantage of a substantial upturn or downturn.
- Unfortunately, SL orders may not work when the market range is narrow and it is stuck in a groove. In any case, it doesn’t hurt to place an SL order when the market is narrow because at worst, it won’t get executed if the stock does not cross above or below your trigger price. Of course, you need to know about stock selection as well, but this post assumes you are a skilled stockpicker.
How To Place A SL BUY Order?
Assume that HBL Power CMP is 105 and your chart reading says that the stock is BULLISH above 106. Here’s what you should do:
a. Select Trigger price (SL) (margin/delivery per your style), in this case, Rs 106.
b. Mention quantity
c. Input a market price (106.10) just in case there are no sellers of the stock at 106.
d. Place the order
E. Now wait for the order to trigger. If it doesn’t, you don’t lose anything. If it triggers, then you can either place an SL SELL ORDER if you are a day trader or carry the position home.
How To Place A SL SELL Order?
Assume that you either own HBL Power and feel the need to either book profit at your pivot point or assume that you are a day trader and have just picked up the stock at 106 (as described above). Now your pivot point is 108 the CMP is 107. You feel the stock will go to 108 and above but would like to book profit at 108. Here’s what you should do:
a. Select Trigger price (SL) (margin/delivery per your style), in this case, Rs 108.
b. Mention quantity
c. Input a market price (107.90 or 107.50) just in case there are no buyers of the stock at 108.
d. Place the order
e. Now wait for the order to trigger. If it triggers, then you make your profit for the day or on your position. If it doesn’t trigger, you have to carry forward the position.
