What is Stop Loss in Crypto Trading?

What is Stop Loss in Crypto Trading?

Crypto trading has now become a thing that many people are interested in. Especially after Bitcoin hit its highest value in 2021 which enabled many people to profit from investing or trading crypto assets. This makes trading crypto more attractive for all including beginners.

Basically, crypto trading is an activity of buying and selling crypto assets to make a profit from the price gap. If you buy when the price is lower and sell at a higher price, the difference becomes your profit. However, many beginners do not really understand how to determine when to buy and sell at the right price. Crypto assets are highly volatile, hence the ability to determine the right price to buy and sell is a must-have for traders. This is when stop-loss comes into play.

What is stop-loss?

Stop-loss is a strategy specifically designed to minimize an investorā€™s loss. In this case, stop loss is a strategy used to determine when a trader will buy or sell a crypto asset when the price has reached a certain limit. For example, when a trader buys Ethereum, he sets a stop loss of 10% below the purchase price. When this happens, if the value of Ethereum drops, this order will be activated and the ETH assets owned will be immediately sold to the market before the price drops even more. With stop-loss, you apply risk management to manage your assets.

With stop loss, you can maintain the capital that has been invested. By preventing bigger losses when a loss incurs, the initial capital invested can be preserved. In addition, the use of stop-loss is a preventive measure when the market price situation deteriorates drastically. When the value of your assets continues to decline, a stop loss technique can prevent you from losing more money than you can bear. You also buy the time to re-think your trading strategy while waiting for the market price to increase again.

When to use a stop-loss?

If you understand the use of stop-loss, the next thing to do is to implement this trading strategy.Ā  To do this, you need to determine when is the right time to use the stop loss strategy. As a reminder, you should set your stop-loss position in a position that is too narrow to be unaffected by normal market fluctuations. For more details, here are some stop loss techniques that can be applied:

  1. Trailing Stop-LossĀ 

This technique is known as a protect stop and is implemented by following the movement of the price trend. When the price reverses from the trend, the trailing will not move. By using this technique, you can earn a fairly high profit and not be limited to earning the initial capital that has been invested. This dynamic adjustment allows you to keep the top of the trade while keeping the downside low.

  1. Risk management

Risk management is a technique that a trader must have to help him trade in a disciplined manner. By doing this, you will gain the ability to earn bigger profits and avoid losses. Here are some risk management techniques that you can apply:

  • Do not use all the funds you have to trade crypto. Make sure you do not use all your savings or the amount you’re ready to lose.
  • Perform calculations more thoroughly and calculate the odds of losing/winning.
  • Make sure you always use the Take Profit and Stop Loss features on the crypto platform you are using. This will automatically ensure the asset will be sold at a predetermined stop-loss price. This is a risk management strategy that needs to be implemented so that you avoid losses and don’t make bad decisions when prices are soaring high due to greed.

Now, do you understand the stop-loss trading strategy and want to start trading crypto? In TokenomyX, you can take advantage of the stop loss feature so you can implement this trading strategy right away. If you are a beginner, you can also use a demo account to practice before trading live. With Tokenomy’s easy registration system, you can get started right away. What are you waiting for? Start trading on Tokenomy right now!

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