Use Stop Buy or Stop Sell Orders to Protect Yourself from Crypto Trading Losses

by Trailing Crypto cryptocurrency experts

Whenever any investor buys a stock or any asset, he expects its price to increase to a certain level. However, there could be some market fluctuations that result in different price levels than expected. Considering advanced order types like take profit, stop loss, trailing stop, stop market orders, etc. protects an investor against drastic fluctuations as these orders automatically sell the stock at a particular price. Usually, this price is set at a lower level than the price at which the asset was bought. 

 

Stop loss/stop order in crypto trading

Stop loss order is also termed as stop order which could be defined as an order placed in advance for a crypto asset to be sold when it reaches a certain level. This order is used to minimize or limit the loss in a trade. Usually, this concept is used for short-term trading. This is a kind of automated crypto trading method which takes place automatically when the preset conditions are met. 

 

A stop order helps protect your position. Many investors and traders do not know how to protect their open positions in crypto trading. Fortunately, there are some simple strategies which manage downside risks in the bullish and bearish markets. And, buy stop, stop sell order, buy stop limits, sell stop limits are all the best strategies used by traders in any kind of market condition. 

 

A stop sell order protects long positions by triggering a market sell order if the price of the asset falls to a certain level. One of the key advantages of the stop loss order is that you don’t need to monitor the holdings on daily basis. 

 

Variants of stop loss orders

There are many varieties of stop loss orders used by traders, each with a distinctive objective:

1.    Buy stop order

This order is used to buy crypto as a cover against losses and to protect gains from a short sell transaction. In this order type, the stop price will always be above the current market price of the asset. Buy Stop is the price level set by the trader when they wish to buy an asset in the future. 

2.    Stop limit order

This order is a combination of a limit order and a stop order. In this order type, whenever the stop price of the asset is reached, the stop limit order will give instructions to limit the order of buying/selling the assets at the specified price. This order type tends to work well in a slowly trending market. 

3.    Trailing buy stop order

In this order type, the stop parameter is based on the trailing change in the asset’s actual price. This order type helps traders maximize profits if the asset price falls or minimize losses if the asset price rises.

4.    Trailing sell stop order

In this order, the stop parameter is also based on trailing change which is part of the actual reduction in the asset’s price. This order type is used to maximize profits in case the price of an asset rises and minimize losses in case of asset price falls.

5.    Stop sell order

This is one of the best variants of stop orders which are used to restrict losses or protect profits if the price of an asset falls. It uses a stop price below the current market price of the asset. Sell Stop is the price level set by the trader when they wish to sell an asset in the future. As a general rule, the predefined price for the Sell Stop is always lower than the current market price of the asset in question. A trader who sets a Sell Stop order, anticipates that the price of their asset will fall.

 

How can one use the stop orders?

Traders can place scheduled orders with predetermined prices that trigger automatically when the asset price reaches this predetermined value. If you own any crypto coin and want to avoid a loss, enter a stop sell order to trigger if that stock reaches the predetermined price below the current value while limiting the losses. You can enter a buy stop order to buy at that price if you believe that the order may have upward momentum if it reaches a specific price. 

 

Let’s understand it with an example:

Suppose you have bought a crypto asset ABC at $50 per coin and you wish to risk no more than a $5 per coin loss on the trade. You place a stop sell order just below $45, say at $44.50. If the market price falls to $44.50, then the stop sell order will be triggered, and your asset will be sold at the next available price.

 

If you are planning to buy and sell any crypto assets, automatic crypto trading is the best solution to earn consistent profits without watching the market trends constantly. If you don’t have the time to trade crypto and don’t want to hold them for long, considering automated crypto trading is the best option. 

 

TrailingCrypto is one such trading platform that supports all the major exchanges like Binance, Coinbase Pro, etc., and allows you to buy and sell crypto safely and securely in a smart way. It has unique trading features and lets traders to customize their investments. From accumulation to long-term holding, and placing advanced orders like Stop Sell order or Trailing Stop settings, it introduces new templates to its platform from time to time for the traders.

 

Having greater control over your crypto investments can be a good thing, and stop orders can maximize some of that control. However, due to the fluctuating nature of the crypto market, your order may not be executed if it doesn't meet the stop price. Understanding different types of stop orders and how they play into your investment goals can help you build a strategy to get the most out of your investments while minimizing costs.

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Created on Jan 11th 2023 21:36. Viewed 158 times.

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