Stop loss in cryptocurrency trading: how to set correctly?

Often I am asked a question about my margin positions, which I post on the channel — why stopsI often have less than open transactions?

I answer — not all feet are equally useful andthey are not needed everywhere. I don’t think that stops should always be placed. This is a useful tool for limiting losses, but you need to know how to work with it, otherwise the stop turns into a way to get those same losses.

Probably my words are that there is no need for stopsalways put, contradict everything you've heard before? But I am not a theorist, but a practitioner, and the tactics of working with stops are based on personal successful experience (many years in Forex and the third year in the crypto market).

When I was trading in the foreign exchange market, the servicesForex trading in the Russian Federation and post-Soviet countries was provided by “dealing centers” — companies that played against the client and were interested in his losses. However, all the training courses of these companies (primarily market leaders, such as Alpari, Teletrade and Forex Club) taught that stops should be set all the time.

This is where I first thought:Wait, is this a loss limitation, or a surefire way to get it? Based on the logic, “if Teletrade teaches something, then it is definitely not in the interests of the client.” And then one of my friends, who works at Teletrade for VIP clients, gave me some insider information. All client losses for the month are 78% triggered stops. And only 22% — leaked deposits. The theory turned out to be confirmed by practice. The stop, which should be a protection against a loss, actually becomes the main tool for obtaining that loss.

There are no companies on the cryptocurrency marketagainst the client. Classic exchanges do not care if you get profit or loss by trading with other customers (we don’t speak for margin trading with leverage yet, this is a separate issue). But everyone in the subject knows that often the price purposefully goes to the stop zone, knocks them down, and then turns around. Stops are often the target of large players, here is one of the latest examples: it was on the Bitstamp exchange.

I was then in the market, and if I had then stoodstop, then losses would be inevitable. And the price returned to 8000 a couple of days later. Since I did not have a stop, and there were pending buy orders on the bottoms, instead of a loss, a good profit was made. So think about whether we were taught.

But how to limit losses if stops are not set? Mistakes in the market are inevitable and happen to everyone, how to protect the deposit in this case?

To do this, you need to understand when it is necessary to place stops, when it is possible, and when it is not necessary to do this. And what other ways are there to limit trading risks?

It is necessary and necessary to put stops in the following cases:

• You are trading against the main trend. For example, now open short positions on Bitcoin. Why do this, the question is already different and I have no answer to it. But if you do, then be sure to stop.
• You bought a coin with low capitalization and liquidity (below the top 100). Here, too, a stop is required, otherwise you can stay in it forever, or get X, but loss.
• You saw that the coin has updated the maximum or is near it and decided to buy it, in anticipation of further movement. Even if this coin is from the TOP-30 and the market is growing, it is better to put a stop too.
• The market has been flat for a long time, directionthere is no main trend. As it was in February-March 2019 for Bitcoin, for example. You are trading from the boundaries of the channel, which have been relevant for a long time. The feet should stand outside the boundaries of the canal.

Of the items listed in 1-3, I do not do it at all and do not recommend it to you. Even with the feet. Part 4 - the option is quite working, I often use it, stops in this case are necessary.

Article by the author of the channel “Chief in Crypt” Pavel Gromov. https://t.me/TOPCRYPTOMAIN

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