How Can You Limit Your Losses in Crypto Trading By Using Stop Sell Orders?

by Trailing Crypto cryptocurrency experts

The only reason you’re trading in crypto market is to earn good profits. Isn’t it?

However, losses are predictable, especially when we are trading in a highly volatile crypto trading sphere. But, is there any way to mitigate such risks?

 Of course, yes! Make sure to use stop orders to prevent incurring huge losses even during the rapid fall in the crypto asset’s price. Most of the traders intend to use stop-loss orders which execute a sell order in case the asset price slides below a threshold.

To buy or sell any asset when its price falls below a certain level, make sure to use stop loss order. Actually, stop orders are the combination of stop orders and limit orders so as to reduce the risk of trader. These are the conditional orders that give traders precise control over the trade when an order is executed.  Advanced crypto traders use trade order entries beyond just simple buy or sell market orders. Placing these orders at market price will ensure that the trader will occur but it may include slippage while making a buy or sell order.

Determining the right risk management plan is one of the most important crucial assets of a successful trading strategy. The best crypto trading platform like TrailingCrypto supports automated crypto trading. This kind of trading helps traders to earn consistent profits without monitoring the market manually. If you don’t have the time to trade cryptocurrencies and don’t want to hold them for long, then it’s better to consider automated crypto trading.  Making use of crypto trading bots and advanced orders is the best example of automated trading.

Before entering any trade, one must have a strict idea of when to exit any trade. Different kinds of strategies and advanced orders are used by expert traders to earn good profits.  Professional and expert traders typically use trade order entries beyond the basic buy and sell market order like trailing orders, take profit orders, stop sell orders, stop buy, stop limit, etc.

 If you want to go beyond stop orders and want to earn good profits on your placed trades, try out stop sell orders.

Stop sell order

This is a kind of stop order which is used by the traders while selling crypto assets. This order is much different than a limit order as it includes a stop price which further triggers the allowance of a market order. Traders can use stop sell order whenever any trade enters at a stop price which is actually lesser than the current market price of the asset.

In this order type, you have to specify a stop price to sell their order. If the crypto asset price moves to the defined stop price by a trader, then a market order is triggered to sell an asset. This order type is quite different than limit orders.

 In case of sell stop order, the traders are required to identify a stop price to sell that particular asset.  Usually, the expert traders use this order types so as to protect their gains and limit their losses on the crypto assets which they own.

Let’s understand it with an example:

Suppose Mr. Joy buys BTC at $35 per coin but wishes to risk no more than $5 per share loss on this trade. He places a stop sell order on the trading platform just below $30, say at $29.50. If the market price of BTC moves down to $29.50, then a sell stop order will be triggered, and it will be sold at the next available price.

Most crypto trading terminals only allow a stop order to be initiated if the stop price is below the current market price to sell and above the current market price to buy. At times, this order type may also be termed as stop-loss order as this order type can be used to help protect your gains, and seek to minimize a loss.

Still confused on this part?

Let’s understand stop sell order type in deep with different examples while longing or shortening a position:

1.    Using a sell stop order to enter a short position

If you are looking to initiate a short position below the current market price, then it’s better to use a stop sell order to enter the short position.

For example, if any asset XYZ is trading at $100, and you want to short its position if the price falls to $47.50, then you might place a stop sell order at $47.50.

2.    Using a sell stop to enter a long position

This order type helps traders to cut down their losses. And, if you have bought some coins of a stock, say XYZ, and are holding an open position, here using a stop sell order below the market price to exit your position is a better option.

 How to use the sell stop orders?

Let’s understand the strategy to use the sell stop orders:

1.    Firstly you need to identify a support level. Here you will use the previous market swing lows as your support level.

2.    Now, it’s time to wait for a build up to form at the support level. After the stop level has been formed, wait for the price to form a build up near its support level.

3.    Now, you don’t want to place your sell stop order on the support level because you are likely to get stopped from the false breakdown. Instead, try to place the sell stop order slightly below support. ‘

Isn’t this order type simple? Try this out on the best crypto trading platform like TrailingCrypto.

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Created on Aug 28th 2023 12:10. Viewed 119 times.

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