How to Put a Stop Loss in Sharekhan

Investing in the stock market involves a certain level of risk. One of the fundamental tools that traders use to manage and mitigate this risk is the stop-loss order. Sharekhan, a leading brokerage firm in India, provides a robust platform for placing stop-loss orders.

In this article, we will guide you through the process of placing a stop-loss order in Sharekhan, ensuring you can protect your investments effectively.

Stop-Loss Orders

A stop-loss order is an automatic order placed with your broker to sell a security when it reaches a certain price. This mechanism helps traders limit their losses on a position in a security. For instance, if you have bought a stock at ₹100, you can set a stop-loss order at ₹90. If the stock price drops to ₹90, your stop-loss order will be executed, and the stock will be sold, limiting your loss to ₹10 per share.

Benefits of Using Stop-Loss Orders

• Risk Management: The primary benefit of a stop-loss order is risk management. By setting a stop-loss order, you can limit potential losses without having to monitor your investments constantly.
• Emotional Discipline: Stop-loss orders remove emotional decision-making from trading. Traders often make impulsive decisions based on market fluctuations, but a stop-loss order ensures that your strategy remains intact.
• Time-Saving: Stop-loss orders are automated. Once set, they do not require constant supervision, allowing you to focus on other aspects of trading or your daily activities.

Setting Up Your Sharekhan Account

Before you can place a stop-loss order, you need to have a Sharekhan trading account. Here’s a brief overview of setting up your account:

• Registration: Visit the Sharekhan website and complete the registration process. You will need to provide personal details, PAN card, Aadhaar card, and bank account details.
• Verification: Once registered, your documents will be verified by Sharekhan. This process may take a few days.
• Login: After verification, you will receive your login credentials. Use these to access your Sharekhan trading account.

Navigating the Sharekhan Platform

Sharekhan offers a user-friendly platform with various features for trading and investing. Here’s how you can navigate the platform:

1. Dashboard: After logging in, you will be directed to the dashboard. This provides an overview of your portfolio, market news, and other essential information.
2. Market Watch: Use the Market Watch feature to track the performance of stocks you are interested in. You can add and monitor multiple stocks simultaneously.
3. Order Placement: The platform allows you to place different types of orders, including market orders, limit orders, and stop-loss orders.

How to Place a Stop-Loss Order in Sharekhan

Placing a stop-loss order in Sharekhan is straightforward. Follow these steps:

1. Log In: Log in to your Sharekhan trading account using your credentials.
2. Select the Stock: Go to the Market Watch section and select the stock for which you want to place a stop-loss order.
3. Place Order: Click on the ‘Place Order’ button. You will see various options for order types. Select ‘Stop-Loss Order’.
4. Enter Details: Enter the quantity of the stock you want to sell and the stop-loss price. For example, if you bought a stock at ₹100 and want to set a stop-loss at ₹90, enter ₹90 as the stop-loss price.
5. Review and Confirm: Review the details of your order carefully. Once confirmed, click on ‘Submit’ to place the stop-loss order.

Types of Stop-Loss Orders

There are two main types of stop-loss orders that you can place in Sharekhan:

1. Stop-Loss Market Order: In this type of order, the stock is sold at the market price once the stop-loss price is triggered. This ensures that the order is executed, but the final selling price may vary slightly due to market fluctuations.
2. Stop-Loss Limit Order: In this type of order, you set a stop-loss price and a limit price. The stock will only be sold within the limit price range once the stop-loss price is triggered. This gives you more control over the selling price but may not always guarantee execution if the market moves quickly.

Tips for Setting Effective Stop-Loss Orders

• Determine Your Risk Tolerance: Before setting a stop-loss order, assess your risk tolerance. How much are you willing to lose on a particular stock? This will help you set a stop-loss price that aligns with your risk management strategy.
• Avoid Setting Stop-Loss Orders Too Tight: If your stop-loss price is too close to the purchase price, you may get stopped out due to normal market fluctuations. Give your investment some room to move.
• Regularly Review Stop-Loss Orders: The market conditions and your investment goals may change over time. Regularly review and adjust your stop-loss orders to align with your current strategy.
• Use Technical Analysis: Utilize technical analysis to identify support and resistance levels. Placing stop-loss orders just below support levels can be an effective strategy.

Common Mistakes to Avoid

• Setting Arbitrary Stop-Loss Prices: Avoid setting stop-loss prices without proper analysis. Use technical and fundamental analysis to determine appropriate levels.
• Ignoring Market Conditions: Be aware of broader market conditions. During highly volatile periods, you might need to adjust your stop-loss orders more frequently.
• Neglecting to Use Stop-Loss Orders: Some traders, especially beginners, might avoid using stop-loss orders altogether. This can lead to significant losses if the market moves against your position.

Advanced Stop-Loss Strategies

For experienced traders, advanced stop-loss strategies can enhance risk management:

• Trailing Stop-Loss: A trailing stop-loss moves with the stock price. For example, if you set a trailing stop-loss at 5% below the stock price, it will adjust as the stock price increases, locking in profits while still providing protection.
• Bracket Orders: A bracket order includes a target profit price and a stop-loss price. This strategy helps you automate both profit-taking and loss-cutting processes.

Final Words

A stop-loss order is a crucial tool for managing risk in stock trading. Sharekhan’s platform makes it easy to place stop-loss orders, ensuring you can protect your investments effectively.

By understanding how to set and manage stop-loss orders, you can enhance your trading strategy and reduce potential losses. Remember to regularly review your stop-loss orders and adjust them based on your evolving investment goals and market conditions.

Happy trading!