How does the “stop-limit” mechanism work when trading on a cryptocurrency exchange
Finance

How does the “stop-limit” mechanism work when trading on a cryptocurrency exchange 

“Stop-limit” is a tool that allows you to automatically sell or buy cryptocurrency when a certain price level is reached. This mechanism can help traders protect their investments and minimize losses while trading on the OKX cryptocurrency exchange https://revieweek.com/review/okex/.

How “stop-limit” works

“Stop-limit” consists of two main components: “stop” and “limit”. “Stop” is the price level that must be reached to activate the order. “Limit” is the price level at which the order will be triggered after activation.

For a better understanding, let’s consider an example. Suppose you bought cryptocurrency at a price of $100 per unit. You want to protect your investment and set a “stop-limit” order to sell at a price of $90 per unit. This means that if the price of the cryptocurrency drops to $90, a sell order will be triggered. You also set a “limit” of $85 per unit. This means that the sale will only be executed at a price of no less than $85 per unit.

If the price of the cryptocurrency drops to $90, your sell order will be automatically triggered. If the price then rises to $85, the sale will be executed. If the price does not reach the $85 level, the sale will not be executed.

“Stop-limit” orders can be set for both buying and selling cryptocurrency. This mechanism can help traders protect their investments and reduce risks while trading on a cryptocurrency exchange.

How to use “stop-limit” when trading on a cryptocurrency exchange

To use “stop-limit” orders when trading on a cryptocurrency exchange, you need to follow a few steps:

  1. Determine the “stop” level: decide at what price the order should be executed.
  2. Determine the “limit” level: decide at what price the order should be executed after activation.
  3. Choose the order type: determine whether it is a buy or sell.
  4. Set the “stop-limit” order: enter the “stop” and “limit” values and confirm the order.

“Stop-limit” orders can be set for both cryptocurrency and any other tradable asset on the exchange.

How to use "stop-limit" when trading on a cryptocurrency exchange

Conclusion

“Stop-limit” is an important tool for traders on cryptocurrency exchanges, which helps protect investments and minimize risks. Proper use of “stop-limit” orders can help traders make money on cryptocurrency trading and achieve their investment goals.

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