This article will examine how to set stop loss in Zerodha after buying shares. Firstly, we’ll define what stop loss in Zerodha is, along with its advantages and disadvantages.
Stop Loss in Zerodha
Stop loss is a risk management strategy used in the Indian stock market to limit potential losses.
It involves setting a predetermined price level or percentage below or above the current
market price of a stock or other security, at which a trade will automatically be executed to sell
or buy the stock, respectively.
For example, if an investor buys a stock at Rs. 100 and sets a stop loss at Rs. 90, the investor’s broker will automatically sell the stock if its price falls to or below Rs. 90, thus limiting the investor’s potential losses.
Stop loss orders can be placed with most Indian stockbrokers, and they can be used in a variety of trading strategies, including long-term investing and day trading.
By using stop loss orders, investors and traders can manage risk, avoid significant losses,
and reduce emotional bias in trading decisions.
Pros and Cons of Stop Loss
Stop loss is a widely used risk management strategy in trading and investing, but it has its advantages and disadvantages. Here are some pros and cons of using stop loss:
Pros:
- Risk management:
Stop loss is an effective way to manage risk by limiting potential losses in case the market moves against your trade. - Discipline:
Stop loss orders help traders and investors stick to their trading plan and avoid making impulsive or emotional trading decisions. - Automation:
Once a stop loss order is placed, it is executed automatically, which means traders and investors do not need to monitor the market constantly. - Flexibility:
Stop loss orders can be used in a variety of trading strategies and in different markets, including stocks, options, forex, and futures.
Cons:
- Volatility:
In volatile markets, stop loss orders may be triggered more frequently, resulting in losses. - Slippage:
Stop loss orders are executed at the next available price, which may be different from the trigger price, especially in fast-moving markets, leading to slippage and potential losses. - False signals:
Stop loss orders may be triggered by short-term market fluctuations or price spikes, leading to unnecessary losses. - Increased costs:
Using stop loss orders may increase trading costs due to the additional commissions and fees charged by brokers for executing orders.
Overall, stop loss is a useful tool for managing risk and preserving capital, but traders and investors should be aware of its limitations and risks and use it in conjunction with other risk management strategies.
Time Needed : 2 minutes
Once you have bought shares on Zerodha, you can set a stop loss order by following these steps:
- Login
Login to your Zerodha account and Go to the 'Portfolio' tab.
- Exit option
Click on the stock you want to set the stop loss for.
Select the 'Exit' option. - Stop Loss Market
Select the order type as 'SL' (Stop Loss Market).
Enter the trigger price, which is the price at which you want the stop loss order to be executed.
Enter the stop loss order price, which is the minimum price at which you are willing to sell your shares. - Sell
Click on the 'Sell' button to place the order. Now you can see the pending order.
Once the stop loss order is placed, it will be executed automatically if the stock's price falls to or below the trigger price you have set.
It is important to note that stop loss orders do not guarantee that losses will be completely avoided, especially in volatile markets.
Traders and investors should use stop loss orders in conjunction with other risk management strategies and regularly monitor their trades.
FAQs
- Q: What is a stop-loss order in Zerodha?
A: A stop-loss order in Zerodha is an order placed by a trader to automatically sell a security when it reaches a certain price. It is used to limit the loss that can occur in a trade.
- Q: How to place a stop-loss order in Zerodha?
A: To place a stop-loss order in Zerodha, follow these steps:
Login to your Zerodha account.
Select the stock you want to trade.
Click on the "sell" or "buy" button.
Select the "stop-loss" order type.
Enter the stop-loss price and the quantity of shares you want to sell or buy.
Click on the "submit" button to place the order. - Q: What is the difference between a regular and a trailing stop-loss order in Zerodha?
A: A regular stop-loss order is placed at a specific price level and does not change. A trailing stop-loss order, on the other hand, is a dynamic order that adjusts the stop-loss price as the price of the stock moves in the trader's favor. It is used to lock in profits and limit losses.
- Q: How to place a trailing stop-loss order in Zerodha?
A: To place a trailing stop-loss order in Zerodha, follow these steps:
Login to your Zerodha account.
Select the stock you want to trade.
Click on the "sell" or "buy" button.
Select the "trailing stop-loss" order type.
Enter the trailing stop-loss price and the quantity of shares you want to sell or buy.
Click on the "submit" button to place the order. - Q: What is the minimum and maximum limit for placing a stop-loss order in Zerodha?
A: The minimum and maximum limit for placing a stop-loss order in Zerodha depends on the stock you want to trade. Zerodha allows traders to place a stop-loss order at a minimum price of Rs. 0.05 and a maximum price of Rs. 10,000.
- Q: What happens when a stop-loss order is triggered in Zerodha?
A: When a stop-loss order is triggered in Zerodha, the system automatically executes the order at the next available price. If the stock's price has moved beyond the stop-loss price, the order will be executed at the best available price. If the stock's price has not reached the stop-loss price, the order will not be executed.