Crypto trading is a risky game where you put your money and hope that it multiplies. Well, it is a bit complicated than that, to be honest. It starts with you analysing the market, looking for support and resistance levels, checking out the trends, and looking for any significant news or announcements that could fluctuate the market movement. Thereafter, you take your position, whether long or short.
Even after you have done your research and set your position, there are instances when the market moves against you and you start making losses instead of profits. During those times, you need a limiter to set bounds on how much you are willing to lose.
The markets constantly keep moving, you will be compelled to have an eye on the charts 24/7. However, that isn’t humanly possible. But how about if I told you that there is a workaround method that imitates you being at your desktop throughout the day, executing your orders.
Understanding stop loss orders
The stop loss is a preset instruction on your platform that triggers when the market moves against you. When you set the stop loss, you are telling the platform, if by any chance the market moves against me, this is the maximum that I’m willing to lose. Once the price reaches the threshold that you have input, the stop loss will trigger and the order will be closed, and the losses will be minimized.
Source: Tradingview
Let’s say you entered into a long position at $1,814, thinking that the price would appreciate. However, it turns out the market is on a downtrend, and ETH starts to shed its price. Since you already bought it for $1,814, there’s no way you are gonna make a profit. However, you could stop the loss that you are making. So when the stop loss is at $1,560, it is just a loss of $254.
Advantages
Minimizes losses: The stop loss feature comes in handy as it puts a limit on the amount that you could lose on a trade, as it exits the market once it is triggered.
Monitors around the clock: once the limit is set, the stop loss, you don’t need to monitor or stress over the markets that aren’t going in favor.
Understanding take profit orders
Setting a take profit is like giving a target to the trading platform, instructing it to take profits once the price reaches the specified target. Once you set the desired parameters on the system, the order will be triggered, and you will earn your profits.
Source: Tradingview
Let’s say you entered the market at $1,809 and you hope to sell the token when it reaches $2,549. No matter how much the price fluctuates, the order will be active as long as the price is within the stop loss and take profit range. Once the price of ETH hits $2,549, the order will trigger, and there will be a profit of $740.
Advantages
Automation: Since the platform keeps track of the price around the clock, you don’t need to sit and monitor charts at your desk.
Prevents greed: the take profit lets you keep away, the trader’s enemy–greed. Trader will be freed from taking emotional trade decisions
