Crypto Academy

Header
Trade With Us
Header
Header

Tag: Take profit

Posted on

Take profit

Basics

Take profit

5 min reading

Learn more about the risk management: Take profit

Back
Take profit- article

Take profit

The main goal of every trader is to get the most profit and not to go into losses on such an unpredictable crypto-currency market. If you are a newbie, the crypto-currency market may confuse you at first, but such tools as “stop loss” and  “take profit” will come to the rescue and make your trading a bit easier. In the article, we will give you an explanation of what profit order is and how to set it properly. 

What is take profit?

Take profit order plays a key role in various trading strategies with a variety of assets: from stocks to crypto-currencies. When prices rise and the last traded price reaches the profit price, the orders serve as an upper limit and ensure that assets are sold before prices start to fall again. Therefore, take profit allows you to close a position when the price changes in your favor and to set a target profit. You can also use take profit orders to open a position.  The main task of orders is to control trading when the user is away.

For example, if the user cannot constantly monitor the market, such a function as take profit is quite useful and even irreplaceable. Indeed, in the absence of a trader, the market can turn suddenly and go in the opposite direction, and in a short time a profitable trade turns out to be loss-making. Stop loss will help keep losses to a minimum in such a situation. The opposite is also true: if at some point a strong movement brings a deal into a good profit, take profit will help fix it before a rollback occurs in the opposite direction. Do you want to learn more about stop loss? Read the educational article here.

Advantages of take profit order

Moreover, the advantage of take profit order does not allow emotions to get control over you when the market trades intensively and rapid fluctuations take place. Opening a trade, choose the price when you close the position without stress, instead of succumbing to emotion and selling assets hasty. Using take profit order, traders do not need to sell the cryptocurrencies manually and constantly monitor price rates throughout the day. 

Though take profit is quite a precise tool, it is possible that the order will be filled but price rates will keep growing. As a result, the trader may skip potential gains. However, everyone can make a mistake, so before setting the take profit orders be sure that the settings are correct. In the case of cryptocurrencies, the wrong order setting can be costly for the trader.

Why?

However, it is important to note that use key support and resistance levels to correctly determine price targets. According to the studies, it is recommended to set the take profit target at the mark that defines the nearest resistance level or close to it. As no one guarantees you that the price will continue to rise above the key level. However, following these simple rules will allow you to get your profits on time, avoiding unnecessary stress, and understand the basic principles of risk management.

Conclusions

  • Take Profit order is an instruction to close a trade at a specific rate if the market rises, to ensure your profit.
  • It is a type of limit order that can be used to either buy crypto at a low price or sell it at a high price.
  • Using key support and resistance levels facilitate correctly determining the price targets.
READ
Posted on

Stop loss

Basics

stop loss

5 min reading

Discover how to prevent possible losses on the crypto market.

Back
Stop loss_Risk management

Risk management (stop loss).

Introduction

Exchange crypto trading is closely connected with multiple risks. Therefore, investors have come up with different ways not to go bankrupt. Stop loss is one of them. 

What is stop loss?

There is an opportunity in the market to limit potential losses. You just set up a stop loss and the assets are sold when a certain level is reached. Such exchange orders are called stop losses. The main purpose of a stop loss is to limit the trader’s losses on each position per share. When you don’t have enough time to sit in front of your computer and monitor everything yourself, it is good to have a tool that can do it for you.

Do I need a stop loss in crypto trading?

On the one hand, traders argue that stop loss allows you to limit losses and call it one of the main risk management tools. On the other hand, crypto traders point to false positives and exit from a transaction at the most unfavorable price. If you are a newbie, a stop loss order will help you to avoid possible losses while practicing. In general, many experts consider this tool of risk management quite useful for everyone, not only for novice traders.

First of all, stop loss insures the investor against losses. It is believed that crypto trading is dangerous without using a stop loss. Stop-loss is also useful when the investor does not have time to wait around at the computer. It helps limit losses in the case of force majeure such as power outages or malfunctions on the exchange platforms. Stop losses can also be useful in trades when the informational background itself is not enough to open a position. Then results of the technical analysis can help to create an opportunity for a good trade. Often, stop losses are not used for long-term investing based on distinct fundamental factors. Fundamental factors include macroeconomic data, operating indicators, industry trends, and others. If you are a newbie in using stop orders, it is better to stick to market orders as they are easier to set up and execute. Also, remember to check the relevance of your pending stop losses in your account.

To understand when to use stop loss, ask you the following questions:

    • What is the maximum loss I am willing to incur on this order?
    • What is the normal trading volatility of the instrument I trade in the stock market?
    • What is your trading strategy?
    • What funds are available for trading?

However, it is still necessary to limit losses in crypto trading.  Mainly, risk management is implemented at the expense of the number of funds invested in each trade. Therefore, such an instrument as stop loss is just a tool that helps you keep trading profitable. You should be confident about the money you are ready to invest in trading.

Trailing Stop loss

A Trailing Stop Loss is an order that is planned to assist you with securing benefits while safeguarding you from day trading losses. It covers the amount that will be lost if the exchange does not work out.  This sort of request changes over into a market request when the security cost arrives at the stop cost. Trailing stops can be set up to operate directly on cryptocurrency trading or exchange platforms and can be physically checked and changed by the trader.

When the Trailing Stop loss order is set, the terminal continually calculates the number of points between the entry point and the current price. If the required “gap” is achieved, the Stop Loss is established in accordance with the specifications given. As soon as the price moves in the desired direction, the Trailing Stop Loss follows in proportion to the predetermined interval. Also, the Stop Loss does not change if the trade loses money. As a result, in the case of an unfavorable market movement, the position of terminating the transaction is automatically locked at the Stop Loss value.

However, it is still necessary to limit losses in crypto trading. Mainly, risk management is implemented at the expense of the number of funds invested in each trade. Therefore, such an instrument as stop loss is just a tool that helps you keep trading profitable. You should be confident about the money you are ready to invest in trading.

Conclusions

  • A stop-loss is designed to limit an investor's loss on a security position that makes an unfavorable move.
  • Putting the stop-loss order, you don’t need to monitor charts all the time
  • Short-time price fluctuations can activate the stop-loss order.
READ