HOW TO USE STOP-LIMIT ORDERS IN CRYPTO TRADING - A SIMPLE EXPLANATION

in #cryptocurrency7 years ago


I have come across many crypto traders(beginners/experts) that are trading crypto-currencies but still do not have the idea what is Stop-Limit feature and how this feature can benefit them in their trading. If you are one of them, lets start and I will try to explain this thing as simple as I can.

First of all, let me clear every reader that every trader use this feature in variety of ways. Some seasoned traders do not buy/sell instantly but they put limit orders and these limit orders triggered when the certain price value is reached. However right now I am not going to explain this, instead I will explain that how can we use this feature to maximize/secure our profits or minimize/book our losses.

As you can see in STOP-LIMIT box, there are 3 components. I will explain each of them one by one.


1. STOP - No complex explanation- treat this as your alarm bell. Whatever the price you input in this field, if the price reach that price that's the first criteria met and whether you have press BUY/SELL it will trigger now

2. LIMIT -  Once your Stop Price reached,  now whatever you have put in this LIMIT BOX it will BUY/SELL immediately as the price hit the LIMIT price as you have entered. 

3. AMOUNT - Very Simple. The amount of coins you want to BUY/SELL by using this STOP-LIMIT feature.

I am sure you are more confused than before :) but wait let me clear all your confusions by giving you an example that will clear everything.

EXAMPLE:

Let Suppose you have bought 10 STEEM coins at the rate of 80,000 Sats. After a day the price rose to 95,000 Sats and you are sitting on a handsome profit but expecting more and more but on the same time thinking that if the price went back to 80,000 or less I may lose all my running profit. So what to do in this case?? Guess!!!! You take the help from STOP-LIMIT FEATURE. You can do the following settings (just an example you may play with other settings as well)

STOP : 86,000

LIMIT : 85,500

AMOUNT : 7

& Hit "SELL" Button.

So what this can do to your trading is that, If the price start to decline from 95,000 Sats and keep on declining so as soon as price went back to 86,000 Sats, immediately your STOP-LIMIT order get triggered and if the price reached to 85,500 Sats, your 7 out 10 Steem coin will be automatically SOLD at the rate of 85,500 Sats which you bought at 80,000 Sats. Isn't it nice? Yes,ofcourse!!!

What if the price declines to 86,000 Sats (Stop) but never reached 85,500 Sats (Limit) and then take a ride towards 90s then what will happens?? The answer is although the Stop is triggered but the limit price is not reached so you are save again and you can alter/update your stop-limit again and try to earn maximize profit from the trade.

I hope it is pretty clear now....but wait as I said in the article above this feature also enable us to minimize losses as well.