What is the trigger price in a stop loss order?
Stock market has an unpredictable and
volatile nature due to which a lot of investors and traders hesitate to invest
their hard earned money. Stop Loss Trigger Price (SLTP) plays a major role in
countering high market volatility and losses and assists the market
participants to invest and trade freely without hesitation.
What
is Trigger Price?
The price at which your buy or sell order
becomes active for execution on the exchange is known as the trigger
price. In other words, the order is delivered to the exchange servers whenever
the stock price reaches the trigger price you selected.
What
is Stop Loss Trigger Price?
The Stop Loss Trigger Price (SLTP) is a
price entered when a stop-loss order is placed. The stop-loss order is
triggered and forwarded to the exchange for execution when the security's price
hits the SLTP price.
A stop-loss (SL) order is a kind of advance
order that is intended to restrict a position's loss. Until the SLTP is met, an
SL order stays active. The order is activated and placed on the exchange
whenever the price hits the SLTP.
It's important to note that the SLTP is not
the price at which the order is placed. The limit price is used to execute the
order. When the share price reaches the trigger price, the order is triggered
and submitted to the exchange.
Also read - What Is Target Price And Stop Loss?
Example:
You purchase 1 share for Rs 525,
anticipating a price increase in the following days. However, you're also
anxious about the possibility of prices going low. In this case, you can use a
stop-loss order to minimize your losses if the prices fall. You must enter an
SLTP (Stop loss trigger price) and a limit price while placing the SL order.
Assume you have a Rs 510 SLTP and a Rs 500 limit pricing. When the share price
hits Rs 510, your order will be executed and delivered to the exchange. When
the exchange finds a buyer at a limit price of Rs 500, the SL order is
executed. This protects you against future losses if the stock falls further,
thereby limiting your loss.
This is the most easiest and beneficial way
to minimize your losses when a share prices fall even below the anticipated
price.
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