Intraday trading involves a lot of risks but at the same time, a broker like Zerodha provides you a way to minimize your losses by offering you the option to place advance orders. Here let’s understand what is cover order in Zerodha.
Before moving ahead with the detail of the cover order, one must know what a stop loss order is. Every time you place a trade you expect the stock market to go in the direction you predicted but in case there is any reversal you can minimize it with a stop loss order.
Here stop loss is simply adding the value lower than the entry price at which you want to exit from the trade in case the market goes in the opposite direction.
Now one can set stop loss order in Zerodha is placed in all kinds of trade, but when used specifically for intraday trades, it is called a cover order.
In simpler words, traders use a cover order to reduce the risk of loss in case a trade goes against them. It reduces the risk for brokers and traders.
A cover order can be used for intraday trading only and it is allowed only on NSE. However, cover orders are not allowed in BSE and futures and options segment.
Since a cover order, is a combination of two different orders you cannot cancel the stop loss order after execution.
How to Put Cover Order In Zerodha?
Putting cover orders in Zerodha is quite easy.
- In case you are using the Kite web or mobile app trading platform you have to select the ‘Order’ tab. Search the scrip you want to buy.
- A window will pop up asking to choose the type of order. You will see order types like MIS (Margin Intraday Square up), CNC (Cash and Carry), and Market and Limit order.
- Click on the limit order or market order to choose.
- Now, to select cover order click on the ‘More Option’s tab. You will see order types AMO (After Market Order), BO (Basket Order), and CO (Cover Order).
- Select CO to put cover order.
- Put ‘Stop Loss Trigger Price’ in the given space and to complete the process click on Buy or Sell tab.
In Zerodha, you have to put a stop loss trigger price in the range of 10% while executing a cover order.
