Experienced traders always seem to talk about how price is triggered at a certain level, and if the price hits this level, their stop loss will be triggered, or their target will be hit. For beginners, understanding what is trigger price and how it works can be confusing and lead them to poor decision-making.
So in this blog post, we will discuss what is trigger price and some other related terms.
What is Stop Loss?
A stop loss is a future order that traders add to the order list to sell stock when it hits a certain price level. Adding a stop loss to your order list means that you have instructed your broker to sell your securities when it reaches a specific price. This is done to limit losses if the planned trade starts to go against the traders’ plan.
Stop loss is also known as ‘stop market order’ or ‘stop order.’ When a trader places a stop loss order, the broker (like Zerodha, Upstox, etc.) is instructed to sell an asset when it reaches or crosses a specific price limit. Stop Loss order plays a vital role in intraday trading.
Importance of Stop Loss order
- Stop loss order helps in Risk Management.
- It can be helpful for people who don’t want to watch the market all the time.
There are two price components to a Stop Loss order
- Stop loss limit price
- The stop-loss trigger price is called the trigger price.
So let’s see trigger price meaning, which is an essential topic of this article.
What is trigger price
Trigger price is the price at which traders/investors buy or sell orders activated for execution at the exchange. Trigger price is part of stop loss order. And to execute a stop loss correctly, traders must add these two types of prices: the limit price and the trigger price.
When the stock price hits the trigger price set by the trader, the order is executed and sent to the exchange servers. And the order will be completed at the limit price set by the trader.
Example of Trigger Price
Please refer to the example below for a clear understanding.
Suppose you buy 50 shares at a rate of RS 610/-. You will add a stop-loss order to limit losses if the stock price falls. The limit cost will be RS 600/-, and the trigger price will be RS 601/-.
If the stock price reaches RS 601/- level, the order will be activated and executed at RS 600/-.
In short, the price at which the order of buy or sell will be activated to complete by the exchange is called trigger price.
A stop-loss is a passive order; to execute it successfully, we need to add a trigger price, which will be above or below the stop-loss order price. Once the price crosses the trigger price level, the stop loss order changes from a passive to an active order.
Other Interesting blog posts related to what is trigger price
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Stop-loss order plays a vital role in intraday trading, and understanding terms related to stop loss is essential, or you may lose valuable time and money.
I hope you guys now understand what is trigger price and how to use a trigger price in intraday trading. Let me know your views in the comment section.
Frequently Asked Questions
ज्या किंमतीवर खरेदी किंवा विक्रीची ऑर्डर एक्सचेंजद्वारे पूर्ण करण्यासाठी सक्रिय केली जाईल त्याला ट्रिगर किंमत म्हणतात.
वह मूल्य जिस पर एक्सचेंज द्वारा पूरा करने के लिए खरीदने या बेचने का ऑर्डर सक्रिय किया जाएगा ट्रिगर मूल्य कहा जाता है।
Stop loss's primary benefit is that it helps risk management in intraday trading.
Yes, Trigger Price is part of the Stop Loss.