Trading is not an easy task, not that it just requires an individual to be risk-taking but the idea also encapsulates a few strategies which if worked out can bring in high return by optimizing lower risk levels. One of the highly regarded and most used strategies is that of stop-loss.
In high frequency trades with higher chances of risk, most of the times traders lose by not taking profits on time and securing some of their investment. The vulnerability of staking all the investment coins the idea of stop-loss. As the name suggests, the stop-loss minimizes the risks by securing profits. To make things simpler, suppose you have taken a long call on BTC at 6,000 in hopes of it reaching 7,000. Now, since bitcoin is a volatile asset, you do not want to risk your entire investment, hence you put a stop-loss at 5,800 which means that the trade would liquidate if BTC goes below 5,800. This situation can be modified even further. Imagine that you entered a trade at 6,000 in hopes of it reaching 7,000 and the BTC is currently trading at 6,500, (which means you still profit). Now in order to secure your profit, you may put a stop loss below 6,100 which means that if BTC would go below 6,100 — the position would liquidate returning you 6,100/6,000–1 = 1.67%.
Putting things into perspective, in the real world, the trades are not that simple and there’re many factors which may affect the prices of BTC. Hence, in such a scenario, stop-loss and take-profit are the strategies used by a wide range of traders to secure their profitability and minimize risk exposure!
To satisfy your curiosity, PointPay is very aware of the tool and has implemented it on its exchange platform so that the trading can become easier and simpler thereby allowing investor to reap maximum usage of all the trading strategies with increasing profitability!
