How to Use Take Profit, Stop Loss, and Copy Trading to Place Successful Trades?

by Trailing Crypto cryptocurrency experts

Do you remember Arabian Nights and the magical lamp, which had the power to make anyone rich? Well, today, Crypto is that magical lamp that performs the same thing! But right investment and some patience while making use of some effective strategies can let you get those extra-ordinary benefits while making you super-rich.

Bitcoin is the perfect example of this. As Bitcoin jumped to its all-time high in 2021, novice investors are more eager to participate in the crypto craze, aiming to earn good profits. Crypto trading has also generated a social layer on Reddit and other channels where millions of users are gathering on forums to discuss the potential market trends with expert traders, hoping for some investment tips for success. There are numerous ways where the traders can earn profits, and one such trend is copy trading. Companies are developing copy trading platforms aimed to target beginners seeking to earn profits. Crypto trading bots, margin trading, making use of safety orders, etc. are some ways that traders can use to earn profits in cryptocurrency trading.

If you are considering investing in cryptocurrencies in 2022, the best way to manage your open positions is to activate the safety orders like stop-loss, trailing stop-loss, or take profit as your exit strategy. These are the safety orders that work in the same way as they sound. As the name suggests, a stop-loss order stops the trader from incurring a loss and take-profit order can be used to lock in the profits on short or long-term price moves.

Here in this article, we will discuss why copy trading, take profit, and stop-loss should become a part of your trading strategy in cryptocurrency?

Let’s understand these ways one by one:

How stop-loss works in crypto trading?

Now the question is,what is a stop loss order?

The traders can consider developing a stop-loss strategy to protect their investments. A stop-loss order is triggered, once the price of a crypto asset drops beneath the specified stop price by the trader. In this case, a market order will be executed selling the asset at the next available price below the stop-loss level.

A stop loss strategy is necessary to cap the maximum loss you will make on any position on cryptocurrency. Let’s know more about stop-loss order with an example:

You bought 10 coins for any cryptocurrency say ABC at $50 per coin with an investment total of $500. You set stop loss at $40. The asset price goes on to tumble in the days after you open your position and it breaches the $40 stop loss. Here the stop-loss order will be triggered, closing your position at$39.95 with a loss of $10.05 per share.

This order type minimizes the trader’s losses together with the pending or market orders.

So, in this type of order, you can specify the size of your stop-loss. Enter the order on the crypto trading terminal and it will wait and sit until it needs to be triggered. So, there are potential drawbacks to the stop-loss order. In volatile market trends, you may find that the stop-loss is triggered following a short-term spike in the market.

Trailing stop loss

But it’s even possible to use a form of stop loss to protect in your profits in the volatile market. Trailing stops are the modification to the standard stop loss order. Trailing stop loss orders allow its traders to set the stop loss at a predefined percentage below the existing market value.

Trailing stop loss will follow the price of the asset with a specified deviation. If the price falls and crosses the specified level, the trade will be closed.

If you want to buy or go long on an asset, you will place trailing stop loss below the market value. And, on the other side, if you want to sell a stock, you will place trailing stop loss above the market value. In the case when your open positions move favorably in the direction you intended, trailing stop loss value will also move. It will trail the current market value.

However, if the price reverses and starts to go against the trader, a trailing stop will stay at its most recent level, limiting their losses or locking in the unrealized profits.

For example, you can put a trailing stop value of 10% which means that if the stock price dropped by 10%, the crypto asset would be sold automatically. Thus, it offers you a profit protection of not more than 10% of your investments.

Example

Let’s assume that you buy 100 coins of ETH at $100 each. You put in a trailing stop loss order for 5%. If the price of asset drops 5% below market price, you would automatically sell the coins.

Although you have every expectation that price for ETH will rise, if it does move against you, you’ll have limited your losses to 5% of the total investment. This protects you and locks in profit. If, however, the cryptocurrency price increases, you will benefit from the gains.

Let’s say that price of ETH jumps in a month to $200 per share. This order will only trigger if the price dips below 5% of $200 ($190).

How take profit order works?’

Take profit order strategies are popular among those who place short-term trades in the marketplace to feed off the fluctuations or volatility in the cryptocurrency value. However, with such market volatility, it could be tricky for some traders to know when to take out the profits. Before too long, they’ve missed the perfect opportunity to exit the trade and their gains are lost.

