Today I wanted to talk about the proverbial stop loss. In trading we love seeing our profits soar and wish we could had sold before price has retreated a whole lot. If I had 1 Bitcoin for everytime I've awoken to find a trade has depreciated 10% or so I would be the true master of Bitcoin. The good news is that there are tools to sell us out before the damage is too much, and also to place sell orders if the price increases to our target range. Once I started incorporating this tool into my trading strategy, it helped manage my emotions which as we all know is the absolute foundation of healthy trading!! These tools are known as stop losses. I won't go into detail on which cryptocurrency exchanges use which style or how to set each one up in detail because they will vary. The most important part is that knowing that they exist and when they should be used, and then you will figure out how to set them up on an exchange. I personally use stop limit buy and sell sets. I will use Binance to give any reference to an exchange where I need to do so because I am very familiar with them and they are one of very very few exchanges at time of writing this that has a mobile app capable of effectively managing stop losses. Easy to manage if Im out of my house.
Stop Limit Buy Orders
I do not use this one often, but I have, as this part of entering a trade I approach more hands on and aggressively. If you suspect a price breakout, you will be able to set a buy order if price gets to where you believe would signal that breakout. For example, if Eth is at 450.00 and I believe 500.00 is where uptrend is confirmed and it quite hasn't happens yet..you can set the order to buy when the price reaches 500.00. Once you enter that price then in next field you will enter the price you want to purchase at. So you put in 500.00 and then 501.00 or whatever you want. Then in next field you input hoe much Eth you want, same as usual. The ex change puts your order in the book when price hits 500.00 and fills it at 501.00 easy as pie right?!
Stop Limit Sell Orders
Basically reverse the steps of the stop limit buy orders. This will protect you losses if you would rather sell at a certain point but have to sleep or go into a meeting or whatever you do :) Stop loss will put order to sell ETH at price of 490.00 on the books and should it hit 489.00 or whatever price you choose, will execute.
Trailing Stop Losses
This one is my favorite one and although I've heard of an exchange possibly existing that electronically updates these for you, I haven't seen them yet. I have not looked for it either i must confess. This I prefer to manage hands on as well because I'm always looking at my active trades. When the price goes up , cancel your stop loss order and set a new one higher, and keep doing this as price rises until you cancel it and decide to sell. Set it higher and higher, all the way to 100,000 if the price goes that high!. This strategy is amazing. It "Trails" the price as it rises!! How cool is that? I know, I know..way cool man :)
That's it in a nutshell, it's really that easy so no longer post needed, use these!! They are easy and awesome :) A solid part of risk management, in my opinion the most solid!