Why Stop loss is important to all traders
The crypto market is bleeding and many people are losing their hard-earned money. This bearish period is not really a great time for new traders who are just entering the game as that may cause a lot to give up and look elsewhere for greener pastures. I will not even deny the truth that even the old-timers in the blockchain world are beginning to scare for their investment.
Let face it, this blockchain technology is still far from being a finished article. I will be straight with this assertion that we are five years from perfecting it and perfecting it means that the element of single news or event directing or dictating where the price of a coin will fall into.
A recent example is the closure of the internet in Indonesia who was rumored to be the second-biggest bitcoin miner on the planet. Let's take a few minutes to imagine the effect of three bitcoin mining countries shutting their doors off cryptocurrency and the blockchain at large.
Well, today is not a day for the usage of our imagination rather, it's a day to educate new traders on ways to avoid total loss while trading in the crypto market. A loss could happen in the spot or futures market and that's why the correct utilization of stop losses is important in all ramifications.
What is stop loss?
let's start from here, understanding what stop loss is in the first place will help one know why it is important to use it while trading regardless of the market you are in.
A stop-loss order is an order placed with a broker to buy or sell a specific stock once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. For example, setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%
Now that we know what stop-loss is and with an example provided, we have a clearer image of what it means, let's get down to where and how we could use this functionality before proceeding to why we should use it in the first place.
New traders might be lost regarding how to use this function and they are not be blamed as newbies tend to utilize the decentralized exchanges more than they do use centralized exchanges. The usage of pancakeswap and Uniswap is quite a common trading market for newbies as they are available with more coins than the centralized ones. And to be honest, newbies invest heavily in shitcoins.
Well, the only way stop loss could be done on this type of exchange is for it to be done manually and that's could be quite stressful and really unachievable. It might even cost more thereby making it likely unachievable.
To fully utilize and fully experience the awesome of a stop-loss order, centralized exchanges like Binance, kucoin, etc are your go-to marketplace. The stop loss automation could be done automatically and this, in turn, helps save time and in turn stops loss more adequately.
Why is using Stop loss important
- It is an efficient way of stoping loss from a token
- It is also an efficient way to lock your profits
- It is easy to use due to the automation function
- It helps one be in more control of assets in his or her portfolio
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