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A Cover Stop loss order allows you to place an order which is sent to the Exchange along with fresh order but gets activated and is triggered only when the market price of the relevant underlying reaches or crosses a trigger price specified by you in the form of 'Stop Loss Trigger Price'. When a Stop Loss Trigger Price (SLTP) is specified in a limit order, the order remains passive (i.e. not eligible for execution) till the price of the underlying crosses the specified SLTP. Once the last traded price of the underlying reaches or surpasses the SLTP, the order becomes activated (i.e. eligible for execution at the exchange) and once triggered behaves like a normal limit order. It is used as a tool to limit the loss on a position.

Examples:
Cover Stop Loss Buy Order
'A' takes a short (sell) position in underlying NIFTY at Rs. 6000 in expectation that the price will fall. However, in the event the price rises above his sell price 'A' would like to limit his losses. 'A' may place a limit buy order specifying a Stop loss trigger price of Rs.6050 and a limit price of Rs. 6055. The stop loss trigger price (SLTP) has to be between the last traded price/fresh sell limit price (as the case may be) and the buy limit price. Once the market price of underlying NIFTY touches or crosses the SLTP i.e. Rs. 6050, the order gets converted to a limit buy order at Rs. 6055.

Cover Stop Loss Sell Order
'A' takes a long (buy) position in underlying NIFTY at Rs. 6000 in expectation that the price will rise. However, in the event the price falls, 'A' would like to limit his losses. 'A' may place a limit sell order specifying a Stop loss trigger price of Rs. 5950 and a limit price of Rs. 5945. The stop loss trigger price has to be between the sell limit price and the last traded price/ fresh buy limit price (as the case may be) at the time of placing the stop loss order. Once the last traded price touches or crosses Rs. 5950, the order gets converted into a limit sell order at Rs. 5945.

Important Note
Please note that in a fresh buy order, the Sell SLTP should be a price lower than the buy limit price (in case of fresh buy limit order) and last traded price ( in case of both market and limit order). An SLTP cannot be placed for a price that has already been surpassed by the market when the SLTP is being placed. Similarly, in case of fresh sell order, the buy SLTP should be greater than the sell limit price of fresh order (in case of Sell fresh limit Order) and last traded price (in case of both market and limit order).