In order to limit your risk on a trade, you need an invalidation point. If a trade doesn’t go in your favour, then a Stop Loss or Stop Limit order is the lifejacket that will prevent you from drowning in a sea of red.

A Stop Loss is an automatically triggering order that sells your coin/token when a certain price is reached. Let’s take an example:

Hasbullah buys SLP at 0.04 and places a Stop Loss order at 0.03. The Stop Loss order will execute when the price reaches 0.03, hence preventing Hasbullah from bearing any further loss. If the price never goes to 0.03, then the order will never be fulfilled.

Another example of a stop loss order:

• You buy 1 BTC at $20,000.
• You set a stop loss order at $15,000.
• This means that if the price of BTC falls to $15,000, your exchange will automatically sell your BTC for you.
• This will limit your loss to $5,000.

In this example, the stop loss order is set at 25% below the purchase price. This is a common percentage to use for stop loss orders in crypto, as it allows you to limit your losses while still giving the market some room to move.

You can also set stop loss orders at other percentages, such as 10% or 30% below the purchase price. The percentage you choose will depend on your risk tolerance and trading strategy.

It is important to note that stop loss orders are not always perfect. In a volatile market, the price of an asset can sometimes fall below your stop loss price before the order is executed. This is known as a “slippage.”

However, stop loss orders are still an important risk management tool for crypto traders. They can help you limit your losses and protect your capital.

Here are some additional tips for using stop loss orders in crypto:

• Use stop loss orders on all of your trades. This will help you protect your capital even if the market takes a sudden downturn.
• Set your stop loss orders at a reasonable percentage below your purchase price. This will allow you to limit your losses without exiting the market too early.
• Monitor your stop loss orders regularly. If the market price is approaching your stop loss price, you may want to consider adjusting it.
• Be aware of slippage. This is the difference between the price at which you place your stop loss order and the price at which it is executed. Slippage can occur in volatile markets, so it is important to factor it into your risk management plan.