A stop loss order automatically executes a market buy or market sell when a specific price is reached. It’s an extremely useful tool for maintaining a predictable level of risk when margin trading.Many traders choose to set stop loss orders 1-2% from the intended direction of their trades. For example, if Bob opens a BTC long at USD6,500, he can set a 1% stop loss order at USD6,435. If the price of BTC moves against Bob to the downside and crosses USD6435, a market sell order will automatically execute locking in a predictable $65 loss for Bob.
Stop loss orders are important in typical unleveraged trading, but they are even more crucial to long-lerm success in margin trading. Why? Because stop loss orders can protect you from being liquidated in a flash crash, which is a common occurrence in crypto.
Liquid’s easy-to-use trading interface supports two kinds of stop orders - “stop” and “trailing stop”. Normal stop orders allow you to set a trigger price in the denominated currency. A trailing stop allows you to set a percentage-based trigger that follows the price of an asset up and down.
Login to Liquid today to check out how to add stop loss orders to your trading strategy.
Trader, analyst, Liquid contributor. Editor of Decrypto.net.