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Stop Loss vs Stop Limit – Traders Tip

Stop Loss vs Stop Limit – Limit vs Stop Limit
How to use stop loss order and stop limit order for beginners and advance traders.

Stop loss is used in trading to minimize loss from a trade and its of two types: the stop limit sell order and stop limit buy order. When price of asset falls to your stop loss, the stop loss is converted to the market price and the trade is closed at that instance.

 

The stop limit sell order is used when you buy/long a market and the stop loss is placed below your entry point, while the stop limit buy order is used when you sell/short a market and it is place above your entry point.

Stop limit is different from stop loss order as it has a stop usdt option and limit usdt option for those using usdt pair. The stop usdt is the stop loss and the limit usdt is two figures below the stop usdt. With this you’ve got a grasp of our topic stop loss vs stop limit.

Stop market is also the same as stop loss and your entry is always at market price.

In calculating stop loss order or stop limit order, the formula below is employed for both stop loss vs stop limit calculations:
SL = EP – %SL
Where %SL = %loss expected/100 x EP
SL = Stop loss
EP= Entry Point
%SL = Percentage stop loss

For example:
BTC has a current market price of $40,000 and I want to calculate the stop loss of BTC trade if I had entered or I want to entee, using the formula of stop loss
SL = EP – %SL
EP= 40,000
Let’s take it that, I want to loose only 10% of my capital placed on the trade if it goes bad.
Therefore, %SL = 10/100 x 40000             %SL = 0.1 x 40000 = 4000
Putting this into the formula SL = EP – %SL
SL = 40000 – 4000
SL = 36000

So, if I want to place my stop loss, it will be on $36000.
For stop limit order, the limit usdt will be $35880 because it should be two units less than the stop loss.

WATCH VIDEO ON YOUTUBE FOR BETTER UNDERSTANDING: 

Some professional traders normally places their stop loss on the previous support below their entry point and don’t need to do all these calculations.

You can also read on nairaland via link https://www.nairaland.com/7039261/stop-loss-vs-stop-limit

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