STOP LOSS

Stop loss is the effective solution to prevent the damage control. Stop loss exactly means what it stands for.It is used to prevent further losses.It is based on simple psycology that "better to lose a little then losing everything".

for example: let us assume ash has brought 200 shares @ 100RS assuming that price of the shares will go up to 105. But at the same time it is even possible that the price of the share will go down. Lets us also assume that price has gone down to 90 Rs and further downside is expected.So it is safe to exit this stock at 90 Rs to prevent further losses. Hence Ash sells his stock @ 90Rs to prevent incurring further losses. But it is difficult for him to keep monitoring the price.So he sets the trigger price of his stock as 90 Rs.

Trigger price is the price at which the order gets activated.In the above case the order automatically activates when the stock value goes down to 90RS.Hence,by using stop losses risk can be managed