How stop limit order works in cryptocurrency trading
A lay man’s explanation that is so simple and precise that even beginners would quickly understand.
Here is a little scenario. You buy into a token on one of those cryptocurrency exchangers with a hope of making a profit.
Les say you buy at $2 and hope that the price will rise to $3 such that you make a profit of $1. You follow the one rule of cryptocurrency trading which says, BUY low and SELL high.
Then immediately after ou have bought, you realise that the price might actually not go up as imagined. Instead of $2 price that you bought at, the price has now risen to something like $2.01 and shows signs of down trend. If the price falls below your buy level, then you are in losses. So what do you do to stop that loss?
Thats what is now called the Stop-limit.
So in stop limit, you are simply commanding the trading platform to make sure that they get you out of the market as soon as price falls below what you have set.
Remember that, The best way to understand a stop-limit order is to break it down into stop price and limit price. The stop price is simply the price that triggers a limit order, and the limit price is the specific price of the limit order that was triggered. This means that once your stop price has been reached, your limit order will be immediately placed on the order book.
What used to confuse me was the STOP price and the LIMIT price. Now I have learnt that, it’s safer for you to set the stop price (trigger price) a bit higher than the limit price (for sell orders) or a bit lower than the limit price (for buy orders). This increases the chances of your limit order getting filled after the stop-limit is triggered.
To see real examples of how this really works, feel free to join this telegram channel and ask for help. Someone will quickly share a live video with you.
Join telegram group here. https://t.me/joinchat/AAAAAEcnOqwsXYB4QrE5Pw