A take-profit order closes your open position for a profit whenever it reaches the predetermined percentage of profit. Setting a crypto trading bot at the best crypto trading terminal allows its traders to place trades smartly and earn profits.

There are different strategies that you can adopt with the take profit orders.  This order types allow the trader to set a target profit price that further ensures that he will make a profit on this trade. This order type allows the traders to maximize their profits. Generally, this order type specifies a predetermined price which is chosen by the trader above the buying price.

If the price of the crypto asset you are trading reaches your set limit, it will automatically trigger a sell order. It’s a kind of limit order where the trader can buy the crypto assets at low price or sell them at a higher price.

Let’s understand how it works with an example:

Let’s say a trader buys an asset ABC at $5,000, and put take profit +10% which means, he has created an order to sell ABC at a price of $5500.

For a while, ABC traded within $5000, and then continued to grow.  Upon reaching $5500 and above, your pending order with take profit +10% will be filled, and the system will close the trade with a sell order.

Here your total profit comes out as $500.

Most often traders use this order type in combination with stop-loss order so as to limit their losses and maximize their profits.

Trailing Take Profit

 Just like Trailing Stop Loss, traders can also consider trailing take profit order, so as to increase their profits. In this order type, your position will not close even if the take profit value is reached, but the price moves further in the profit zone. Trailing Take Profit Order continues to follow the price, and at the slightest movement back, it will close the trade with a larger percentage of profit than a simple take profit order.

If the trailing take profit moves up, then it will not move back. Thus, it is the most profitable order type which will prevent your losses.

Let’s understand how it works:

Imagine that a trader has bought XYZ for $10,000 and set a take profit order at $11000, trailing take profit for 5%. If the XYZ price climbed to $10,500, the order is not executed as the point at $11,000 has not been hit.

·         If the price for XYZ has climbed to $11000, a stop market order at $10450 would be placed.

• If the XYZ price dropped to $10500, the stop-limit order is still at $10450

• If the XYZ price climbed to $12000, the stop order jumps to $11400.

• If the XYZ price falls to $11000, the stop-loss order at $11400 is executed.

As you can get, without the trailing take profit feature, you would earn less, missing the price at $11400, and your XYZ would have been sold at $11000. But with Trailing Take Profit, you have earned extra profit of $400. TrailingCrypto is one of the best crypto trading platforms that lets its traders place this order type automatically using bot.

Another popular strategy that traders can consider while trading cryptocurrencies is copy trading. This is a perfect strategy for the novice traders.

Copy trading

Also known as mirror trading or social trading, copy trading allows its traders to automatically copy the trades of the high-profile or expert traders.

Let’s understand how it works:

As a copy trader, you give up some control over your investments. After deciding how much of your portfolio will be copied to another investor’s account, all of their trades are automatically copied by your account.

You need not worry about the size of your account as the system will adjust it accordingly.

If the trader you’re copying has an account size of, say, $50,000 and makes a purchase for $5,000 (i.e. 10% of their portfolio) then the system will automatically calculate 10% of your portfolio and duplicate that particular trade – be it a purchase for $50 or $500.

Of course, you decide if or when you want to consider copy trading. If you’re unhappy with the choice of the investor you copy from, you’re free to move on to someone else or quit copy trading.

Some of the popular copy trading platforms are offering profit-sharing copy trading which was developed with the unified interest of both traders and followers in mind. This means, more profits in your account, the higher the compensation will be given to the expert traders.  This kind of trading is quite beneficial as there is no-volume based fee and there will be no compensation for traders if they don’t have profitable strategies.

This is the next generation of copy trading which you must consider to earn more profits.

Conclusion

Making use of expert strategies is important in the crypto trading market to carry successful trades. TrailingCrypto platform offers a wide range of tools to the traders to automate their trading strategies. By using the above order types and copy trading, the traders can protect themselves from the volatile market trends and unexpected price fluctuations; get the maximum benefits from the price movements, and expand the trading opportunities so as to minimize risks and optimizing more profits.

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Created on Jul 20th 2023 12:14. Viewed 82 times.

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