How to put stop loss and target in option trading in groww app

There are two common types of orders in the stock market – market order and limit order. Each of these orders has specific characteristics that are suitable for certain types of transactions. 

Additionally, there is another option that might help you handle your trades better – a stop loss (SL) order feature. This can help you set a trigger price for your market and limit orders. 

In this blog, we will discuss in detail about stop loss orders and how they can be beneficial to you.

What is a Stop-Loss Order?

To place a stop-loss order, you need to understand the concept of the Stop Loss (SL) Trigger Price. Since you can place a stop loss order for both market and limit orders, we will explain the SL trigger price for both these orders.

Where Can I Find the SL Feature? 

When you place a regular buy or sell order ( Market or Limit), you would be able to access the SL feature by clicking on ‘Advanced Options’. 

Select the ‘ SL -Stoploss Order’ option and then mention the ‘SL trigger Price’ value. Your order will executed when the live price of the stock hits the tigger price.

Let us see how the SL Trigger option can be used while placing market and limit orders. 

Market Order

When you place a regular market order, you don’t specify a price, and the order is executed at the current market price. However, let’s say that you don’t want to buy or sell at the current market price. Here are two scenarios:

BUY Order

Let’s say that the live price for a stock is Rs.100. Say, for some reason, you want to place a buy order for the stock only when the market price reaches Rs 110. In case of a regular market order, this will get executed immediately as you are willing to pay a higher price for the stock than its current market price, however, if you want to wait for the market price of the stock to rise till Rs. 110, you can place a market SL Trigger Order at trigger price of Rs.110. This order will become a regular market buy order in the market once the live price hits Rs. 110

SELL Order

 Let’s say the live price of a stock is Rs.100. You want to place a sell order for the stock when the market price reaches Rs.95. Now a market sell order will get executed immediately as you are selling less than the current stock price. However, say you want to sell the stock the moment it hits a threshold value of Rs 95 (market price), then, you can place a market SL Trigger Order at trigger price of Rs.95. This order will become a regular market sell order once the live price hits Rs. 95.

Limit Order

When you place a limit order, you specify a price at which you want the order to be executed. This allows you to determine a limit on the price that you buy or sell the stock. Now in case of a buy limit order, the orders get executed at the specified limit price or a value that is lower, so that you get the best price. Similarly, when it comes to a sell limit order, the order gets executed at the limit price or at a higher price so that your losses if any are minimised. 

Now that we know how to limit orders work, let’s see how SL trigger price comes into the picture. Here again, there could be two possible scenarios. 

BUY Order

Let’s say that the live market price for a stock is Rs.100. You want to place a limit buy order at Rs.110. For some reason, you want to buy the stock only when it hits the Rs 110 mark. However, in the case of limit order, as explained above, it would get executed at the best buy price, which would be Rs 100. So to ensure that the buy price remains Rs 110 only and nothing below that, you can place a limit SL Trigger Order at trigger price of Rs.109.50. This order will become a regular limit buy order in the market once the live price hits Rs. 109.50 and will get executed at Rs.110 or a better buy price.  

SELL Order 

The same concept would apply here as well, say the live market price for a stock is Rs 100. You want to place a limit order at Rs 90. This means the order would get executed immediately at the market price because, for a limit sell order, the order gets executed at the limit price or more. However, if you specifically want the order to be executed when it hits the Rs.90 threshold, then you can place a limit SL Trigger Order at the trigger price of Rs.90.50. This order will become a regular limit sell order in the market once the live price hits Rs.90.50 and will get executed at Rs.90 or a better sell price.

Regular orders – both market and limit orders are placed in the market book directly. A stop-loss order, on the other hand, is placed in the stop-loss book and moved to the market book when the live price hits the trigger price.

When is SL Trigger Order used?

As the name suggests, an SL trigger order is an instruction given by the investor to trigger a market/limit order at a predetermined price. SL orders can be placed if you want to take a buy/sell position, only when the market reaches the desired trigger price.

Alternatively, SL orders also limit losses and reduce risk exposure. When you place a stop-loss order, you try to curb your losses by exiting a trading position at the desired stock price. This works as a good way to protect yourself against potential losses when the market suddenly moves against you.

Let’s look at some examples to understand these scenarios –

Case 1: SL Order when you have a Long Position

Let’s say that you have purchased a share at Rs.100 (net position is +1 ) and are hoping for the stock price to rise. However, you don’t want to suffer a huge loss and decide to sell it if the price falls below Rs.95. To ensure this, you can follow these steps –

  1. Select SELL option

  2. Select Stop Loss in the Advanced Options

  3. In case of –

  Market Order – Set SL Trigger Price = Rs.95.10

  Limit Order – Set SL Trigger Price = Rs.95.10 and Limit Price = Rs.95.00

This would mean that once the live market price reaches Rs.95.10 the SL order would become open in the market. SL Limit/Market sell order would get executed based on order conditions. 

