Stop Loss Strategies used under NEPSE

In NEPSE’s secondary market, stop-loss strategies are a bit different from developed markets because we don’t have automated stop-loss orders in the TMS platform. Investors usually have to monitor and execute manually.

Here are the main approaches investors use in Nepal to set a stop loss:

1. Percentage-Based Stop Loss

• You decide in advance the maximum % loss you are willing to bear from your buying price.
• Common ranges: 3%–10% depending on your risk tolerance and stock volatility.
• Example: If you bought at Rs. 500 and your stop-loss level is 8%, you sell if the price falls to around Rs. 460.

2. Support Level Stop Loss (Technical Analysis)

• You identify strong support levels using chart patterns, moving averages, or historical price zones.
• Stop-loss is placed slightly below this support.
• Example: If a stock has support at Rs. 480, you might set your stop loss at Rs. 475.

3. Moving Average Stop Loss

• Commonly uses 20-day, 50-day, or 200-day moving averages.
• You exit if the price closes below a key moving average line.
• Works well for trending stocks but may cause early exits in choppy markets.

4. Volatility-Based Stop Loss (ATR Method)

• Uses Average True Range (ATR) to adjust stop loss based on the stock’s volatility.
• Example: If ATR = Rs. 12, you might place stop loss at buy price – 2 × ATR = Rs. 500 – Rs. 24 = Rs. 476.

5. Portfolio / Capital Protection Rule

• Instead of setting per-stock limits, you define total capital at risk.
• Example: You decide not to risk more than 2% of your total portfolio value in any single trade.

💡 NEPSE-specific reality:

• Since there’s no automated stop-loss feature in NEPSE’s TMS, traders usually monitor live price feeds and execute sell orders manually.
• Many use alerts from broker apps (like MeroShare, TMS notifications, or third-party NEPSE live apps) to know when prices hit their stop level.

If you want, I can give you a ready-made NEPSE stop-loss calculation table that automatically shows your sell point based on % loss, support levels, or ATR. That way you won’t have to calculate every time.