Arjun,
I am unable to understand how you placed a limit buy order of 126.50 with a stop loss trigger of 123? It has no meaning you should have placed a limit sell order not a buy order
The stop loss trigger is between the limit price and the LTP otherwise the system doesn't accept the order.
Anyway to explain the concept we will consider a buying example.
A limit buy price is the maximum price you are willing to pay, for example lets say "A" is trading at 100 and you place a limit buy at 95, this means 95 is the maximum price you are willing to pay for A.
Now lets suppose A LTP comes down to 99, you order will not be executed, after a while it comes down 98, your order will still not be executed, next the LTP suddenly drops to 95.50 your order will still not be executed, then it goes up a bit to 97 but your order will still not be executed. After this it suddenly drops to 95, at this point your order will be queued for execution and if liquidity is good it will be executed for 95.
On the other hand if it drops from LTP 97 to LTP 93 with no offers in between your order should be executed at 93 (or lower if liquidity is poor).
So a limit buy is the max price you are willing to pay for A it could even be a better price than the lmit but not "more" than the limit.
Reverse the above explanation for a limit sell order, so for a limit sell order it is the "minimum" price you are willing to sell for.
Now coming to the stop loss trigger price.
As I said it is to be between the limit price and the LTP, all it does is keep the limit order inactive till the trigger price is reached.
In the above example let us suppose you have purchased A at 95 and want to lmit your loss at 90 in other words you want to sell should the price go below 90, although it is cutrrently above 90. Now if you give a lmit sell order at 90 what will happen?
A will be sold immediately at 95 why? Because in a limit sell order the lmit price is the minimum price you will sell at, so it means you are willing to sell at a minimum of 95 or better, hence it will be sold at 95
Now if you want to protect your loss what you should do is issue a limit sell order at 90 with a stop loss trigger price at say 91. When you issue this order what will happen.?
Initially the order will remain inactive as the LTP is 95 and the trigger is 91, when and if the LTP reached 93 the order will still be inactive. Now lets suppose the LTP reaches 91, which is also the trigger so according to the definition of trigger I gave you above what will happen your order will become an active limit sell order at 90 which means 90 is the minimum you are willign to pay for A so A will be sold at 91 or 90.90 or 90.85 or any available price upto 90.
In case the LTP rapidly drops from 95 to 88 your order will be queued as a limit sell orer at 90 and your share will not be sold till the price reaches a min of 90, so u c it is not foolproof you have to monitor whats happening.
Now that you have read this you tell me what sort of order and what values you should put in if u would like to buy a stock say at 100 and would like to sell it either when I get a 20% margin at 120 or I can bear a loss of 5% so 95.
Re