Can someone from zerodha explain in detail, the working of Trailing Stop loss? Here are my specific questions.
Is it a functionality provided by the broker or the exchange ? ie Who updates the trailing stop loss ?
What is the frequency at which trailing stop loss is updated ?
At each iteration how is the trailing stop loss computed ?
Here is my understanding (Which is differing from the observation on Zerodha and hence the question)
On each iteration (I assume the) broker checks if the trailing stop price has been reached
- If Yes : the order is executed with a
Marketexecution type approach
- If No , the
stopprice is recalculated by using the latest
closeprice and subtracting the
- If the new price goes up, it is updated
- If the new price would go down (or not change at all), it is discarded
A similar thing is explained on - https://www.kotaksecurities.com/ksweb/faqs/Equity/Trailing-Stoploss
But what is observed on Zerodha is similar to what is described in Understanding Trailing Stop Loss in BO
Any insight on this is greatly appreciated.