STOPS IN CRYPTOCURRENCY  TRADING

What is a Stop?

A stop (or stop-loss order) is a type of order you place with your exchange that automatically sells (or buys, in case of shorting) your cryptocurrency when it reaches a certain price. It acts as a safety net to prevent large losses.

✅ Types of Stop Orders

Stop-Loss Order

Triggers a market order when the asset hits a specified price.

Example: You buy Bitcoin at $30,000 and set a stop-loss at $28,000. If the price drops to $28,000, your Bitcoin is automatically sold to limit further loss.

Stop-Limit Order

More precise: it sets both a stop price and a limit price.

Example: Stop at $28,000, limit at $27,900. When BTC hits $28,000, a limit order is placed to sell at $27,900 or better.

Trailing Stop

A dynamic stop that moves with the market price.

Example: You set a trailing stop 5% below the highest price. If BTC rises to $35,000, the stop adjusts to $33,250. If the price then drops by 5%, the order is triggered.

🧠 Why Use Stops?

Limit Losses: Prevent large losses during volatile swings.

Lock in Profits: Secure gains without constantly watching the market.

Reduce Emotion: Automate decisions and avoid panic selling.

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⚠️ Things to Keep in Mind

Slippage can occur with stop-market orders during high volatility.

Whale manipulation can "hunt stops" — where prices are briefly pushed to trigger stop orders, then rebound.

It's crucial to set stops based on technical levels, not emotions.

🔧 Example Strategy

You buy ETH at $2,000:

Set a stop-loss at $1,800 (10% risk).

Set a take-profit at $2,400 (20% gain).

Risk-to-reward = 1:2 — a solid risk management setup.

Using stops effectively is key to surviving and thriving in crypto markets. Start small, test different stop types, and always tailor them to your trading plan.

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