An Ultimate Guide to Placing Stop Sell and Trailing Stop Sell Orders

Have you ever wondered how professional crypto traders ride big trends?

Doesn’t it trouble you when you come back after a vacation, and find that you have missed a lucrative opportunity to buy/sell the crypto assets?

Trust us, it messed us too!

You know, what is that type of trend or strategy that keeps going higher and makes the expert traders earn profits- while doing nothing?

Well, the secret is that they are using trailing stop orders!

A great way to preserve the capital gains while trading cryptocurrency is to use Stop and Trailing Stops. And, with that, you need a solid automated trading strategy to make stops work for you efficiently and not against you. Well, these features are not that complicated as they sound. Implementing a trailing stop strategy is the best way to ensure that your trade management plan remains robust and agile.

Before getting into the details of stop sell orders and trailing stop sell orders, let’s understand how using automated trading is important to get profitable results.

Automated trading

Indeed, there is a promising future for those who are in buying and selling of cryptocurrencies by following an optimum strategy. And, using automated crypto trading is an easy solution for consistent profits without constantly monitoring the system.

In the crypto sphere, smart crypto automated trading is fast becoming an attractive option for those who want to experience reliable and profitable trading. Automated trading uses algorithms to buy and sell orders at certain times. Depending on the automated strategy, trades are executed on the crypto asset price, technical indicators, and the proportion of value in your portfolio.

If you don’t have the time to trade cryptos and don’t want to hold them for long, considering automated cryptocurrency is the best option. TrailingCrypto is one such trading platform that supports all the major exchange adapters like Binance, Coinbase Pro, etc., and allows you to buy and sell cryptos safely and securely. It has unique trading features and lets the traders to customize investing. From accumulation to long-term holding, and Stop or Trailing Stop settings, it introduces new templates to its platform from time to time for the traders.

Automated trading is recommended to set stop sell orders and trailing stop sell orders within your trading platform.

Now, you have understood what is automated trading. Let’s jump in and see, what are the features of a Stop Order and Trailing Stop Sell Order, and how they are beneficial in preventing your day-to-day cryptocurrency losses. Before moving further, let’s understand about the different order types.

Types of orders

We all know that there are different order types that can result in vastly different outcomes, and its’ important to use them wisely. The three main order types in the crypto market are market orders, limit orders and stop orders.

Limit Order

A limit order allows you to place an order at a specific price. If the price matches or is lower than your limit price, a Buy Limit order will be executed. And, on the other side, if the price is at or higher than your limit order, the Sell Limit order will be executed.

Market Order

Market orders are the orders to instantly buy or sell cryptocurrencies at the best available current price. It needs liquidity that needs to be filled, which means it is executed based on the limit orders previously placed on your order book. Unlike limit orders, where orders are placed in the order book, the market orders are executed quickly at the current market price.

Stop Order

A Stop Order is an order to buy or sell your crypto assets at the market price, once the asset has traded at or through a specific price i.e. stop price.

If the asset reaches at the stop price, it becomes a market order and is executed at the next available market price. And if it fails to reach the stop price, the order is not executed. The Stop Order is also referred to as a Stop Loss and Take Profit Order.

Managing risks and optimizing profits are the two basic ideas behind any successful trading. Traders use different techniques to earn profits and cut down their losses in cryptocurrencies. A properly executed stop order can help you achieve both. The two such techniques used in stop order are:

· Sell stop order

· Trailing sell stop order

What is a stop sell order?

It is a kind of stop order used while selling. It is much different than the limit order as it includes a stop price which triggers a market order. The sell stop order has a specified stop price. A stop sell order is placed when the trade enters at a stop price that is lower than the current market price.

In case of the stop sell order, the trader needs to specify a stop price to sell their asset. If the price moves up to the stop price then a sell market order is executed. These are different than limit orders and may include some slippage since there might be a marginal discrepancy between stop price and the following market price execution. The stop orders are generally used in more advanced hedging and margin trading strategies at different crypto trading platforms. A sell stop order is entered at a stop price below the current market price. Usually, the smart traders use sell stop orders so as to limit their loss or to protect the profits on the crypto assets they own.

