Why the trigger price must be lesser stop loss price

Earlier, we were able to keep trigger price same as the stop loss price.

But now, trigger price must be kept lesser than the stop loss price.

Any reason behind changing this?

hello trader,

The exchanges will accept stop loss orders with the Trigger and Price as the same amount.

It depends on the trading Platform you place your orders from. Some platform are designed to do it with the same amounts, some are not. There is no logical reasoning as to why this should not be allowed. Check with your broker.

Hi,

Lets assume you buy a stock at Rs.500 and you wish to place Rs.498 as your Stoploss.

Now if you place a SL order with Price = Trigger Price = 498, this is what will happen -

When the price of 498 is triggered, it is only then that your Stoploss Limit order of 498 is sent to the exchange.

Now in this time, between your Stoploss being triggered and your Stoploss Limit order being sent to the exchange, if the Price comes below 498,

Then your Stoploss Limit order will become a Sell Limit order and your Buy position will still remain open. In a falling market, this can be detrimental to your funds as the losses can be very high.

This is why its practical to place your Trigger Price higher than the Stoploss Price because -

  1. It gives an executable range to your Stoploss.
  2. It increases the chances of your Stoploss being executed.

Please note, sometimes in a steep market fall, even SL orders with a narrow range between trigger and price may not be executed due to the speed of the fall. SL-M orders overcome this where when your Stoploss is triggered, a sell market order is sent to the exchange and your position will be squared off at whatever is the available market price.

You will have to use your discretion on which order you place depending on the type of market you are trading.