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A stop-loss is an order type to limit potential losses on a cryptocurrency trade. If coming from stock market trading you may have used these, if not you may not have heard of them. This guide doesn't cover margin orders, we've posted a separate guide explaining this. If the price goes up, you earn money; but if it goes down you lose it. The idea of a stop-loss is to place a sell order at a lower price than when you bought it to avoid losing too much money on this one trade.
In principle this is very good practice and is used very widely. But in the cryptocurrency world it isn't always a good idea as, unlike the stock market, most cryptocurrencies aren't regulated. A good example of this occurred on GDAX, on 24th June , where an account placed a multimillion dollar sell order at the market price and caused hundreds of stop losses to be triggered, and numerous people to lose money. Most cryptocurrencies with a high market cap are already widely used in the real world, and so unlike new coins released in ICOs - it's less likely that their price will drop to 0 after some bad news still possible, just less likely.
Then unlike people who didn't use stop-losses, you wouldn't still have your coins after the recovery. For the most part, stop-loss orders should be avoided completely in cryptocurrency; but there are specific scenarios where they can be useful, and the risk can be decreased:.
In the past, our favourite broker for using stop losses was eToro, as its user interface was beginner-friendly. In December they removed this functionality for crypto, so we looked for an alternative. Now a broker called IQ Option is our favourite.
They offer a wider range of cryptos than eToro, and continue to offer support for stop-losses and even better functionality, for example overlaying stop-losses on price charts. We posted a guide on how to start with IQ Option here.
We posted a guide comparing brokers and exchanges here. Any links to exchanges below are affiliate links, so we'll get some money if you sign up via them. In practice, when setting up a stop-loss order on an exchange you'll have a 'Stop Price' and a 'Price'. This site cannot substitute for professional investment or financial advice, or independent factual verification. This guide is provided for general informational purposes only.
The group of individuals writing these guides are cryptocurrency enthusiasts and investors, not financial advisors. Trading or mining any form of cryptocurrency is very high risk, so never invest money you can't afford to lose - you should be prepared to sustain a total loss of all invested money. This website is monetised through affiliate links. Where used, we will disclose this and make no attempt to hide it.
We don't endorse any affiliate services we use - and will not be liable for any damage, expense or other loss you may suffer from using any of these. Don't rush into anything, do your own research. As we write new content, we will update this disclaimer to encompass it.
We first discovered Bitcoin in late , and wanted to get everyone around us involved. But no one seemed to know what it was! We made this website to try and fix this, to get everyone up-to-speed! Click here for more information on these.
All information on this website is for general informational purposes only, it is not intended to provide legal or financial advice. Oct 8th, Updated Feb 27th, Trading A stop-loss is an order type to limit potential losses on a cryptocurrency trade. What is a stop-loss order? Sometimes stop-losses aren't needed Most cryptocurrencies with a high market cap are already widely used in the real world, and so unlike new coins released in ICOs - it's less likely that their price will drop to 0 after some bad news still possible, just less likely.
Scenarios where stop-loss orders are less-risky For the most part, stop-loss orders should be avoided completely in cryptocurrency; but there are specific scenarios where they can be useful, and the risk can be decreased: Brokers like IQ Option allow you to modify your stop-loss after opening an order.
This means once your trade goes positive, you can essentially remove all risk from that trade and be safe if Bitcoin's price crashes. When trading altcoins short-term , there are a number of different approaches.
For those with the goal of earning more fiat USD short-term, they may use small trades between dollars and altcoins.
A stop-loss however can be useful. When trading altcoins long-term , it might be better to use a different approach. In this case a much lower stop-loss order might be a good idea when trading coins with a small market cap. An alternative approach is to use a technique called dollar cost averaging. But the same principle can be used on specific trades. This way if the price goes up - you've made a bit of money, and if the price drops - your average buy price will go down.
Best broker for stop-losses? Best exchanges for stop-loss orders? Some exchanges that support stop-loss orders: Binance is a popular crypto-crypto exchange, offering what they call 'Stop-Limit' orders where the stop price is referred to as 'Stop'.
BitMEX , an exchange more useful for advanced traders as it offers up to x leverage, has an option for 'Stop Limit' orders they refer to the stop-loss as 'Stop Price'. IO is a popular exchange allowing fiat deposits.
It has a margin trading feature which allows a 'Stop loss price' to be set. When trading with margin there's a risk you can lose more money than you put into a trade, so a stop loss is even more important.
See our guide on margin trading for more info. Coinigy is a possible alternative. It's a platform that allows trading on multiple exchanges via their APIs, and has built-in stop-loss functionality they also refer to these as 'Stop Limit' orders. This works different to an exchange, where the stop-loss order is only sent when the price reaches your stop-loss price. A benefit is that the order is kept off the order book so a malicious person won't know when to trigger it , but a concern is that if the exchange API is down when the stop-loss is triggered, it might not close you out of a bad trade although there's always a risk of this on the exchanges themselves, it's just more so in this scenario.
March 30th, How to Trade Bitcoin on eToro. Written by the Anything Crypto team We first discovered Bitcoin in late , and wanted to get everyone around us involved. Never invest money you can't afford to lose.