When we want to close our open position at a particular price then we need to specify this stop loss price at which our order will get executed.

When we want to close our open position at a particular price then we need to specify this stop loss price at which our order will get executed. Is the above statement confusing?

So let us understand it by taking an example: When you buy say ITC ltd at the price of Rs. 280, and then you can put a stop loss of Rs. 260. So that if there is any terrible fall in this stock due to any news, then your position will be closed at Rs. 260 by limiting your loss to Rs. 20 .

If you hadn’t put a stop loss at Rs. 260 then you could have incurred unlimited loss. This is the MAGIC of stop loss order.

You should generally place stop loss price at the low of the most recent candlestick when you are buying the stock and place stop loss price at the high of the most recent candlestick when you are selling the stock.