What are Stop Loss Orders and Where to Put these Orders?
The world of crypto is self-explanatory, and its scope is far broad. Many portions of it are untouched, and those known to us have yet to be fully explored. This is why discoveries in this field always amuse and surprise us. Along with these facts, many terms and other conditions need to be visited occasionally so that something similar can be kept updated. As the crypto market is continuously changing, people cannot rely on expired information. Instead, they should have a significant source of knowledge and information to be used at any time. One of the terms that are used entirely on a large scale is stop loss orders.
This is one thing to consider when making trade and exchange practices. Its use is a significant step and a decision-making turn in the transaction. In this article, we will study these stop-loss orders and learn about different aspects of them. So, let us start our discussion about the stop-loss orders. In addition, you may start your trading journey and Try out Bitsoft360.
Stop-Loss Order- The Definition
Often brokers look for a specific price before and after which no trade and trade out is made. This optimum price helps the user get the desired return on his investments and gain a significant proportion. A stop-loss order is generally placed with a broker to buy or sell exciting stock. Once the stock reaches a particular price, either the stock is sold, or the same is bought. If someone has set the stop-loss order of 10% above the price, the same can be achieved when the stock price reaches that much. This will help the user focus on other things, not only on this order. Thus, time can be invested in other important works. Other names resembling stop-loss orders are stop-limit orders which are almost similar to stop-loss orders.
Advantages of Stop-Loss Orders
The foremost advantage of a stop-loss order is its no-cost policy. For setting up the same, one has nothing to put in. Everything is free. The only cost one needs to pay is the commission, and that too only when the price reaches that amount of time. Secondly, there is no need to keep track of prices and other features related to your stock. Once favorable conditions prevail, the stop-loss orders will get executed automatically without any physical intervention. Thus, there is complete insulation from human intervention, and as a result, the margin of error reduces to zero. Finally, stop-loss orders can be considered as the source of profit-making. The facilities are tested and marketed only for one purpose: to get profit out of the practices involved. Generally, the stop-limit orders relate to this purpose and get executed only when such a level is observed.
The Disadvantage of Stop-Loss Order
The foremost disadvantage of stop-loss order is the fluctuation-related activation of the stop price. As fluctuations are common in the crypto market, these prices can get activated by themselves when the fluctuation considers that amount but, in the end, will pour the output into a complete loss. The fluctuations are so considerable that sometimes a stop-loss order or 5% has taken around 10% of the fluctuation value. So, this thing should be considered and taken into note.