Stop limit at Bitvavo
When you are actively trading in cryptos, it can be attractive to automatically close your losses at a certain level. In this article, we will discuss how to use the stop limit order.
What is a stop limit order?
A stop limit order makes it possible to automatically close your position at a certain loss. This may for instance be attractive when there is a strong level on a certain price. When this level is broken through, there is a big chance that the price is going to drop even further. By setting up a stop loss limit below this level, you’ll prevent it from going down with the market.
You can also use a stop limit order to sell your cryptos at a certain profit. To achieve this, you just enter a value that is above the current price.
How to use a stop limit at Bitvavo?
To be able to use a stop limit, you first have to navigate to the advanced trader. You can do this by clicking on advanced in the menu bar.
Then click on the crypto pair on which you want to set a stop limit and click on stop limit. Here, you fill in at least the following details:
- Trigger price: the price at which you want to execute the order.
- Quantity: the amount you want to sell at this price
- Limit price: the maximum price you are willing to pay/the minimum price you want to receive. When the price is not available, the order is not executed even though it is triggered by the trigger price.
With the trigger reference, you can indicate specifically when the order should be executed. You can choose between the last trade, best bid, best ask and mid-price.
Under time in force, you can also specify what should happen to the order when the specified limit price is not immediately available:
- Good-til-cancelled: the order always remains active until the full quantity has been filled.
- Immediate-or-cancelled: only the part of the quantity that can be filled immediately at the limit price or better is executed. The order is then deleted.
- Fill-or-kill: only if the order can be executed immediately at the limit price it will be filled, otherwise it will be removed immediately.
Does a stop order always work?
A stop order does not always work: there must be enough buyers on the market at that moment for the specified price.
Especially when the market suddenly moves strongly, this can be difficult. In case of high volatility, there are simply not enough buyers available at a certain price level. A stop loss order is therefore never a guarantee!
When the price moves a lot at once, you might experience slippage. If you wanted to close the order at a price of €40.000, but the best available price is €39.000, the crypto will be sold for €39.000. This will result in an extra loss of €1000.
The advantages & disadvantages of a stop limit order
Stop limit orders can be very useful, especially for the active trader. With a stop limit order, you can protect your positions against strong market movements without having to be constantly in the vicinity.
A stop limit order can of course also be disadvantageous. Maybe you sell your cryptos at an unfavourable moment because of the stop limit order. After a big drop, the price could just rise again… you never know!