A Stop Loss is an order placed to sell a crypto asset if it drops to a predefined price.
The objective of a stop loss order is to minimize a client’s loss.
At CoinSmart we support two kinds of Stop Loss Orders:
Stop Market Order:
- A Stop Market order will fill your order with the best available price in the current market, if your crypto asset reaches the specific predefined stop price that you have set.
- The disadvantage of a stop market order is that you’re not guaranteed a specific price you’re trying to sell at. It all depends on what's available on the order book.
- A stop market order is executed based on the order book which is filled by limit orders placed by other users. The order book can change significantly since the last traded price, especially in less popular trading pairs.
Current Price of Bitcoin is $50,000
Stop Price : $40,000
Bitcoin Price drops to $40,000
If the price of Bitcoins drops to $40,000 a market order to sell is submitted and your position will be exited.
Note: A Market Order to BUY crypto will be executed in a similar manner.
How to place a Stop Market Order?
To submit a Sell Market Order in your CoinSmart account, go to the "Advanced Trade" tab found at the top of your account page.
Select the Stop Market Type to Sell the crypto via a market order when the price reaches the "Stop Price" that you wish.
Stop Loss Limit
- A Stop Loss Limit order differs from a stop market order because when the Stop Price is reached, instead of a market order being submitted a limit order is submitted at the price you specify.
- In this case you will have to specify two prices:
- Stop Price
- Limit Price
- The Stop Price is the price that will trigger the submission of the Limit order to sell at the Limit Price you specify.
- It’s important to note that unlike a Stop Market order with a Stop Loss Limit order there is no guarantee that an order will fill at the Limit Price you define and your position will be exited. This is particularly true if you set your Limit Price very close to the Stop Price in a volatile market.
How to place a Stop Limit Order?
To submit a Stop Limit Order in your CoinSmart account, go to the "Advanced Trade" tab found at the top of your account page. And fill the following fields as below:
Select Order Type "Stop Limit"
Select the "Limit Price" you wish to sell based on your strategy.
Select the "Stop Price" to indicate when the limit price should be triggered for action.
Article is closed for comments.