How to Get the Most Out of Stop Loss Orders: Secrets and Hints


Trading at a professional level involves using strategies to maximize your gains while minimizing any losses. When you buy cryptocurrency you’d probably expect to sell it at a profit. However, due to the volatile nature of the crypto market, prices can fluctuate way beyond and below the bid price.

Traders make use of important strategies such as using stop loss orders in order to cushion the impact of price fluctuations. In this article, we explain all you need to know about stop loss orders and how to make the most out of it.

What Is a Stop Loss Order?

Well, here’s a simple breakdown. Orders are generally executable instructions that a trader sends to their trading systems, instructing them on how to buy and sell on their behalf. A stop order is an executable instruction placed to say the trading system to sell coins when they reach a certain price. It is a strategy in which traders set a floor below which they do not want to realize losses.

How Do They Work?

A trader setting their stop loss order at 10% below the buying price will ensure  they do not incur loses beyond 10% of that price.

Let’s say you purchased Bitcoins at $20,000 per coin six months ago and set the stop loss at $18,999. This means you want to hold as many coins as you can and sell them when the price goes up. At the same time, you want to protect yourself from losing all the unrealized profits  you have accumulated so far with the Bitcoins.

Therefore, setting the stop loss order means  you have capped your loss limit at $18,999 per coin. You can trade the coins at any price above $20,000. However, if their price happens to drop below $18,999, your coins will be automatically sold at the current market price; also known as the best price available in the market.

Secrets and Hints of Making the Most from Stop Loss Orders

Stop loss order can be risky. Take our example above, where Bitcoins worth $20,000 per coin are set at a stop loss order of $18,999. The stop loss order operates as a market order, which means the trading system will sell at whichever price available once the price of the coins falls to $18,999. If no trader in the market is willing to trade at $18,999, then you may be forced to trade at a worse price. We call this slippage.

The following are tips on how you can protect yourself from this by making the most out of stop loss orders.

1.     Have a Definite Stop Loss Strategy

Your stop loss level shouldn’t be random. Instead, ensure you test your trading strategies before setting up your stop loss level. Therefore, you trade in the general direction of the market trend and set your stop loss at a level which allows adequate room to allow price fluctuations, and that cuts you off from trading when the prices go against you.

2.     Know Where to Place a Buying Stop Loss Order

The ideal stop loss order should have enough room to fluctuate when the prices rise, and at the same time, protect you when the price falls. This is achieved by placing a stop loss order below the “swing low” when buying. A swing low is the price a cryptocurrency settles at when the market prices fall and bounce up again; also known as the level that the cryptocurrency price finds support from the market.

3.     Know Where to Place a Short Selling Stop Loss Order

When short selling, the ideal stop loss order is set at the price at which a cryptocurrency settles at when the market prices rise then fall back again. This is known as the swing high. It is the level at which the cryptocurrency price encounters resistance from the market.

Setting the stop loss above the swing high or below the swing low levels only guarantees protection from incurring losses. You, however, risk losing the unrealized profits as the swing high and low levels are also known to change with the volatility of the market. You can insure your unrealized gains by adopting trailing stops.

Trailing Stops

In the crypto market, prices can skyrocket or take a dive. A drastic short-term fluctuation in the price of a cryptocurrency can trigger the stop loss order. For instance, if you set a stop loss order at 5% but the crypto coin fluctuates in price at an average of 10%, you may end up trading at a much bigger loss. This is where trailing stops come in to help.

Trailing Stop Buy
Trailing Stop Buy

Trailing Stops are tools that manage stop losses automatically. They can be found in terminals like Superorder. The Trailing Stops move the stop order as the prices rise, hence ensuring your trade is cushioned from activating due to a sharp unpredicted fall. You can set the number of crypto coins you wish to protect and set the distance between the stop loss and the market price of the crypto coins. This way, the trading terminal compares the market rates and moves your stop loss order as the prices rise. In the event the prices fall, the stop loss remains at the same position and the trade is made to avoid greater losses.

Trailing Stop Sell
Trailing Stop Sell

Learn more on how you can use trailing stops here.

Why Are Stop Loss Orders Important?

The cryptocurrency market is highly volatile. Market prices rise and fall randomly. Besides, they can be very difficult to track, especially for traders trading over multiple systems.

  • Stop loss orders are fully automated. They monitor the prices for you in the background and place the respective trade on your behalf once the prices fall below your set stop loss.
  • Stop loss orders in automated terminals like Superorder, eliminate the need to physically monitor prices 24/7.
  • They are a free-to-use precautionary strategy. The commission you receive is only charged when the prices fall below the stock loss level and the cryptocurrencies are sold.
  • They eliminate emotional triggers from the trade, ensuring your executions are purely based on data and strategy.

Parting Shot

Whether you are struggling to minimize excessive losses or lock down the unrealized profits, stop loss orders are the trading insurance policy  you need to start making use of. For instance, try out cryptocurrency trading bot, which gives you access to helpful stop loss order features at the touch (or click) of a button!


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