What is a stop-limit order?
Although the cryptocurrency market can generate high profits, it comes with certain risks due to its high volatility. Therefore, traders use various types of orders like ladder smart orders, limit orders, market orders, and stop-limit orders in trading, which help them solve a number of tactical decisions. With stop-limit orders, traders set the minimum amount of profit they want or the maximum amount they are willing to lose. A stop-limit order is a kind of order that consists of two components: a stop price and a limit order.
Let’s take a closer look at what a stop-limit order is and how it works.
What does a stop-limit order mean?
A stop-limit order is a pending order until a certain price of a particular asset is reached. As we have already said, a stop-limit order includes a stop price and a limit order. Stop-limit orders provide traders with the ability to set the minimum amount of profit they want or the maximum amount of funds they are ready to lose during a trade. If the market reaches the specified price, a stop-limit order will be automatically placed for sale even if the trader is logged out or offline. Stop-limit orders can be placed strategically based on support and resistance levels, as well as the volatility of the digital coin.
Why do you need a stop-limit order?
A stop-limit order is designed to sell or buy a cryptocurrency at a set price by a trader, and it also helps to maintain control over the order after entering the market. That is, a trader who opens a new order to purchase or sell digital coins can set up trading parameters and manage risks. You can also change order parameters such as execution time and more.
Unlike simple market orders, a stop-limit order opens up more trading opportunities. Understanding how this order works is very important in crypto trading.
How does a stop-limit order work?
If you want to know how a stop-limit order works, you should distinguish it into 2 parts: the stop price and the limit price.
The stop price is responsible for placing a limit order if the asset reaches a certain value.
The limit price is the predetermined price at which the limit order will be executed.
Thus, in case the stop price is reached in the market, a limit order is created automatically with a custom price (limit price).
The limit price and the stop price can be the same, but it doesn’t have to be. However, it is safer for a sell order to set the stop price (trigger price) a little higher than the limit price, and for a buy order – a little lower. This increases the likelihood that a limit order will be implemented after the trigger is fired.
What do you need to know before placing stop-limit orders?
Another important point to pay attention to is the choice of strategy. The right choice of strategy will increase the efficiency of order execution and avoid some negative phenomena. But in order to choose the necessary crypto trading strategy, you need to pay attention to the following parameters:
- The volatility of the asset on which the crypto trader places a stop-limit order.
- The liquidity of the asset that the trader is going to trade.
- Using technical analysis to determine the value of a digital coin.
Advantages and disadvantages of a stop-limit order
The stop-limit order allows traders to:
- Set up and plan deals.
- Set a suitable amount for fixing profit.
- There is no guarantee that this order will be carried out.
How to place a stop-limit order in the Cryptorobotics terminal?
To place a buy or sell stop-limit order in the Cryptorobotics trading terminal, you need to follow these steps:
- Follow this link and go through the registration process.
- Create an account on one of the crypto exchanges that are integrated into the terminal.
- Link the account of the exchange of your choice to the terminal using the API key.
- Replenish the exchange wallet (in case the funds are absent in the balance).
- Click on the “Trade” button.
- Choose a crypto exchange.
- Choose a crypto pair.
In order not to search for the selected crypto pair for a long time, you can add it to the “Favorites” section by clicking on the heart.
After that, you can place a buy or sell stop-limit order.
To do this, you must do the following:
- Select Stop Limit.
Then a settings window will open where you will need to specify the following options.
- The stop price at which a stop-limit order will be sent to purchase or sell a coin when the specified trigger price is reached.
- The price at which the coin will be bought or sold (depending on whether the given order is issued for sale or purchase).
- The amount of the purchased coin.
- After all the parameters are specified, you must click on the “Buy” or “Sell” button, and the stop-limit order will automatically go into work.
If you plan to place a smart order, then select the “Smart Order” button or the “Buy” / “Sell” button.
In a smart order, you can set a Take Profit, Stop Loss, and Trailing.
Take Profit specifies the price at which the order will be closed in profit (as a percentage). Take Profit can also be set by moving the level on the chart.
To activate Trailing Take Profit, you must check the box and specify the distance in %.
When setting Stop Loss, the trader needs to indicate the loss (in percentage) that he is ready to lose if the asset price falls. When this value is reached, the order will be closed automatically. Stop Loss can also be set by moving its level on the chart.
As for Trailing Stop Loss, it is also activated by adding a checkmark.
We advise you to use Trailing Stop Loss only in a rising market. This feature may reduce your profit during other stages of the flat market.
After all the parameters are specified, you have to click on the “Buy” or “Sell” button in the lower-left corner, and the Stop Limit order will automatically go into work.
The price value can also be set by moving the level on the chart.
It is worth noting that Cryptorobotics also offers a wide range of tools for automated trading like crypto bots, crypto signals, copy trading, etc. To check the price of these functions, users can go to the Cryptorobotics tariffs and plans page.
A stop-limit order is a powerful tool that opens up more trading opportunities than simple market orders. These orders do not require active control in order to be executed. With this order, a trader can easily manage his assets, regardless of the trend that prevails in the market.
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