What is Stop-Loss Order?
Let's find out Stop-Loss Order meaning, definition in crypto, what is Stop-Loss Order, and all other detailed facts.
Stop-Loss Order, also known as a stop order, is an order to buy or sell an asset that’s triggered when the minimum trading price has been reached. It minimizes the risks by allowing investors to limit their losses.
Cryptocurrencies can be especially volatile, but there are also other financial securities that experience price fluctuations. Since it’s quite a common occurrence, you can see stop-loss orders on various exchanges.
How Do Stop-Loss Orders Work?
Firstly, traders have to set the lowest price they’re willing to sell their assets for. This way, the exchange will be able to trigger a sell order in case this set price is reached. By triggering a sell order, the exchange ensures that the trader experiences minimal losses.
What are the Advantages of Utilizing Stop-Loss Orders?
Stop-loss orders enable traders to automate the investing process by eliminating the need to monitor the market at all times of the day. Even if there is a bearish outlook on the market within the community, the investor can feel secure that they’re not losing significant amounts of money.
Moreover, traders who set up stop-loss orders have the opportunity to make a profit by setting a price at a higher level than the one the asset was purchased at.
When it comes to the crypto sector, it’s well-known that cryptocurrency markets experience high volatility. Because of this, stop-loss orders can be especially useful within these markets.
For example, placing stop-loss orders at higher prices than what they were initially purchased for. This way traders still get some profit back, even in the case of decreasing token prices.
Stop-loss orders became quite popular in the middle of 2021. This happened because both Bitcoin and Ethereum markets started going on a downward trajectory.
As mentioned above, stop-loss orders are capable of minimizing the trader’s losses. It’s done by setting up this type of order at a specific price that still gives you some leeway to make a profit. So it’s really no wonder that crypto enthusiasts turn to stop-loss orders to prevent any possibility of losing large amounts of money.