Trigger Price

Trigger price is the price at which a conditional order (stop-loss or bracket order) is activated and sent to the exchange. Once the market price reaches the trigger price, the order becomes active and is eligible for execution at the specified limit price or at the market price.

What Is a Trigger Price?

In the Indian market context, many order types involve two prices:
1. **Trigger price**: the price at which the conditional order is activated and placed into the exchange’s order book
2. **Limit price**: the price at which the order actually executes (after being triggered)

Until the trigger price is hit, the order does not appear in the exchange’s order book. Once triggered, it becomes an active limit or market order.

When Is Trigger Price Used?

**Stop-Loss Order:**
– You hold shares at Rs 200 and want to limit your loss
– You place a stop-loss order: trigger = Rs 185, limit = Rs 180
– If the price falls to Rs 185, the order is activated and a sell limit at Rs 180 is placed

**Cover Order / Bracket Order:**
– Used for intraday trading with automatic stop-loss
– Two prices are specified: target profit and stop-loss trigger

**Stop-Buy Order (breakout buying):**
– Trigger = Rs 220 (above resistance), limit = Rs 225
– If stock breaks Rs 220, buy order at Rs 225 activates

Trigger Price vs Limit Price

| Component | Role |
|———–|——|
| Trigger Price | Activates the order; must be reached first |
| Limit Price | Price at which execution happens after triggering |

The trigger price must be between the current market price and the limit price.

Practical Example

Seema buys shares at Rs 150. She places a stop-loss order with trigger at Rs 135 and limit at Rs 130. If the stock falls to Rs 135, the system places a sell limit at Rs 130. If the order fills, she exits at Rs 130, limiting loss to Rs 20 per share.

Key Takeaways

– Trigger price activates a conditional order; the order enters the exchange book only after the trigger is hit
– Used in stop-loss orders, bracket orders, and breakout buy orders
– The trigger price must logically precede the limit price in the price movement direction
– Trigger and limit prices together give investors both automatic activation and execution price control
– Essential tool for risk management in intraday and positional trading