What is Stop-Loss?

What is Stop-Loss?

Stop-loss means stop loss. The instruction to sell an investment when it reaches a certain price is called a stop loss order. The purpose of stop-loss orders is to prevent traders from losing money as much as possible, that is, to minimize a possible loss. A stop-loss order allows the position to close automatically when the current price of the traded security, especially
the crypto coins
, reaches the level determined by the investor. In this way, the investor puts a limit on the amount of position he wants to risk according to his strategy. For example; You bought Bitcoin when it was $12,000 and it reached $13,000, you have a good profit, but you need to place a stop-loss order to secure your business and not make a loss.

The price is $12,500 Your last risk price you set is your last risk price by creating your order at this price and automatically selling the Bitcoins you have in your hand in case of a possible price withdrawal, you will not sell below the price you have set and you will protect your risk. The biggest advantage of stop-loss orders is the protection of your investment in price movements that will occur outside your control. For example, you are on holiday and you cannot follow the market, so this order will save you from a loss situation. At the same time, you can eliminate your risk situation that will occur as a result of fluctuations in certain time zones in the markets that offer 24/7 investment services.
 

There are some things to consider when placing a stop-loss order.

  • Determining the stop-loss order price in advance, before proceeding to any investment position, you need to determine your risk and decide which position to put a limit on.

  • When it comes to placing a stop-loss on random numbers, deciding on a stop order, you should determine it by analysis. Stop-loss placement should not be preferred at some price levels that meet a certain percentage or give you the value you want.

  • Changing the stop location according to the profit status, the purpose of Stop-loss is to protect you when your investment idea does not work. You should not change your stop order continuously according to your profit situation. It is an indication that the stop-loss order should be based on technical analysis.

     

To summarize;

  • Stop-loss is a protective measure to manage the risks of traders.

  • It refers to the maximum loss set for an investor.

  • If you have a certain loss threshold, you can use stop-loss.

  • The stop loss is automatic and you don’t have to examine your position.