How to Set Stop Loss on BitMEX
The cryptocurrency market is lucrative but very volatile. Cryptocurrency trading works just like forex where traders buy or sell currency pairs. However, cryptocurrency trading is riskier because sharp fluctuations of the value of the tokens. Therefore, one needs to protect one’s account from sudden loss.
What is stop loss?
A stop loss is a tool that traders use to automate their activities. This tool enables traders to put a stop to a loss making position before it empties the funds in the account. Since a stop loss order is pre-set, it executes automatically once the specified price is breached. Traders call the specified price at which a stop loss order executes as the stop loss price.
For example, you believe that the value of the XBTUSD pair will grow and then you buy the pair at 7888. However, the value begins to tumble just after submitting the order. If the value continues falling, you could lose all your funds. What can you do to prevent a total wipeout of your account? You set a stop loss.
If you enter a buy order, the stop loss is less than the market price of the cryptocurrency pair. In our example, therefore, you can set the stop loss at 7870. This means that once the XBTUSD pair reaches 7870, your broker will exit the trade position.
Let us see a real example on TrailingCrypto
TrailingCrypto is a platform that brings together 15 cryptocurrency exchanges with BitMEX being one of them. Once you create an account on TrailingCrypto, you can trade on each of the exchanges without having to open another account with the individual exchange. All you need to do is sign up on TrailingCrypto and select BitMEX as your preferred exchange.
Once you have BitMEX open, you can go ahead and place an order. In our case, we will place a market buy order. To place the market buy order, go to the order window and click on the box at the top. A drop down will open and then select ‘MARKET BUY’.
Clicking on ‘Market Buy’ in the drop down will select the order in the box above. Then, set the parameters of your order. In our example, we have set the quantity of the order at 10, and the pair we are trading is Bitcoin as the base and the US dollar as the quote. We have left the margin at zero because we are not margin trading.
Once you submit the order, it is time to send another order to BitMEX to prevent the risk of losing all the funds in the account. Back to the order window, select ‘STOP LOSS’ from the first box on the Order window.
Next, specify the parameters of your order. While specifying the parameters, it is important to note that BitMEX allows you to set one of three types of stop loss. You have to choose among MARKET, LIMIT, or TRAILING stop loss.
In our case, we will go with MARKET stop loss. This means our order will execute the moment the market price of the XBTUSD pair matches the price of our stop loss order.
In this example, the stop price is 7600. This means that once the quote price breaches 7600, the order will execute automatically.