Why Bracket Order and Cover Order Leverage on stock price and Not on actual Stop Loss price?

General
1

As we all know Zerodha offers 20 Times Leverage on BO/CO. My Q is why Zerodha not give Leverage on Actual stop loss price? Let me explain, If I have Rs.10,000/- in my account and want to Buy Reliance when trading at Rs.1000 making stop loss of 995 and Target 1020… Now if I place Buy order I can buy maximum 200 stocks (20 Times Leverage) As my stop loss is Rs. 5 below Buy level, if it gets triggered my Loss will be Rs.1000. If you give Leverage on stop loss level then If I want to Buy 1000 stocks I can easily buy and Zerodha will not at Risk because if my stop loss get triggered my maximum loss will be Rs.5000 and I already have Rs.10,000/- in my account. Giving normal example in reality it will help a lot for BOTH Scalpers and low risk high reward techniques players, as well Zerodha because more trades more brokerage

Thank You

2

In markets there will be always jumping of prices as in the case you mentioned what if prices jump from 996 to 980 suddenly and with out trading 995? one has to end up loosing more money than one has. These circumstances happen regularly in markets with random scrips at different times as one will be having no clue before it happens.

So, to safeguard both broker and trader from Gap risk it is better not to give too much of leverage.

Also as leverage is double edged sword even if one make profits in 4 trades out of 5 and it requires that one trade to loose all the capital so one should be cautious enough in using leverage as already which is being provided( 20 times in this case) is high enough.