How Basic Guide To Using Stop Losses Can Keep You Out of Trouble

Short Guide To Stop Loss

We are already aware of the Importance of Stop-loss.

But using it in the right way is even more important.

Things have changed drastically post 5th October 2012 when NSE fell 15% in a very short time.


Different Stop Loss Situation

With the advent of a different trading system and multiple options in stop loss.

A simple stop loss is no longer efficient as it was earlier.

Situations have changed.

  • Gap Up or Down Opening
  • Insufficient Number of Traders
  • High Volatility
  • Trading Range
  • Stop-loss in Circuit
  • Price Spike
  • News Spike
  • Technical Problem (11th July 2017)
  • Flash Trading
  • Technical Glitch

Your stop loss should be prepared to deal with the above situations.

Types of Stop Loss

The number of types of stop-loss has also increased.

People these days more options on the type of stop-loss than before.

Let’s look at the types of Stop-loss Orders.

  • Stop Loss Limit
  • Stop Loss Market
  • Bracket Order
  • Trailing Stoploss

Any other different name you come across its just the same concept in a different name.

Now that you know different kinds of stop-loss. It is important that you work on your strategy to ensure that it can handle all the situations.

All your strategies should be even flash crash proof.

On October 5th, 2012 certain trade led the market to crash 900 points in Nifty.

This halted the entire trade-in NSE for about 15 minutes until it was restored back to normal.


Stop Loss Based On Volatility

Most of us fail to understand the importance of Volatility for stop loss.

If your stop-loss is getting hit all the time. The ratio of stop-loss hit exceeds over 60% then stop-loss tweak is essential.

According to, volatility is:

“the degree of variation of a trading price series over time.”

You have got to keep the stop-loss to be in control over your risk. At the same time, it should be flexible enough for it to sustain market volatility.

Understanding the importance of stop-loss and implementing in the right way both are very important.

At times wrong stop loss decisions can take away years of hard work.


Stop-loss is a very important tool for managing your Risk.

At times it might be time-consuming to calculate various aspects before adding the stop-loss.

But believe me its worth every minute you spend.

In the coming days, we will give you more details about how to handle stop loss in different situations, with different concepts to implement to maximize profit and minimize risk.

For now, if you wish to tell your experience with stop-loss and how it acted against you. feel free to let me know in the comment section.

And if this tutorial was helpful, do share it with others who can benefit!

I have covered stop-loss a few times before. Check out those articles.

Understanding Stoploss – Don’t turn to Trading System without it.

8 Ridiculously Simple Ways To Improve The Way You Survive A Stock Trading Loss

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top