What is the order called in the cryptocurrency market that helps protect profits or limit losses?
Petty RandolphDec 26, 2021 · 3 years ago3 answers
In the cryptocurrency market, what is the specific order type that traders use to safeguard their profits or minimize potential losses? How does this order work and what are its benefits?
3 answers
- Dec 26, 2021 · 3 years agoOne order type that traders use in the cryptocurrency market to protect their profits or limit losses is called a 'stop-loss order'. A stop-loss order is an instruction given to a cryptocurrency exchange to automatically sell a certain amount of a particular cryptocurrency when its price reaches a specified level. This level is set below the current market price for long positions and above the current market price for short positions. By setting a stop-loss order, traders can minimize their potential losses by automatically exiting a trade if the price moves against their position. This order type is particularly useful in volatile markets where prices can fluctuate rapidly.
- Dec 26, 2021 · 3 years agoWhen it comes to protecting profits or limiting losses in the cryptocurrency market, one order type that traders often rely on is known as a 'take-profit order'. A take-profit order is an instruction given to a cryptocurrency exchange to automatically sell a certain amount of a particular cryptocurrency when its price reaches a specified level. This level is set above the current market price for long positions and below the current market price for short positions. By setting a take-profit order, traders can secure their profits by automatically closing a trade when the price reaches their desired target. This order type allows traders to lock in gains and avoid potential reversals in price.
- Dec 26, 2021 · 3 years agoAnother order type that can be used to protect profits or limit losses in the cryptocurrency market is called a 'trailing stop order'. A trailing stop order is a dynamic order that adjusts the stop price as the market price of a cryptocurrency moves in the trader's favor. For example, if a trader sets a trailing stop order with a 5% trailing stop value, the stop price will be adjusted to 5% below the highest price reached since the order was placed. This allows traders to capture potential profits while still protecting against significant price reversals. BYDFi, a popular cryptocurrency exchange, offers trailing stop orders as part of its trading platform.
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