Stop Loss

A stop-loss order is a risk management tool that automatically closes your position when the price reaches a specified level, limiting your maximum loss on a trade. It is the single most important tool for margin traders.

How Stop-Losses Work

1. You open a long BTC position at $50,000 2. You set a stop-loss at $49,000 (2% below entry) 3. If BTC drops to $49,000, your position is automatically closed 4. Your loss is limited to $1,000 per BTC (2%)

Types of Stop-Loss Orders

Market Stop-Loss

Triggers a market order when the stop price is reached. Guarantees execution but not price (slippage possible).

Limit Stop-Loss

Triggers a limit order at a specified price. No slippage, but may not fill if the price gaps through.

Trailing Stop-Loss

Automatically moves the stop-loss as the price moves in your favor. Locks in profits while allowing the position to run.

Guaranteed Stop-Loss

Available on some CFD brokers (IG, Plus500). Guarantees execution at the exact stop price, even through gaps. Extra fee applies.

Stop-Loss Best Practices

• Always use one: Never enter a trade without a stop-loss
• Set before entering: Decide your stop-loss level before you trade
• Don't move it further away: Only move stop-losses in your favor
• Account for volatility: Don't set stops too tight (normal fluctuations will trigger them)
• Use with position sizing: Stop-loss distance determines your position size