Stop-Loss Strategies

Decide the stop before entry. It caps loss when the trade thesis is wrong. It is not a price prediction.

1. Where (method)

Method	Best for	Long-side rule
Structure (preferred)	Swing trades with clear swings	Below the swing low that invalidates the idea − buffer
ATR	No clean structure, volatile names	Entry − 1.5–2.5 × ATR(14)
S/R	Ranges, well-tested levels (≥2 touches)	Below support × (1 − buffer)
Moving average	Trend-following	Daily close below SMA20 (fast), SMA50 (medium), SMA200 (positional)

Buffers: 0.5% for large caps, 1% for mid/small caps, and 1.5–2% for illiquid names (under about ₹5 crore daily value). Don't place the stop exactly at round numbers (₹1,000, NIFTY 24,500) or at the biggest put-OI strike. Those are where everyone else's stops sit and where stop-hunting wicks reach. Go beyond them.

Get levels and ATR from ta.py summary. It prints ATR stops and the structure stop with buffer.

2. Validation

• At least 1 ATR from entry (otherwise it sits inside daily noise).
• Wider than the typical overnight gap (ta.py summary prints 60-day gap statistics).
• The resulting size keeps risk ≤ 1–2% of capital (risk.py size).
• R:R ≥ 1.5–2 after costs (risk.py rr).
• It sits beyond a real technical level, not at a convenient round number.

3. How (Indian execution mechanics)

• SL orders are DAY orders. A stop-loss order for a delivery (CNC) holding expires at 15:30. For a stop that lives across days, place a GTT (good-till-triggered; Zerodha, Groww, Upstox, Dhan and others support it), or re-enter the SL every morning.
• GTT on trigger places a LIMIT order. If the stock gaps below both trigger and limit, it won't fill. Set the GTT limit 1–2% below the trigger in volatile names, and watch results days manually.
• SL (stop-limit) needs a limit beyond the trigger, for example trigger ₹980 and limit ₹975. A zero-gap SL often fails to fill in fast moves.
• SL-M (stop-market) is blocked by many brokers for options and illiquid contracts, and has caused freak fills. Prefer SL-limit.
• Closing-basis stops use the daily close, which on NSE is the VWAP of 15:00–15:30. Check near 15:20–15:25 and exit in the closing session if the stop is breached. The post-close session (15:40–16:00) trades only at the official close.
• Circuits. In a lower circuit there are no buyers, so no stop executes. For band-limited stocks, size smaller instead of trusting the stop.
• MIS positions auto-square around 15:15–15:25 regardless of your stop, often for a fee. Exit yourself first.

4. F&O stops

• Futures: stop on the underlying or futures chart with the same methods. Use SL-limit with a buffer. Freeze-quantity limits apply to large orders.
• Long options: stop on the underlying level that invalidates the view, not a fixed premium %, because premium moves are non-linear and theta erodes it. Add a time stop: exit if the move hasn't happened within N sessions.
• Short options: define the exit as underlying crossing a level, or premium reaching 1.5–2× the credit. Use hedges (spreads) so the worst case is capped even if the stop fails on a gap.
• Illiquid strikes have wide spreads. Market stops there can fill far away.

5. Hard rules

1. Max loss per trade is 1–2% of capital (≤1% with leverage).
2. Never widen a stop. Only tighten it or leave it.
3. When the closing-basis stop is breached, exit in the closing session or at the next open. Don't wait for "one more day".
4. Set the stop before entry. Don't move it on emotion after entry.
5. Put the stop in the system (GTT or SL). A mental stop plus an alert is acceptable only if you will actually watch the market.

Output

Stop: ₹S (method: structure below swing low ₹L dd-mmm − 0.5% buffer)
Distance: ₹d (x% | y ATR) | wider than 60-day max gap? yes/no
Execution: GTT trigger ₹S, limit ₹S−b (or SL trigger/limit for today), closing-basis check at 15:25
Validation: size ok (risk r%) | R:R after costs z