A powerful tool for controlling risk in crypto trading

On Aug 8, 2023

Trailing Stop loss orders allows traders to fix a loss percentage they can afford to lose while trading on any crypto assets. Trailing Stop loss orders play a powerful role in providing profit protection and managing risks, considering profit-protecting stops. When a crypto price rises or falls, the set stop price also moves accordingly. Therefore, traders can take home their gains until the market starts turning against them. Apart from this, BYDFi is a popular crypto exchange that offers a Trailing Stop feature. Let us learn more about Trailing Stop loss and how traders can benefit from using this powerful tool.

What is Trailing Stop? How does it work?

To have a better understanding of what Trailing Stop is and how it works, let us use an example of a crypto that has the following market data in dollars –

Purchasing price = $10
The last market price at the time of setting the Trailing Stop = $10.05
Amount of Trailing Stop = 20 cents
Immediate stop loss value = $9.85

The Trailing Stop value rises to $10.77 if the market price surges to $10.97. If the last market price drops to $10.90, the stop value remains intact at $10.77. However, if the price continues to fall below $10.77, it immediately triggers a market order and penetrates the stop level.

The order then gets submitted based on the last market price. Now let’s assume that the bid price is $10.75. The position will be closed at this price. The overall gain will stand at $0.75 per unit of crypto minus the commissions. In the example above, if the price again hits $10.80, traders can tighten their Trailing Stop order to $0.11 from $0.20, allowing some flexibility in the asset price movement. However, they must also ensure the set stop is triggered before a considerable pullback occurs.

How do traders benefit from Trailing Stops?

BYDFi’s Trailing Stop feature is a powerful tool for its registered users, who can effectively control their risk and prevent excessive losses, a common experience in the highly volatile crypto trading market. Unlike the basic stop loss order offered by many other crypto exchanges, the advantage of using BYDFi’s Trailing Stop lies in setting a predetermined value for the stop loss orders as the price of the crypto asset increases.

With the Trailing Stop feature, the stop loss orders are automatically adjusted as soon as the crypto prices rise. In this way, potential profits are protected. At the same time, caution is prioritized against heavy losses. BYDFi offers outstanding features for novice and professional traders and has received many requests in the past for this powerful tool that satisfies every trader’s needs.

Check out our BYDFi review to know more about the platform’s newly launched Trailing Stop feature, recently added for users to enjoy trading derivatives without worrying about constant monitoring of the crypto market and adding an additional layer of security to the trades.

Users benefit from Trailing Stop loss orders in the following way:-

This feature does not put any ceiling on potential profits.
Trailing Stop loss orders are designed to sell crypto assets automatically as soon as the market price falls below the pre-fixed percentage.
The order prevents traders from making reckless decisions driven by human emotions and allows them to concentrate on predetermined objectives.
Essentially, these trade orders tend to be elastic, meaning traders can customize their risk levels by choosing a preferred percentage for their Trailing Stop loss orders.

Conclusion

BYDFi recently introduced a Trailing Stop feature on its platform that undeniably offers the most dynamic approach to safeguard traders’ money and employ effective risk management by adjusting to favorable market conditions during unfavorable ones. However, traders must evaluate the crypto market conditions before setting up a Trailing Stop loss order. Remember, the key is to balance potential risks with expected profits and align the strategy of using Trailing Stop with individual risk tolerance levels and trading goals.