28 How can I apply stoploss in commodity ? | iCommunity ICICIdirect

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Community User Posted on 06:38pm 30-Apr-2021

How can I apply stoploss in commodity ?

  • ICICIdirect Executive Thank you for the query. We would like to inform you that a Stop loss order allows the client to place an order which gets activated only when the market price of the relevant security reaches or crosses a threshold price specified by the investor in the form of Stop Loss Trigger Price . When a stop loss trigger price (SLTP) is specified in a limit order, the order becomes one which is conditional on the market price of the contract crossing the specified SLTP. The order remains passive (i.e. not eligible for execution) till the condition is satisfied. Cloud Order eligible for execution by being taken up in the matching process of the exchange) and then on behaves like a normal limit order. It is used as a tool to limit the maximum loss on a position.

    Examples:

    Stop Loss Buy Order

    A short sells 2500 Quantity (1 lot = 2500 qty) of Copper contract at Rs 325 in expectation that the price will fall. However, in the event the price rises above his buy price A would like to limit his losses. A may place a limit buy order specifying a Stop loss trigger price of Rs 345, a limit price of Rs 350 and last traded price 340. The stop loss trigger price (SLTP) has to be between the last traded price and the buy limit price. Once the market price of Copper breaches the SLTP i.e. Rs 345, the order gets converted to a limit buy order at Rs 350.

    Stop Loss Sell Order

    A buys 2500 Quantity of Copper contract at Rs 325 in expectation that the price will rise. However, in the event the price falls, A would like to limit his his losses. A may place a limit sell order specifying a Stop loss trigger price of Rs 305 , a limit price of Rs 300 and last traded price is at 310 The stop loss trigger price has to be between the limit price and the last traded price at the time of placing the stop loss order. Once the last traded price touches or crosses Rs. 305, the order gets converted into a limit sell order at Rs. 300.

    Important

    Please note that in a buy order the SLTP cannot be less than the last traded price. This is treated as a normal order because the condition that the last traded price should exceed the stop loss trigger price for a buy order is already satisfied. Similary, in case of a stop loss sell order the SLTP should not be greater than the last traded price for the same reason.

    04:58pm 12-May-2021