1. The following is the most popular Stoploss method...

(normal one) As soon as a demat account is

opened for trading most people start trading Intraday. When you trade Intraday it is highly
recommended that you keep SL (Stop Loss) in the system and not leave any trade without stop loss
in system.

Why Most Traders Start With Intraday Trading?

1. Intraday trading looks very attractive because traders think they can make money every day. Fact
is that they do not, in fact after trading Intraday and speculative trading I myself lost a lot of money
when I started trading.

2. Brokers give a lot of leverage in day trading. Day trading is done using the MIS trading advantage.
MIS stands for MARGIN INTRADAY SQUARE-OFF. It means that if you do not close the trade by 3.15
pm your broker will close the trade anytime between 3.15 to 3.29 pm. Most brokers have
automated this process to reduce the risk.

Because MIS positions are not taken overnight, the risk is slightly less therefore brokers can give
more leverage. In India brokers block only 10% of the required margin. For example if a stock is
trading at Rs. 500 and a trader wants to buy 300 shares for Intraday trading total money required to
buy the shares is 500*300 = Rs. 150,000. If traded for intraday under the MIS, brokers will block only
10% of 150,000 = Rs.15,000/-.

Why they block only 10%? Because it is assumed that intraday movement can only lose maximum
10% of the total amount not more. However if there is more loss than the margin blocked, brokers
will call their customers to close the trade or add more money to their account. If the customer does
not responds, they close the trade immediately. However these chances are rare.

Traders however should be more cautious when trading Intraday therefore it is highly recommended
that you keep a stop loss in the system as soon as the original trade is completed.

If you do not keep a stop loss there can be lot of problems during the trade.

1. Your Internet connection may be disrupted and you may not know what is happening to your
trades. It may end the day in huge loss therefore keeping stop loss in the system as soon as possible
is a must.

2. Due to some emergency you may have to leave the system and with no stop loss in the system
you may lose a lot of money.

3. Your computer may have issues and you may not be able to see your trades. In this case call your
broker and ask them to put stop loss in your account.

Here are the best ways to keep Stop Loss in the system.

Most Popular Method :Normal Stop Loss Orders

This is very popular among Indian Intraday traders. Almost every Intraday trader knows this method.
This method is simple, just take a trade and keep a stop loss in the system as soon as the trade is
completed.

For example:

1. Buy Stock XYZ at 95, Stop Loss (Sell) at 90, Target (Sell) at 100, or,

2. Sell Stock XYZ at 95, Stop Loss (Buy) at 100, Target (Buy) at 90.

If Ex. 1 is being decided by the trader, they will buy the stock as soon as it reaches 95 and
immediately thereafter keep a Sell Order in the system at 90, to avoid more than 5 points loss. If
they are wrong and the stock falls down to 90, the Stop Loss gets triggered and the order is sold at
90 with the max loss of 5 points.

The above can be done on Options and Futures as well.

Please note that Intraday or day trading margin blocked for Equity Cash, Options and Futures differs
because of the risk involved.

There are two types of Stop Loss Orders.

A) Trigger Price Orders:

B) Limit Price Orders:

Here the broker trading system asks for a Trigger Price and a Limit Price.

Lets take the above Example 1 – Buy Stock XYZ at 95, Stop Loss (Sell) at 90, Target (Sell) at 100.

Suppose the trade has been taken and the trader decides to take a Stop Loss between 90 and 88,
then the Trigger Price should be kept at 90 and the Limit Price at 88. This will ensure that the stop
loss gets executed between 90 and 88 only.

Please note that for the Buy Stop Loss orders, the Limit Price has to be higher than the Trigger Price.

For above Example 2, Stock XYZ was sold at 95 and the trader wanted to take stop loss between 100
and 102. In that case the Trigger Price will be 100 and the Limit Price will be 102.

The above will ensure that the stock is sold between 100 and 102 not above 102.

Difference between Trigger and Limit Price

The Trigger Price is the place where the Stop Loss or the Profit Taking Order gets activated in the
market and the system tries to sell or buy back the trade with the best possible buyer or seller
between the Limit and the Trigger Prices. However if there is a jump, and no trade takes place in
between the Trigger and Limit price, then the order gets pending and the Sell or Buy order does not
get executed.

Warning:
During very volatile market conditions it is highly recommended that both the Trigger and Limit
prices are entered in the system, else if only the Trigger price is entered, the order will be completed
at any level below or above the Trigger Price as the trader has not specified any limits on the Stop
Loss Order.

For example, if the trade was Buy Stock XYZ at 95, Stop Loss Trigger at 90, No Limit Order, Target
(Sell) at 100, and if by chance a bad news comes in the stock and it suddenly falls from 95 to 71, then
the Sell Trigger Order gets executed at 71 and the loss goes to 95-71 = 24 points, instead of 5 points
as decided by the trader.

This mistake is being done by a lot of Intra day traders in the world. Please ensure you put both the
Trigger and the Limit Order Price in the system to avoid such a situation from incurring huge loss.

Method 2 :stoploss calculation.....

