How to Set Stop Loss and Target in Zerodha

Understanding Stop Loss and Target Orders
Stop Loss Order: A stop loss order is designed to limit an investor's loss on a position. It triggers a market order to sell a security once it reaches a certain price. For example, if you buy a stock at ₹100 and set a stop loss at ₹90, your shares will be sold when the price falls to ₹90, preventing further losses.

Target Order: A target order, also known as a limit order, is set to lock in profits by selling a security when it reaches a predetermined price. For instance, if you set a target price of ₹120 for a stock bought at ₹100, the shares will be sold once the price hits ₹120, securing your profit.

Setting Up Stop Loss and Target Orders in Zerodha
To effectively set up these orders, follow these steps:

A. Login to Zerodha Kite

• Open the Zerodha Kite trading platform on your desktop or mobile device.
• Log in using your credentials.

B. Placing an Order with Stop Loss

• Select the Stock: Choose the stock or instrument you wish to trade from the market watch list.
• Initiate a Trade: Click on the 'Buy' or 'Sell' button based on your trade direction.
• Set Stop Loss: In the order placement window, select the ‘SL’ (Stop Loss) option. Enter the stop loss price at which you want the order to be executed.
• Complete the Order: Enter the quantity and any other relevant details. Review your order and click ‘Place Order’.

C. Setting a Target Price

• Select the Stock: As before, choose the stock you want to trade.
• Initiate a Trade: Click on the 'Buy' or 'Sell' button.
• Set Target Price: Choose the ‘Limit’ option to specify the target price at which you want to exit the trade. Enter the target price in the designated field.
• Complete the Order: Enter the quantity and other necessary details. Review and confirm the order by clicking ‘Place Order’.

Using Bracket Orders (BO) for Stop Loss and Target
Zerodha also offers Bracket Orders (BO), which are designed to help traders set both stop loss and target prices simultaneously.

A. How to Place a Bracket Order

• Select the Stock: From the market watch, choose the stock or instrument.
• Initiate a Bracket Order: Click on the ‘Buy’ or ‘Sell’ button and select ‘Bracket Order’ from the options.
• Set Stop Loss and Target: Enter the stop loss price, target price, and order quantity. Zerodha’s platform will automatically set these as per your specified parameters.
• Review and Confirm: Check all details and click ‘Place Order’ to execute.

Managing and Modifying Orders
After placing orders, you can manage and modify them through the Kite platform. Here’s how:

A. Reviewing Orders

• Go to the ‘Orders’ tab on Kite.
• Review the status of your stop loss and target orders.

B. Modifying Orders

• Select the order you wish to modify.
• Click ‘Modify’ and update the stop loss or target prices as needed.
• Confirm the changes by clicking ‘Save’ or ‘Update’.

Common Pitfalls to Avoid
A. Incorrect Stop Loss Setting

• Avoid setting a stop loss too close to the current price, which might trigger it prematurely.
• Ensure your stop loss level aligns with your risk tolerance and market volatility.

B. Target Price Misalignment

• Setting an unrealistic target can lead to missed opportunities. Ensure your target price is achievable based on market conditions and analysis.

Leveraging Advanced Features
A. Trailing Stop Loss

• Zerodha offers a trailing stop loss feature that adjusts the stop loss level as the price moves in your favor. This helps to lock in profits while protecting against adverse price movements.

B. OCO (One-Cancels-the-Other) Orders

• Use OCO orders to set both a stop loss and a target price. If one order is executed, the other is automatically canceled, simplifying trade management.

Conclusion
Mastering the use of stop loss and target orders is essential for effective trading. Zerodha provides robust tools to set these orders and manage them efficiently. By following the steps outlined above, you can better control your trades, minimize risks, and maximize profits. Always ensure to review your orders periodically and adjust them as per market conditions and trading strategies.