What is Trigger Price in Intraday Trading: The stock market is a very volatile and unpredictable place and no matter the level of expertise you have in technical analysis, there is always a possibility of you going wrong.
That is where stop loss plays an important role in controlling your losses and maintaining your discipline in the market. But while entering the stop loss for your orders, you might have come across the term “trigger price”.
In this article, we are going to discuss what is trigger price in intraday trading
What Is Trigger Price In Intraday Trading?
Trigger price is the price that is entered when your stop-loss is placed. When the price of the security touches the trigger price, your stop-loss order gets activated and becomes ready for execution.
What Is Stop Loss?
Now that we have understood what is trigger price in intraday trading, let us now understand what is stop-loss and how a trigger price works for different orders.
A stop loss order is a buy or sells order placed to exit your current position when the price hits a certain limit in the market. A Stop loss is an order placed in the market that gets executed when the price of the existing position goes against you, and it has reached a point beyond which you don’t want to lose more money.
Categorization Of Stop-Loss Orders
Stoploss Orders Can Be Categorized Into Two Types:
1. Fixed Stop-Loss Order
These are stop loss orders that get triggered when a pre-determined price is hit. A fixed stop-loss order can be further divided into two types:
Stop-loss market order: In this type of order, your stop order gets converted into a market order, once it reaches the trigger price. In this order, you only need to enter the trigger price which converts your order into a market order and the order will get executed at the market price.
Example: Suppose you buy 40 stocks at the price of Rs 300 each and place a market stop loss order with the trigger price of Rs 290
When the price hits the level of Rs 290, the stock held changes into a market order and gets executed at a market price. This kind of stop loss is useful when the market is volatile and you would want to exit at the available price.
Stop-loss limit order: In this type of order, your stop order gets converted into a limit order, once it reaches the trigger price. In this order, you need to enter the trigger price which converts your order to a limit order, and the limit price at which you want your order to be executed.
2. Trailing Stop-Loss Order
Trailing stop-loss is a stop-loss order that acts as protection for your capital gains and also hedges your risk when the market moves against you.
In this stop-loss order, the limit is kept as a percentage of the total asset price, when the price moves in your favor, the stop-loss moves along with the price.
When the price moves against your trade, the stop-loss stays at the level it has moved to and protects you from the losses.
Suppose, you have bought a stock for Rs 300 with a stop loss of Rs 290. Now, if the price of the stock moves to Rs 310, the stop loss will be trailed up to Rs 300 and so on as and when the price move in your favour.
Also Read: Can Fundamental Analysis Be Used In Intraday Trading?
In Closing
In this article, we discussed what is trigger price in Intraday Trading and how it works for different types of stop losses.
While executing intraday trades, entering trigger price and stop loss will insure you against huge losses in the market, and since the orders are automated it will also save you time.
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