A stop-loss is the price at which you accept that a trade is wrong and exit. Its job is not to predict the market — it is to cap the loss at an amount you decided before you entered.
Every trade has a stop-loss, whether you set one or not. Without one, the "stop" is wherever you finally give up — usually much further away.
Where traders place stops
A stop should sit where the reason for the trade stops being true — not at a round number that feels comfortable.
| Method | How it works | Suits |
|---|---|---|
| Below a swing low / above a swing high | Exit if price breaks the last low that held | Trending moves with clear structure |
| Volatility (ATR) stop | Entry minus 1.5–2 × the average daily range | Volatile stocks without clean levels |
| Below support / above resistance | Just past a level price has respected before | Range-bound markets |
| Moving average | Exit on a close beyond, say, the 20- or 50-day average | Longer trend-following trades |
Add a small buffer. Prices often poke just past an obvious level before turning. Placing the stop a little beyond it — and beyond normal day-to-day noise — avoids being shaken out by a wick.
Stop-loss orders in India
- SL (stop-loss limit) — when the trigger price is hit, a limit order is placed. You control the price, but in a fast move it may not fill.
- SL-M (stop-loss market) — when triggered, a market order is placed. It fills, but possibly at a worse price. Availability varies by broker and segment.
- GTT (good till triggered) — a trigger that stays active across days, offered by many brokers for delivery positions.
Gaps: when a stop can't protect you
A stop is triggered by the next traded price. If a stock closes at ₹500 and opens at ₹460 after bad news, a stop at ₹480 fills near ₹460 — not ₹480. Overnight and weekend positions carry this gap risk, and leveraged F&O positions feel it most.
Common mistakes
- Moving the stop further away once the trade goes against you. A stop should only ever move in your favour.
- Stops too tight for the stock. If the stop is inside normal daily movement, it gets hit by noise.
- Mental stops. Deciding to "exit if it gets to ₹480" and then not doing it. A placed order does not hesitate.
- Choosing the stop to fit a quantity. Pick the stop from the chart first, then size the trade (see position sizing).
Where NEOGreeks helps
The Smart Money Board shows each F&O stock's structure — recent breaks of highs and lows, demand and supply zones, and yesterday's high and low — the same levels traders commonly use to decide where a trade's idea is proven wrong.