Stop Loss Orders in Crypto
Pre-set exit. Price drops to a certain level, position closes automatically.
Bought ETH at $3,000. Stop loss set at $2,700. ETH falls to $2,700. Trade closes. Loss locked at 10%. Can't get worse from there.
No decision required in the moment. No watching the chart hoping it recovers. No convincing yourself to hold just a little longer. Already decided before emotions existed.
Stop Market vs Stop Limit
- Stop market. Price hits stop level, market order fires immediately. Guaranteed to close. Price not guaranteed. Fast moving market or low liquidity token, fills wherever it can. Could be significantly worse than the stop level during a flash crash.
- Stop limit. Price hits stop level, limit order placed at specified price. Price guaranteed if filled. Not guaranteed to fill at all if price gaps through the level. Token drops from $1.00 to $0.60 in one candle. Stop limit at $0.85 never fills. Still holding a position now down 40%.
Stop market for liquid assets where guaranteed exit matters more than exact price. Stop limit only makes sense where slippage is the bigger concern than not filling.
Where to Put It
Should reflect where the trade thesis breaks. Not where it hurts less emotionally.
Long ETH because it's holding support at $2,800. Stop goes below that level. $2,750 maybe. Support breaks convincingly, reason for being long is gone. Exit.
Not at $2,900 because normal volatility hits there twice a day. Gets triggered by noise not by being wrong.
Not at $2,000 because that's more comfortable psychologically. That's hope, not risk management.
Avoid obvious round numbers too. Large players know retail clusters stops at $2,700, $2,500, just below recent lows. Price wicks to those levels, triggers stops, reverses immediately. $2,683 instead of $2,700. Small adjustment. Harder to hunt at scale.
The Part Most People Fail At
Setting the stop is easy. Not moving it when price gets close is where discipline breaks.
Price approaches the stop. Instinct says give it more room. Probably bounces here. Move it down slightly.
Sometimes bounces. Feels like the right call. Then next time it doesn't bounce. Stop further away. Loss bigger. Same process repeats until either a massive loss or a full liquidation.
Pre-commitment is the only fix. Stop set before the trade. Rule established before emotions exist: stop doesn't move in the direction of the loss. Sounds obvious. Genuinely hard during a drawdown when every instinct says otherwise.
