Investing in stocks is one of the best thing you could with you surplus money. Lot of people are interested to put their hard earned money in stocks. Having said that its not at all easy for any of these traders to earn money from the get go itself. Lot of effort is required to carry out trades and achieve success while investing in stocks. Traders over the years have been successful when they used each and every tool available in stock market to good effect. Stop loss is one the tools, lot of traders don’t how to use it effectively and minimize the losses the might come their way while trading. Read on to know how to use stop loss in MCX.
Its very much important how you use stop loss while trading commodities. You can use stop loss in positional and intraday trading.
Two methods are used to place stop loss orders in commodity markets. Below are the two stop loss orders that might be used while trading commodities.
Stop Loss order types
Order Type SL
- Generally traders use stop loss with two different values that are trigger price and price.
- With SL traders keep minimum of 2 points when they are trading commodities.
- It could be very risky as commodity price movements can be fast and lose your trade in matter of seconds if server speed is not good.
- With the sudden movements of commodities stop loss won’t trigger that much faster. Its advisable that you keep 30 points of SL in crude and 400-700 points in silver.
- Its advisable that you keep enough difference between trigger price and price values or else use SL-M to place stop loss orders.
Order Type SL-M
If you are choosing SL-M than you have the luxury of putting Stop loss and trigger price same. For example if you are buying Crude Oil @ 3948 and stop loss @ 3940. Simply put trigger price @3940 as well. That’s it once the stop loss price is reached the trade will be executed.
Benefits of SL-M
- You can stop loss order fast
- No need to bother about speed and sudden movement of prices as stop loss will be executed perfectly.
- Best SL method for big traders H1N1. Not only that its the most preferable SL method for all the inventory day traders.
Each and every trader should be aware of each and every stop loss strategy in commodity markets. Most of them just ignore it to core. As a trader you should remember that you don’t keep stop loss more than 2-3% of your invested capital.