Stop-loss: intraday basis, closing basis, slippage and gaps

The stop-loss is the price at which the call is exited if the trade goes wrong: below the entry for a BUY, above it for a SELL. It sets R, the risk on the call, and the call's result is measured against it. A stop-loss is a level. It does not guarantee the price you exit at.

A stop on intraday basis means: exit as soon as the price trades at or beyond the stop, without waiting for a candle to close. It can be placed in advance as a stop-loss order with your broker, so it works while you are away from the screen.

A stop on closing basis means: exit only if a candle of the call's own timeframe closes beyond the stop. A move through the stop during the candle is not an exit by itself. On a daily call that is the day's close; on an hourly call, the close of the hourly candle.

A closing-basis stop cannot be placed as an ordinary exchange order, because the exchange does not know your rule. You check the close yourself and exit near it, or at the next open. If the next session opens far beyond the stop, the loss is larger than planned.

Slippage is the difference between the stop level and the price you actually exit at. In a fast market a stop-loss order can fill a few ticks beyond its trigger. A gap is larger: the price opens beyond the stop, and there is no trade at the stop at all.

This is why a trade is sized on the rupees you accept losing, with room for a gap, and why a position held through results or overnight carries more risk than its stop distance shows.

• A stop moved further away after entry increases the loss you accepted when you sized the trade. A call's stop moves only when the analyst posts an instruction, and then only in the trade's favour (trailing).
• Removing a stop because the price "is about to turn" is a common way for a small, planned loss to become a large one.
• Averaging down, buying more as the price falls toward or through the stop, adds to a position the analysis already says is wrong.

• How to read a research call: stop-loss
• Booking part of a position, and trailing stops
• Glossary: slippage