What is SLM in Zerodha? Is there a difference between SLM and SL Orders? Why are both these used? I am really confused, can anyone explain this.
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- Updated On:18-Mar-2024
- Replies:4
Short Answer
If you are into stock trading, you might have often come across the abbrevations SLM and SL. So, here we'll be clarifying: What is SLM? What is SL? You'll also know the difference, SLM vs SL with examples.
Detailed Answer
SLM Meaning & Full Form: Stock Trading
SLM refers to a Stop Loss Market Order made by an investor to avoid risk. These orders are intended to place a lock on the loss amount so that you only lose what you can afford to. For instance, if you have bought a share worth Rs. 100 and you can not afford it to fall more than 95. So, if and when the price of that share hits the bar, the stop order enables the broker to sell on your behalf so that you don't incur any more losses.
SLM vs SL: Types of Stop Loss Orders Examples
There are 2 types of Stop loss orders namely SL order i.e SL-M order i.e Stop Loss Market Order and Stop-loss Limit Order.
1. SLM: Stop Loss Market
In the first type, a fixed trigger point is decided. When a stock hits the trigger price, it is immediately sent off for buying or selling. So, in SLM you have to specify the trigger price.
2. SL: Stop Loss Limit
In this, a range is decided rater than a particular value. It includes the trigger price and the price that you specify. Hence, SL orders are based on Price + Trigger price as specified.
SLM & SL for Buy Position
Remember, if you have a long/buy position in market, your stop loss order will be a sell order.
Buy Position Examples
You buy a stock for Rs.600 and don't wish to lose above 2% of your capital and set up a stop loss at Rs.590 only.
Now, you can either place a SLM or SL order.
SLM Order: Stop Loss Market
You place a sell SLM order and set the trigger price at Rs.590. When the stock price reaches Rs.590, you sell order shall be forwarded to the exchange (as market order) and the stock will be sold at market price.
SL Order: Stop Loss Market
On the other hand, you can place SL order by specifying the price and trigger price both. Here, the trigger price should be greater than or equal to the price for sell order. Right!
Let's say you set trigger price at Rs.590.5 and the sell price at Rs.590 only. So, you have a range of 0.5 paise (590.5-590). Now, when the price of Rs.590.5 is reached, you sell order shall be forwarded to the exchange as a limit order.
SLM & SLM for Sell Position
Here are few practical examples to explain these two codes. Remember, if you have a short/sell position in market, your stop loss order will be a buy order.
Sell Position Example
For instance, you have shorted a stock of Rs.500 and can't afford a loss of more than 2%.
SLM Order: Stop Loss Market
So, he sets the trigger price is set at Rs.510. As soon as the stock hits Rs.510, your buy order shall be forwarded to the exchange (as market order) and the stocks shall be purchased at market price.
SL Order: Stop Loss Limit
Let's take another example of selling but with the other type i.e. SL. For instance, you set the trigger price at Rs. 609.5 and buy price of Rs.610. The trigger price, in this case, ranges from 0.5 paisa (610-609.5) So when the trigger price is reached, your buy order is sent to the exchange at a limit order at Rs. 610
This method, however, can prove to be risky at times of intense market fall. The price will fall more in the meantime that the next bid would've been in place and you can end up losing more than you can afford to.
How to Place SLM & SL in Zerodha?
You can place a stop-loss order using Zerodha's Kite console. In the software, while you are placing the order it asks for two sets of data. One is the number of shares, their price per share, and another SL or SLM order type on the right-hand corner. When you choose SLM it asks for the trigger price and when SL, it asks the range of trigger price. It acts according to the type of order you place.
By now it must be obvious that an SL order is a passive one. The trigger is the threshold and when the market crosses it, the order activates. Stop loss is used for intraday only. So, if the market doesn’t cross trigger price during that day, your order will not be executed. It will stand as canceled.
New investors are generally confused as to which one is better: stop loss or stop limit. Stop limit orders are stop loss orders itself. The only difference is in execution. When a stop limit order is executed the buyer gets the limit price for it. This price is often better.
So, that was something interesting to learn about SLM and SL Orders in reference to stock trading in India. Do you wish to add any other key points here? Feel free to share your opinions and discuss for any queries.
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Discussion (3)
SLM orders are more reliable than SL orders as the SLM orders get triggered even if there are wild moves against your position. There might be a slight slippage in the price but the Existing position will get squared off. On the other hand, SL orders are quite rigid and do not get triggered on an occasion where the price jumps beyond the SL price. In this way, the Trader can face huge losses if their SL order does not get triggered.
SLM and SL are terminologies that are often used to limit the losses on pre-defined purchases of shares or equity in the stock market. They help investors and traders prevent excessive losses and have a better chance fo seeking relevant investments in other domains.
Trigger price is the price entered by a trader during stop-loss limit and stop-loss market orders. Let's understand this in detail. In Zerodha following this mechanism is really simple.
Putting Stop losses for any position is an essential step to ensure that no major losses occur if the view on the underlying goes wrong. You should always place a Stop Loss when trading Intraday or positional. You can use a stop loss in Zerodha by following some easy steps.
Zerodha Kite allows you to sell shares either at market order or by placing stop loss. The order will be executed at the best available price.
Stop-loss orders are used to limit the losses in case your view goes grown. An SL-M or Stop Loss Market order ensures your position is squared off at the market price if the trigger price is reached. Whereas in an SL Limit order, a separate trigger price has to be added, which when reached will forward the limit price to the exchange.
You can place a stop loss as well as a limit order together while trading in derivatives such as Futures and Options. To implement this you will have to maintain a sufficient margin for additional orders.
Intraday trading on Zerodha can be executed with ease by choosing the type of trades you want to engage in. These could be NIFTY, BANK NIFTY, or future options of companies. Once you choose the respective lot, then choose the type of orders and then buy the shares. Trade them when you see a profit or wait till a specific point till you recover your investment.
Trading in the stock market is a pretentious task given the ups and downs it brings to the table. But for traders, brokerage firms have made life simpler and more comfortable to execute relevant trades more straightforwardly. For the same, we have Bracket Orders (BO) from leading stock brokers like Zerodha that helps in keeping a constant tab on the selling and buying of stocks on pre-determined specifications.
Streak is an online Options trading platform that helps Derivative traders to, create, backtest and deploy their own option strategies in the live market. Streak also provides Algo trading to its users without the need for any coding. This automates the process of trading to a large extent.
GTT in Zerodha is an acronym for the Good Till Trigger feature offered by Zerodha that lets the investor select a trigger price and a set of predetermined conditions that as and when are met, an order is placed automatically.
If you're looking for a straightforward and comprehensive take on options trading, then Sensibull should do the job perfectly. However, if you're and expert and want more complex trading tools, then Opstra is the one to choose.
Rishika Agarwal
SLM expands to Stop-Loss Market order and SL stands for Stop-Loss Limit. SLM orders are more effective than SL orders because they are activated even when the market moves towards you. They investment opportunities and merchants in avoiding large losses and increasing their chances of finding relevant opportunities in other areas. It is important to study both before deciding what is to be done because both has their own perks and cons.