Guys! In this post i am going to discuss something very important about Stop Loss orders.
There are two usage of Stop Loss orders:
1. To Enter into the trade
2. To Exit out of the trade.
Stop Loss orders may be with Limit Price/@Market Price while Entering into the trade but must be @Market Price while Exiting -- Richard Donchian
...............Just because while exiting, the reason for being into the trade vanishes. For example, if you have entered into the trade to profit from momentum with a bullish stochastic crossover. Now trade goes into profit and Stochastics finally makes bearish crossover. Now you MUST exit the trade without your order being skipped by the market as bullish momentum has already vanished from the market.
Now look at the two cases:
(a) Suppose you have a limit price in the Stop Loss order and there comes a big order at your limit price or market has low liquidity at that price your order may get skipped and your profits may disappear and if it is a losing trade losses may swell. You never know how much damage market can do to you.
I have once suffered a big loss due to skip of SL order in the very liquid market of NIFTY where my gap between Limit price and Trigger price was 1 point. I was in office and had opened a trade over phone and put a SL order and was relaxed that if i am proved wrong my losses would be limited to my SL Limit price.
(b) Now if you have Stop Loss order as: Trigger price: (value) and Limit Price as '0' (zero). Then you don't have to worry about liquidity etc. your order will get executed @market price and there is no danger of it being skipped which is a must while EXIT. When you SHOULD exit (either with profit or loss) you MUST exit at any cost just because the reason of the trade has vanished by then.
Kamlesh Uttam
Commodity Trading is not the easy Task, when we are constantly keep watch on market Trends, Market Trend Prices on that basis we can start trading. for that we have to check market watch reports of commodities.