A stop-loss order #stoploss is like a safety belt in the trading world.. it protects you from losing your entire capital if the market crashes suddenly and you are away from the screen.
Here is a simplified explanation of how to apply it practically:
1. What is a stop-loss order?
It is an order you place in advance that tells the platform: If the price of the currency reaches (X).. sell what I have immediately to protect me from a larger drop.
2. How to set it practically? Example on $XRP
Imagine you bought XRP at $1.90 and fear that the price will drop and cause you a significant loss.
Go to the trading page and test the 'Sell' option.
Instead of the 'Market' or 'Limit' option, choose 'Stop-Limit'.
You will find two essential fields:
Stop: This is the price at which the platform starts to move. For example, we set it at $1.75.
Limit: This is the actual price at which the sale will occur. We set it a bit lower than the stop price, for example, $1.70.
Meaning: When the market touches the price of $1.75, the platform will automatically place a sell order for your coins at $1.70 to ensure a quick exit before it drops to $1.50 or lower.
3. The golden method for determining the price
Do not set the stop loss too close to the purchase price (so you don't exit due to minor fluctuations).. and not too far (so you don't lose much).
For the cautious investor: set the stop loss at 5% to 7% of your entry price.
For the long-term investor: the stop loss may reach 15% or 20% because it can withstand fluctuations.
4. Moving the stop to secure profits (Trailing Stop)
This is the style of professionals
If the price of XRP rises from $1.90 to $2.50, do not leave the stop loss at $1.70. Instead, raise it to $2.30.
Result: Even if the market crashes later.. you will exit as a winner because you booked part of your profits.
Summary of steps on the platform:
Trade -> Sell.
Choose Stop-Limit.
Enter the alert price and the sale price.
Set the quantity to 100% and press Sell XRP.
Note: Always ensure there is sufficient liquidity in the market.. In cases of very severe crashes, the price may quickly exceed your sell point (which is rare in large currencies like XRP).