When using margin, a stop sell can be set to initiate short sell. The stop sell order is used to limit losses or to manage the accumulated profits.

Let’s understand it with an example:

Suppose you have bought a crypto asset at $30 per share and you wish to risk no more than a $5 per share loss on the trade. You place a stop sell order just below $25 a share, say at $24.50. If the market price falls to $24.50, then the stop sell order will be triggered, and your stock will be sold at the next available price.

What is a trailing stop sell order?

A trailing stop sell order is a trading order whereby the trader will set a fixed stop price for the order below the current market price as per the trailing amount. Interestingly the stop price increases concurrently with an increase in market price but it is always rising with the initial interval set by the percentage of the trailing amount.

Once the stop price is attained, the order will then be triggered and the same can also be done in reverse for a buy trailing stop sell order. With this kind of trading strategy, investors and traders can minimize their maximum possible losses with endless possible gains. Trailing stop order is actually a risk management technique that allows you to specify the conditions that will automatically trigger an order to sell the position. If we want to place a trailing stop sell order, then it would be placed at a price that was above the trade entry.

Working of trailing stop order

To understand how trailing stop order works, consider a trade with the following data:

· Buying price $10

· Last price at the time of setting trailing stop $10.05

· Trailing amount 20 cents

· Effective stop-sell value $9.85

If the market price reaches at $10.95, your trailing stop value will rise to $10.75. And, if the last price drops to $10.90, your stop value will also remain intact to $10.75, but if the price continues to drop, say it reaches to $10.74, it will immediately trigger a market order.

Your order would be submitted based on the last price i.e. $10.74. Assuming that the bid price was $10.73 at the time, the trailing stop sell position will be closed at this point and price. So the net gain in this order would be $0.73 per share, less commissions. And, during the momentary price dips, it’s important to reset the trailing stop, or your stop-loss may end up lower than expected.

Let’s go through another example to understand trailing sell stop order:

Let’s assume, you buy an XYZ stock at $20 per share. The price for the share rises to $22. And, you place trailing stop sell order with a trailing stop price of $1 below the market price. As soon as the price moves in your favor, your trailing stop price will stay at $1 below the market price.

If the price of XYZ reaches up at $24 and then starts to drop. Your trailing stop price will now remain at $23. And, the shares will be sold at $23, though the execution price may deviate. So, here you have earned a profit of $3 per share.

But, before considering the trailing stop order, the traders should consider the following:

· It’s important to carefully select the trailing stop price which they use for the trailing sell stop order since there are chances that short-term fluctuations may activate the trailing stop.

· As with the stop and stop-limit orders, different trading platforms may have different standards for determining whether the stop price of the trailing stop sell order has been reached. Some exchanges use only the last prices to trigger the trailing stop order while there are some exchanges that use quotation prices. Make sure to check which standard would be used for the trailing stop orders.

Pros and cons of trailing stop order

Pros

One of the key benefits of trailing stop order is the flexibility that it offers. It is a kind of automated trading wherein you don’t have to manually move your stop if the position moves up in your favor. If you leave a basic stop on an open position, which you don’t readjust if the trade is profitable, then it will close your position only if it retraces back to where you placed your stop sell order originally.

Trailing stops protect your profits on a successful trade and minimizes the risks/losses.

Cons

When you are placing a trailing stop, you need to be careful not to set your trailing stop too far away or too near to the market price. If you set them too far away, there are chances that you are at the risk of unnecessary losses, and if you set them too close to the market price, you might be closed out before your trade gets chances to earn profits.

If the trailing stop order is used incorrectly, it would most likely cause you to lose money.

Understanding Trailing Stop Sell Order on Binance

Can I use trailing stop orders on Binance?

The trailing stop order on Binance is enabled only in the Binance Futures section. Moreover, you have to use the new version of the website, if you are in the older version.

