Stop-Loss Orders

Stop-loss orders are your safety net. They automatically close your trade at a certain price to prevent bigger losses. Think of it as cutting your losses short. Place your stop-loss based on market volatility and your trading strategy, not on gut feeling.

Exercise

Objective: practice setting appropriate stop-loss orders based on market conditions.

Scenario: you’re trading BTC/USD and decide to buy at $30,000. You want to limit your loss to $1,000.

Steps:

1. Enter the trade: buy BTC/USD at $30,000. You can find this price in April 2023. Use historical data navigation to teleport there.

2. Set stop-loss. place a stop-loss order at $29,000 ($30,000 - $1,000).

3. Monitor volatility. Check how BTC/USD moves and ensure your stop-loss is effective.

4. Adjust if needed. If volatility changes, adjust your stop-loss accordingly.

5. Review. After the trade closes, see if your stop-loss helped manage your risk.