It's easy to explain with some real example.

For example, let's say you buy 100 shares of XYZ Ltd.You bought the shares at Rs 200, and now they are trading at 250 per share. So at this time you are running a gain of 50 Rs per share. ( the gain is not realized yet )

You want to continue holding this share in case it might go up further, but you don't want to loose all 50 Rs/share that you already gained. So you make your mind that I will keep share if it keep going up but I will sell them if it falls below 230 . ( still 30 Rs gain )

Now your stop loss order comes into picture.

You could input a stop-loss sell order to your brokerage to sell 100 shares of XYZ if its price falls to 230.

Conclusion :

1. you trigger price to buy the stock was 200 Rs .
2. stock moves higher to 250 , now you don't want to loose this gain.
3. here comes stop loss.
4. your stop loss is at 230, that means you still want to pocket 30 Rs gain.
5. Remember this stop loss is not from 200 but from 250 ( current market price )

I hope this helps.

Hello Pratik,

Here is a buy scenerio:
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Stock A is trading at Rs. 100 . You feel that price may go up.You buy 500 shares at Rs. 100 in Limit Price Mode. Your sell target is above 105.

But for a safe side you don't want to loose more than Rs. 5/- a share.

For that you place a Sell Order in Stop loss mode. With Sale Price is 94 and trigger price is 95.

Because trigger will execute when price falls to 95 but there is delay in time when order triggers and it gets routed to exchange computers. In order to protect yourself from sharp fall you set the sell price lower then trigger price. In this case 94 Rs.

If the price crosses 105 cancel stop loss order and place a sell order for 105 and above.

opposite works for short selling.