Percentage on margin blocked stop loss method is stop loss or profits taken on total money risked or
blocked as margin trading for that day.

This is continued from the article on best ways to keep stop loss for intra day trading. There we
discussed the most popular method called the normal stop loss order method.

In India percentage stop loss method is the second most popular method after the normal stop loss
order method.

For example let us assume an Option Intraday trader has bought Options worth Rs.45,000.

The most popular is 5% profit or loss taking percentage stop loss method. 5% is popular but this
percentage may differ from trader to trader, and also from one day to another.

Below is an example of a day trader taking a 5% profit or loss on margin blocked. Based on 5%, the
trader needs to calculate the points he needs to take a stop loss or profit.

Assuming Nifty Option which was bought was priced at 100 when he bought it. The trader bought 6
lots:

45,000/100 = 450/75 = 6 lots buy.

In other words 75 is the lot size currently of Nifty. 6 lots buy Option premium at 100 is equal to,
6*75*100 = Rs.45,000.00

The trader wants to make or lose 5% of 45000.

5% of 45000 = Rs. 2250.00

How to calculate the stop loss so that max loss is Rs. 2250.00

2250/75 = 30/6 = 5 points.

Here is the calculation:

5*6*75 = Rs. 2250.00

Therefore he keeps the stop loss as per his calculation of 5% max loss on margin blocked at 100-5 =
95.And he keeps the profit taking target at 100+5 = 105.

Another easy way to calculate this is, just take out percentage of the premium price and keep the
target or stop loss.

5% of 100 is 5. So keep profit target at 105, and stop loss at 95.

Please note that this point may change as per the premium of the Option.

For example if the Option premium was priced at 50 when he bought, the results of the percentage
on margin block stop loss method will change. Assuming he is willing to trade with the same amount.

45,000/50 = 900/75 = 12 lots buy.

In other words 75 is the lot size currently of Nifty. 12 lots buy Option premium at 50, is equal to,
12*75*50 = Rs. 45,000.00

Now the trader wants to make or lose 5% of 45000: 5% of 45000 = Rs. 2250.00

Calculating the stop loss so that his max loss is Rs. 2250.00

2250/75 = 30/12 = 2.5 points.

Here is the calculation: 2.5*12*75 = Rs. 2250.00

Therefore he keeps the stop loss as per his calculation of 5% max loss on margin blocked at 50-2.5 =
47.50, and the profit target at 50+2.5 = 52.50.

If you want to calculate the easier way: 5% of 50 is 2.5.

For stop loss minus 2.5 from 50, for profits add 2.5 to 50 and set your targets.

Note that according to their experience in trading and market condition, intra day traders keep the
profit loss percentage at different numbers.

For example on a very volatile day they might decide to keep stop loss at 8% and profit at 10%.
Similarity on non-volatile days they may keep the profits and stop loss both at 3%. But this comes
only after experience. If you are not very experienced trader and trading intra day, please keep your
profits and loss small, so that even if you lose you lose less money. With time when your skills gets
improved, you can vary the percentage of profit taking and stop loss.

Average True Range ATR Stop Loss Method

Average True Range (ATR) stop loss method is more popular among the experienced traders. In
some countries like India it is also known as Day Moving Average (DMA).
Please note that MA (Moving Averages are different than ATR or DMA). Simply put, Moving Averages
are calculated on the closing price of a stock on daily basis. It can go from last 5 trading days up to
200 trading days. Moving Averages are mostly used by stock traders who buy stocks for the short or
medium term, not Intraday or day traders.

How Is the ATR / DMA Calculated?

The percentage of the difference between the highest point and the lowest point of daily moving
averages of last few days is taken into account.

Day traders usually take last 5 days Average True Range, ATR or Day Moving Average, DMA. Some
take last 14 days moving averages. Positional traders usually take last 30 days ATR or DMA.

Let us take the last 5 days ATR (Average True Range) of Nifty 50. As on today, the last 5 trading days
are 29, 30 Dec 2016, 2, 3 and 4 Jan 2017:

Here is the image of daily high and low of the last 5 days taken from the NSE site:

Nifty 50 Last 5 Trading Days High Low

Nifty 50 Last 5 Trading Days High Low

Date High Low Points difference

29-12-16 8111.10 8020.80 90.30

30-12-16 8197.00 8114.75 82.25

2-01-17 8212.00 8133.80 78.20

3-01-17 8219.10 8148.60 70.50

4-01-17 8218.50 8180.90 37.60

Calculating the Day Moving:

90.30 + 82.25 + 78.20 + 70.50 + 37.60 = 358.85 / 5 = 71.77

71.77 is 0.87% of 8256.00 the current spot Nifty price.

Therefore if a day trader has bought Nifty Future to trade Intraday when Nifty spot is at 8256.00 his
Stop loss will be at 8256-72 = 8184.00, and sell target, profit will be at 8256+72 = 8328.00. If at the
end of the day the trade is in small profit or loss the day trader will exit as the trade was initiated for
Intraday day trading and not positional trade.

Courtesy: Email from DILIP SHAW received on JANUARY 5, 2017