What is Bitcoin Stop Loss?
The Bitcoin Stop Loss setting function is a key feature in coin futures trading, serving as an important scheduled selling tool. It offers the advantage of preparing for forced liquidation of coins or reducing potential negative losses, and is especially widely used in sleep trading.
The term ‘Coin Stop Loss’ ( = SL) literally means to stop the losses. By setting the stop loss function before placing an order, your position will automatically be traded at that amount.
- In simple terms, it’s akin to a concept of a scheduled sale.
As previously mentioned, the stop loss is an invaluable tool in preventing the liquidation of coin futures and in minimizing losses.
The difference between not setting a stop loss and applying one can be substantial, so after reading this post, you are highly encouraged to set a stop loss.
- Next, we will discuss the methods of using stop loss.
How to Set and Use Bitcoin Stop Loss
The method of using stop loss differs slightly between exchanges, so I will explain based on the Bitget and Binance exchanges.
Setting Stop Loss on Bitget
In the image below, you can see the TP and SL activation button at the bottom right.
Clicking it reveals a field to set the market prices for take profit and stop loss. Here, you only need to enter the prices at which you want to apply your stop loss and take profit.
For example, based on the image, if the Bitcoin price is around $16,000 and you enter a long position, you would enter $17,000 for take profit and $15,000 for stop loss. These will be automatically activated at the entered prices.
Conversely, if you enter a short position, you would put $15,000 for take profit and $17,000 for stop loss.
Setting Stop Loss on Binance
The Bitcoin stop loss setting on Binance works similarly to Bitget. The image above illustrates Binance’s stop loss feature, where you just need to enter the prices for take profit and stop loss.
An important aspect to note here is the ‘Mark’ and ‘Last’ prices. The Mark Price corresponds to the second item, while the Last Price is the standard for the first item.
Additionally, ‘Last’ denotes the most recently concluded price, and ‘Mark’ exists to prevent unnecessary liquidation.
The reason for the existence of Mark Price is to prevent the manipulation of coin futures market prices by a few individuals (like whales).
Binance Stop Loss Fees
Exchanges such as Bitmex, OKEx, Binance, and Bitget do not charge fees for using stop loss. However, once the stop loss is triggered and a trade is concluded, transaction fees must be paid for the concluded part. Stop loss typically applies a limit order fee.
In Case of Stop Loss Liquidation
If someone (such as a whale) suddenly trades a large volume, or there are no active orders for the entered price, the stop loss function may not be triggered.