One of the unattractive characteristics of the cryptocurrency market is that of significant volatility, so much so, that you cannot tell for sure when cryptocurrency prices are likely to go up or take a considerable swing low. One of the many reasons for this volatility in the cryptocurrency market is due in part to there being barely any regulatory body in place or measures taken to help maintain stability in the market.
As a result of this trend, individuals or groups that hold or control a large number of cryptocurrencies can easily manipulate the market, causing the price to appreciate or depreciate hugely.
A practical example of this situation happened on GDAX on the 24th of June 2017 when an account placed a multi-million dollar “sell” at the market price.
However, one tool that is widely overlooked and underused provides an excellent strategy that crypto marketers are using more and more to avoid substantial losses in the crypto market. This tool is the stop-loss order which is a type of order that limits potential losses when trading in the cryptocurrency market.
Where the Stop-loss Is useful and where it Is not.
These types of orders are not always needed in crypto transactions; some transactions do not require a stop loss. An example of where the stop loss isn’t necessarily needed are cryptocurrencies with a higher market capitalisation that are less volatile due to their broad audience and trust in the market. This makes it less likely for its price to drop significantly or even to zero after some negativity in the market place.
However, there are some specific scenarios where stop-loss orders can be used such as when you want to control and sell out of a falling position and “limit” the amount of “loss” your take. Platforms like the deVere Crypto Exchange App, allow you to modify your stop-loss on the move quickly and efficiently and also give you the leverage of setting very low stop-loss orders and yet still allow you to change your stop loss should markets shift positively and quickly.
Some of the better crypto exchanges that best support stop-loss orders are: deVere Crypto Exchange, HitBTC, and BITmex. All are good, and all allow you to check market statistics to stay ahead of the curve.
“It is important to remember that stop-loss orders, do not guarantee a sale price of your asset, since should markets move quickly against you and move downwards fast – the system will try to settle you trade as quickly as it can – but it depends on the velocity of the downward movement, says Mr. Nigel Green, CEO of the deVere Group, the worlds largest independent financial advisory group. Mr. Green also adds, “Stop-loss orders are, however, critical for removing emotion from day to day trading and giving you peace of mind should you not be at your computer or a place to trade manually”.
A critical piece of information to also accept is that placing an order is inherently more difficult in the market of digital currencies since volatility is , therefore, the chance of a small stop-loss order being triggered unintentionally due to a significant daily swing, may, in fact, trigger unnecessary losses.
The simplest way of looking at them is like an insurance policy, you hope that you never need it but its good to know its there as a safety net if things go down quickly.