Stop-loss in Stock Markets – Learn the concept of the Stop-loss trading in the stock markets and how to use it while trading using the various brokrage platforms like Angelbroking, Sharekhan etc.
Stop-loss is a method used by an investor to limit his losses. It works as an automatic order given by the investor to his broker to sell a security as soon as it reaches a certain predetermined price.
For example, let’s say any investor i.e. Ridam buys 50 shares in “StateBank: at the rate of one thousand rupees per share. Shortly, the share price falls to 960 rupees per share. Ridam wants to limit his losses; so he inputs a stop-loss order at nine hundred and fifty rupees. If price corrects further to nine hundred and fifty rupees, his broker Karvy will sell the shares to prevent further losses.
On the other hand, if the share price jumps to one thousand four hundred rupees per share, Ridam would want to hold on to his shares and not lose his advantage; so he inputs a stop-loss order to sell the shares if the price falls to one thousand three hundred rupees. By placing the stop-loss order, Ridam protects his investments by retaining his gains and preventing potential losses.