# What is a Stop-Loss Order?

## What is a Stop Loss Order?

A stop-loss order allows traders limit their losses by exiting trades when a trigger price (or price) is reached.
You can reduce the risk of losing a trade by using Stop-loss Orders
Trigger Price is an important aspect of stop-loss order. This is the price you wish to have your order executed at. The stop-loss order will be activated when the security price reaches or exceeds the trigger price.

## There are two types:

Stop-loss Market Order: Only Trigger Price
This is where the Stop-loss Order becomes a Market Order once it reaches the trigger price.

Stop-loss Limit Order- Trigger price and Limit Price
This is where the security price reaches trigger price. The Stop-loss Order becomes a Limit Order.

## What is a Stop-loss Order?

Take this example: If you have a buy order for stock 'X' at Rs100, and then wish to place a stop-loss or sell stop-loss order at stock X at Rs95,
To place a sell stop loss-Market order

Trigger price = Rs95

This means that if the Last Traded Price (LTP), reaches Rs95, a Sell Market Order will be activated and your position will squared off at the applicable bid price.
To place a Sell Stop Loss-Limit Order:

Trigger price = Rs95

Let's keep Rs94 as the Limit Price. Remember, Limit Price is Rs94 for a Sell Stop Loss Limit Order.

The Sell Limit Order is activated when the LTP reaches Rs 95. Your order will then be squared at the next available bid higher than the limit price of Rs94. Your Stop loss order could be executed at Rs94 in this instance.
Notice: In the above example, if current market prices fall below Rs94 or don't exceed Rs94 during market hours, your stop loss order won't be executed.
Let's say you sell stock X at Rs100. You wish to place stop-loss orders at Rs105.
The trigger price for a buy stop loss-Market order is Rs105. The trigger price for a buy Stop loss-Market order is Rs105. This will trigger a Buy Market Order. Your position will be squared at the market price.

Let's say that you set the Limit Price at Rs106 and the trigger price at Rs105 for a Buy Stop Loss Limit Order.

The buy limit order will activate when the market price exceeds Rs105. Your position will then be squared at the next ask/offer lower than Rs106. Your Stop loss order could be executed at a price below Rs106.
Notice: In the above example, if Rs106 is not reached during market hours, your position remains open.

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