A Stop Order is a pending order that will only execute a trade once the market price hits the desired trigger price you have entered in the trade.
- Stop orders are primarily utilized to offer protection against a long position.
- A stop order lets you exit your position once the market reaches a specified price, known as the stop price.
- When the stop price is reached, it triggers a market order. This will be useful because it allows you to open several orders in the market without exposing your capital in a single trade.
- Stop orders enable you to manage risk more effectively by protecting yourself from sudden price changes. Additionally, other people will not see the orders since they are only activated after the price is reached.
How do I place a stop order?
For example, if you have identified a support level at around $10000 for the price of Bitcoin as shown above, there is a chance that if the price falls below this support line it could potentially lead to a sudden downturn in the Bitcoin price which in turn, will put you at risk of incurring serious losses on your trades.
A Sell Stop can be placed to protect you from this, you would set the stop price at around $10000 so a Market Sell order will be executed once the market value hits the stop price (Example of Trade shown above). This is an effective tactic that can be used to manage your risk and more specifically to minimise your losses while trading on our platform.
As with any market order in volatile markets, a market order triggered at the stop price may receive an execution price significantly different from the quoted price of that asset when the order is triggered.
Please note that at this time, the Blockchain Exchange does not offer buy stop orders, although we may in the future.
Disclaimer: Please note Blockchain.com does not provide investment advice or recommendations. The information made available to you is for your general use and is not based on any evaluation of your personal circumstances. If you are unsure of any investment decision, you should seek independent financial advice.