Enabling trailing stop order

When you enter at the new website, you need to go through the place order section and move the cursor to the stop limit tab. There will be a drop-down menu, where you have to select Trailing Stop.

After clicking on Trailing stop, now you can see the image below:

Callback Rate

This determines the amount a trailing stop price will trail. This range is available from 0.1% to 5% on Binance. You can place the rate manually in the above-shown Callback rate field. Quick options such as 1% or 2% are also available for quick selection.

Activation Price

Here the traders will fill the price level that triggers the trailing stop. If no activation price is being filled, it will set it by default according to the marker price i.e. either the last price or mark price subject to the choice of trigger type.

To place a buy trailing stop order, the activation price must be less than the current market price. And, on the other side, to place a trailing stop sell order, the activation price must be higher than the current market price. The market’s highest price must exceed the activation price, so as to meet the condition. If the price doesn’t go above the activation price, trailing stop sell order will not work.

Reduce-only Trigger

This option comes under the advanced button. It is all obvious that the trailing stop loss is used for reducing or closing your position. So, it’s must to activate this flag reduce-only trigger in the advanced section.

Types of triggers which are set in the Advanced section

Traders could either choose ‘Last Price’ or ‘Mark Price’ as the trigger. If they select ‘mark price’ as the trigger, and if the Mark price reaches or exceeds the activation price, the trailing stop order will be activated even if the Last price doesn’t reach the activation price.

Note: Binance uses Mark price as a trigger for liquidation so as to measure the unrealized profit or loss.

Conditions for Activation

There are basically two conditions for activation of the trailing stop order. Activation price and callback rate will need to be fulfilled to activate the order to be issued as a market order.

Trailing stop sell order is placed if:

· Activation price <= Highest price

· Rebound rate >= callback rate

Trailing stop buy order is placed if:

· Activation price >= Lowest price

· Rebound rate>=Callback rate

How does a Trailing Stop sell order works on Binance?

The Trailing Stop order could be placed as a reduce-only order with an aim to decrease or to close the open position.

For a long trade, a trailing stop sell order is placed above the trade entry. And, the trailing stop price moves up by some percentage. The trailing percentage is also called as the callback rate. A new trailing stop price is formed when the price of the trade moves up. Whenever the price moves down, the trailing stop order discontinues moving.

The sell order will be issued only if the price moves more than the predetermined trailing percentage rate from its peak price and reaches the trailing stop price. And, the trade will be closed with a sell order at the market price.

And, for the short trade, a buy trailing stop order would be placed below the trade entry price.

Using www.trailingcrypto.com, cryptocurrency traders can now perform Trailing Stop orders on all those exchanges which don’t natively support these kinds of order.

This Tool is Free to use and currently provides support for Binance Futures, Bittrex, Bitmex, Kucoin, CEX.IO, Poloniex, Hitbtc, Huobi Pro, OKex, Coinex, Indodax, Timex, Kraken, Bitstamp, Binance US. Under one platform, user can now trade on all the supported exchanges and different order types supported by those exchanges.

To set up your stop sell order on TrailingCrypto using Binance, you have to select the exchange from the main tab using the drop-down arrow. Then select the order type. In this case, it will be a trailing stop sell order and then pick the quote and base coin. When it comes to picking the number of coins which you want to sell you can either specify the number of coins or you can select a percentage option.

Input the quote price you bought the crypto and if you leave it blank then the current market price will apply. The offset will be the fixed percentage just before the market price which is an offset of the peak market. In the event, the market price increases the stop loss amount will increase, and in contrast, if it drops the stop loss doesn’t change.

Summary

The Trailing stop order is the risk-management tool that can help you maximize your profits while trading and reduce the risk of significant losses. As we all know that trailing stop order only moves when the market price moves in your favor, so, it’s an effective way to increase gains.

TrailingCrypto gives you the right tools that you need to place Trailing stop sell orders, buy orders, multiple entries or exit conditions to your trades. No matter whatever your trading method or strategy is, you can earn profits with TrailingCrypto.