How do stop loss trigger price works in trading for stocks???????????

stocks n investment

http://www.wikiaffiliates.net/secretsofs...

What with so many facets to look at and brood over when weighing a stock buy, it's easy to forget about the little things. The stop-loss order is one of those little things, but it can also make the world of difference. Just about everybody can benefit from this tool in some way.

Read on to find out why. .........

Aahhh! Difficult question to answer - not because I do not know about the stop loss but because I do not know exactly what you want to know. I would like to explain the stop loss in simple terms and its benefit and loss.

Stop loss is a price YOU place of a particular share you have bought, which you feel is the maximum loss you can bear for fall in its price. When you instruct your broker to maintain a stop loss at perticular price then your broker will immediately put your share on sale at market price the moment the price reaches this stop loss price. Concider an example below.
You buy a share X at Rs.100 (You feel that this share is highly volatile - might either make a lot of money or just dissappear). You concider that the maximum loss you can bear on this is Rs.25 so you order your broker to maintain a stop loss price at Rs.75. When the share price of this stock reaches Rs.75, your broker puts this share on market price. you might get Rs.74 or Rs.73 or any other price. Just to state that stop loss will not be the price at which it will sell at ( if you are lucky it might end up paying you exactly at Rs.75 as well)

Benefits:
It gives you option to gamble a little.
In bearish market you end up losing lesser than you might if this share crashes.

Loss:
If the market is just a bit volatile this share might go down to price of stop loss then bounce back to a wonderful price. you lose on the gain.

I hope I could make a bit of sense there.

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