- Due to the volatility of crypto, a stop-loss order is the best bet for investors.
- Stop-loss is designed to limit an investor’s loss on an asset.
- Still, crypto investors must first understand how and when to use it.
Cryptocurrency is widely known to be volatile. As a result, losses are almost unavoidable. Crypto losses have become one of the fundamentals one must bear in mind first before thinking of acquiring a coin. But as problems arise in the crypto sphere, solutions are also developed to tackle such, with that came the stop-loss order.
A stop-loss limits an investor’s loss on a security position that is unfavorable. A stop-loss is mostly used by traders to exit a dire position to avoid the price of the crypto moving against the investor. Moreover, one considers a stop-loss when the price reaches a certain threshold.
Notably, there are three types of stop-loss, namely; complete or full, partial, and trailing Stop-loss. A complete stop-loss permits an investor to sell their investment entirely if the price falls drastically overnight. While, partial stop-loss, allows the trader to sell half or a portion of the crypto in response to the event that led to that set off the stop-loss. A trailing stop-loss is an advanced approach to tackle trading losses.
It is important to learn more about crypto trading loss and its solution so you can enjoy your investing journey. That means, if one understands the basics, it will enable them to know the right time to invest.
Crypto can be a little difficult to grasp especially for newbies at the beginning, hence, investors may get carried away to only earn. But true to its nature, crypto has a way to pull you back to reality with a deep loss when there’s a bear that transcends to a massive fall in price.
However, it is essential to utilize a stop-loss order while trading in the crypto market. For all that, traders must study the risk-reward ratio extensively and also the value of the asset. For good measure, crypto exchanges apply the same technique to avoid future losses on a trade.
Nonetheless, stop-loss does not guarantee the complete elimination of loss, rather, it only minimizes it. Above all, it is advisable to do your personal research before investing your hard-earned money in crypto trading.