How to make use of stop sell orders to minimize risks and earn profits?

We all know that crypto trading market is highlyvolatile. These market swings may be temporary, lasting for few hours, or they may be more protracted going on for days. One contributing factor receiving a high level of attention towards market volatility and risk management is making use of stop orders.

Investment professionals always recommend using stop orders as a tool to manage market risks. Stop sell orders are used to protect a profit position of the trader if the price of an asset declines. On the other side, the traders may use stop buy orders to limit the investor’s losses to a short position if the price of a stock increases.

Determining the right risk management plan is one of the most important parts of a successful trading strategy. The best crypto trading platform and exchanges support automated crypto trading. This allows traders to earn consistent profits without monitoring the market. If you don’t have the time to trade cryptocurrencies and don’t want to hold them for long, considering automated crypto trading is the best option. Trading bots and advanced orders are the best examples of automated trading.

Before entering any trade, the trader must have a strict idea of where they should plan to exit any trade. Different kinds of strategies and advanced orders are used by expert traders to earn profits. Advanced traders typically use trade order entries beyond just the basic buy and sell market order like trailing orders, take profit orders, stop sell orders, stop buy, stop limit, etc. If you want to go beyond stop orders to earn good profits on trades, try out stop sell orders.

Sell stop order

A stop sell order is actually a type of stop order used when selling crypto assets. It is much different than a limit order because it includes a stop price that then triggers the allowance of a market order. Traders can use this order whenever any trade enters at a stop price which is actually lower than the current market price of the asset. In case of a sell stop order, the trader needs to identify a stop price to sell an asset.

Usually, the expert or smart traders use sell stop orders so as to protect their gains and limit the losses on the crypto assets which they own. A stop sell order is an order that is placed below the current market price.

Example:

Suppose a trader has bought any stock say, XYZ at $50 per coin but wishes to risk no more than $5 per share loss on this trade. He places a stop sell order just below $45, say, at $44.50. If the market price moves down to $44.50, then a sell stop order will be triggered, and the stock will be sold at the next available price.

Most trading platforms only allow a stop order to be initiated if the stop price of the asset is below the current market price to sell and above the current market price to buy. Sometimes, this order type is also termed as stop-loss order as you can use it to help protect your gains, and seeking to minimize a loss.

The stop sell order helps traders to cut down their losses. Many a time, whenever the price of an asset falls steeply, there are chances that your trade would have turned out to be ugly if you haven’t placed a stop sell/buy order. So make sure to place the stop sell order.

Why one should use a sell stop order?

Stop sell order is the right tool to make your trading simpler. Let’s understand how:

1. You are using a breakdown strategy

So, you are expecting the price to go much lower if the price breaks the support level. But, the breakdown of the support could happen within seconds and there are chances that you could miss a shorting opportunity. And, by placing the sell stop order ahead of breakdown, you can always stay in the trade.

2. Improve your trading psychology

By using a stop sell order, you are less likely to miss any kind of trade. You will not chase any price when it gets overstretched. Further making use of sell stop order will allow you to plan ahead and short at better risk to reward. This is an automatic order, so you need not watch the charts for the whole day waiting for any breakdown to happen.

3. Automation

The stop sell order helps to automate the selling of the crypto assets and hence you need not to watch the market all the time. This order type is triggered automatically in case the asset reaches the predetermined price.

4. Balancing risk and reward

When it comes to trading cryptocurrencies, maintaining risk and reward is important. In order to earn profits, you need to stick to a fixed amount of risk, and using a sell stop order will let you do so.

How to use the sell stop orders?

There is a strategy to use sell stop order including:

1. Identify a support level- you will use the previous market swings lows as your support level.
2. Wait for a build-up to form a support level- After the stop level has been formed, wait for the price to form a build-up near support level.
3. Place Sell Stop Order slightly below the support level- Now, you don’t want to be placing your sell stop order on the support level because you are likely to get stopped from the false breakdown. Instead, place the sell stop order slightly below support.

Isn’t this simple? Try this out!

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