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Stop losses are not a new thing in the world of finance. They have been in existence for a long time especially in stock markets. By definition, a stop loss is a type of order that aims at limiting a possible loss on a cryptocurrency trade. Typically, when you buy cryptocurrency then prices go up you gain and when prices fall you lose.

The concept of a stop loss is whereby you place a sell order at a price less than that at the time of purchase. Once the price falls to the stop limit, it automatically triggers a sale thus avoiding too much loss of cash. Cryptocurrency exchanges also make heavy use of stop limits. The following cryptos have well defined capabilities of creating stop losses.

Binance

This exchange has a simple and intuitive user interface that enables quick transactions. Upon logging in you will find the stop loss option on the top menu.  Click on it and you get redirected to a different page where all the magic happens. In this new page you will find a stop order box with spaces in which you should enter the following.

  • Your stop price
  • A limit price of your choice
  • The amount of tokens to sell

Your stop price represents the limit at which you want to sell or buy your coins.  This will appear in the order book. Coming to the limit price, you key in the price at which the stop limit gets automatically executed to prevent loss. Finally, for the amount, you key in the coin value you wish to sell. The functionality enables a great ton of flexibility. The same mechanism can get used for purchases.

Poloniex

This is also another exchange that is quite simple to use. Just log into your account and get started. You will find the stop-limit box on the main screen. Similar to binance, this box has three inputs namely the stop, the limit and the amount. Let us go over an example each of buying and selling.

Selling

Suppose you buy 1000 LTC at a price of .024 BTC. it then surges to .027 BTC. Here you have gained a profit, but you feel that LTC still has opportunity to surge upwards. Similarly, you also know of the volatility of cryptos and want to play it safe. The following is a way you can place your stop-limit order

Stop: 0.025 BTC

Limit: 0.024 BTC

Amount: 1000 LTC

After these steps, click the ‘sell’ button on the stop-limit box. Immediately, you then get a confirmation box telling you the result to expect. In case the greatest bidding drops below 0.025 BTC, an instant order to sell 1000 LTC at 0.024 BTC gets placed.

Buying

Let’s assume that XPM has plummeted to a price of 0.002 BTC. it’s definitely a great time to buy that 200XPM you have been eyeing. In this case you can place a stop-limit order as follows.

Stop: 0.0021 BTC

Limit: 0.0024 BTC

Amount: 200 XPM

Click “Buy” within the stop-limit box. You will get a confirmation just like in the selling process. If the lowest bid rises above 0.0021 BTC, an order to buy 200XPM at the price of 0.0024 BTC gets placed.

Kraken

Kraken recently re-introduced some advanced order types they had previously deactivated. With the installation of a new trade engine sometime in early 2018, their system is now more efficient. Furthermore, 10 currency pairs have also been added. The advanced order types enabled are the stop loss and take profit.  A stop loss sell order triggers a market sale when a trade gets executed upon the exchange at or below stop prices. A take profit sell order executes a market sale upon the trade of the exchange at or above a take profit price. As simple as that.

To create an advanced order log on to https://trade.kraken.com. Select either take profit or stop loss from the ‘Type’ field. Enter your take profit or stop trigger price within the ‘price’ field.

A similar method is available on https://www.kraken.com: Navigate to the ‘Advanced’ order form and select Take profit or stop loss in the ‘order Type’ field. Key in your take profit or stop loss trigger price. Once done confirm!


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This information should not be interpreted as an endorsement of cryptocurrencies or a recommendation to invest. Historic performance is no guarantee of future returns. As an investment class, cryptocurrencies are speculative investments and investing in cryptocurrencies involves significant risks – they are highly volatile, vulnerable to hacking and capital loss and sensitive to secondary activity. Before investing you should obtain advice and decide whether the potential return outweighs the risks.
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