Case 2: SL Order When you Have a Short Position

Let’s say that you have sold a share at Rs.100 (net position is -1 ) and are hoping for the stock price to fall. However, you don’t want to suffer a huge loss and decide to sell it if the price crosses Rs.105. To ensure this, you can follow these steps –

  1. Select BUY option

  2. Select Stop Loss in the Advanced Options

  3. In case of

Market Order :  Set SL Trigger Price = Rs.104.90

Limit Order : Set SL Trigger Price = Rs.104.90 and Limit Price = Rs.105.00

This would mean that once the live market price reaches Rs.104.90 the SL order would become open in the market. SL Limit/Market buy order would get executed based on order conditions.  

A stop-loss order is a tool that helps you place an order at the desired price beforehand in the market. Use it wisely to manage your trades!

Hope this was helpful.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

Bracket order is a type of market order that is placed during intraday trading only. Such orders combine a buy order with a stop-loss and target order. Bracket orders are meant to help stock market traders square off a favourable position by the end of the trading session. However, the result of this is entirely dependent on the selection of stock, how the trader picks the stop-loss and target levels.

What is a bracket order?

Bracket order combines three orders in one. Like the name suggests, bracket orders are designed to “bracket” your order. This means that along with the initial order, there will be two opposite side orders placed as well. This can work for both buy and sell orders.

In case the initial order is a buy order, then both the target and stop-loss orders will be sell orders. Similarly, when the initial order is a sell order, the other two orders will be a buy order.

Let’s consider a bracket order example to understand this:

Say an investor places a limit order to buy a stock of a company at Rs 100 per share. This is placed along with a stop-loss at Rs 92 per share and a target order at Rs 105 per share.

Here we can see that the investor’s main position of Rs 100 is bracketed by a higher-priced and lower-priced limit order.

Only one of the two limit orders can be placed.

Scenario 1: After the investor places a limit order for Rs 100 if the stock price rises and goes to Rs 105, then the target order will get automatically placed, and naturally, the stop-loss order will get cancelled.

Scenario 2: In case the stock price falls to the investor’s stop-loss limit, then the target order will get cancelled as the order will get executed at Rs 95 per share.

Scenario 3: Since bracket order in the share market is mostly a limit order, there is a chance that the main order also does not get placed. In this example, the main order was a limit buy order of Rs 100. If the stock price does not reach Rs 100, then the investor will not be able to buy the stock in the first place.

Nevertheless, in any of the three scenarios, if an order does not get placed, the bracket order will be cancelled by the broker at the end of the trading day. This is because bracket orders cannot be carried over to the next trading session.

To summarise, bracket order in the share market is made up of three orders.

  • The main order that books the trader’s position
  • A target order. Some call this a profit booking order.
  • A stop-loss order

Benefits of a bracket order

The first benefit of bracket order is that it enables traders to place three orders in one go. It is useful for intraday traders who have to square off a profitable position in around 6 hours or so.

Some brokers also provide the trailing stop-loss feature which allows the stop-loss level to get adjusted on a real-time basis depending on how the current market price is moving and in which direction.

Bracket order may help intraday traders to curtail some risks because of the way bracket orders work. It will either help traders to book a profitable position with the target order in place or help to curtail losses to some extent with the stop-loss order in place.

Bracket order and cover order

Cover order is also another type of order that intraday traders can use. There is a significant difference between bracket order and cover order. While bracket order is a combination of three orders, cover orders are a combination of two orders.

Cover order combines an initial order and a stop-loss order. It does not have a profit booking/target order.

Cover order= initial order + stop-loss order

Along with the initial order, a trader can place only a compulsory stop-loss order. Here too, the stop-loss order can help the trader control risks to a great extent.

There are a few similarities between the two types of orders.

Both get squared off in the same trading session. In the case of cover order, if the stop-loss order is not executed, the order will be cancelled by the end of the trading session. Cover orders, like bracket orders, cannot be carried over to the next trading session.

What is meant by intraday trading?

Here is a quick recap of what is meant by intraday trading. Intraday trading happens when the trader mostly buys and sells the scrip in one trading session. The trader will buy the stock very close to the market opening time and sell it near the closing time. Traders try to book profit within one trading session.

To Sum Up

One must attempt such order types only when they have full knowledge about how the stock market works and the nitty-gritty of intraday trading. To understand and analyse stocks for intraday trading, there are many technical indicators like momentum oscillators and candlestick charts that one must be aware of. Squaring off a profitable session within the same trading day can turn out to be challenging if stock market participants are not briefed with the characteristics of intraday trading. Study, research and be an informed investor!

Bracket orders are an evolved version of cover orders.

Written by Jane