Another well known type of stop loss order is; the stop loss market order. This type of order is a direct derivation of the well-known stop loss limit order. In fact, both orders act identically except for one point:
- A stop loss limit order uses a stop order as a marker to generate a limit order that will be noted in the exchange’s order book.
- A stop loss market order uses a stop order as a marker to generate a market order that will be executed immediately using the market value of the asset.
At Atani, both orders are supported as long as the exchanges support them.
When to use a stop loss market order?
A stop loss market order is especially useful when we want to minimize our risk management in our trading operations. But what does it really mean? Well, to better understand this, let’s see how the well-known stop loss limit order works. In this type of orders, the values of the generated limit order are manage by our criteria. This allows us a lot of flexibility. Especially, since we can decide what is the best price to buy or sell the limit order.
However, this has a weakness: if the generated limit order is not filled, due to a sharp drop or rise in the price of the asset, we will make a loss. This weakness is well known. And, in fact, leads many amateur traders to make mistakes when proposing limit order values.
In that case, the stop loss market order seeks to solve this problem in a simple way: you have the power to decide when to generate the market order, and if it is generated, its execution is immediate. If the price goes up or down a lot it doesn’t matter, the market order will be fully executed and you will not have any asset holdings of any kind. It is something like an all-or-nothing order in trading.
Because of this, the stop loss market order is very useful to avoid big losses (when the price of the asset plummets). But, it is not very attractive when the asset price rises, unless you come from a long period of accumulation and you want to sell at a price specificed by the stop you have set (maximizing the profit).
How to use this order in Atani?
As we mentioned at the beginning, the stop loss market order is a very specialized type of order. A order that is supported only by some exchanges. In this case, we are using Bitfiniex that offers support for this type of operations.
That said, to use the stop loss market order in Atani, you must have an account in this exchange. If you have one, using it will not be a problem. First of all, you just need to choose the Bitfinex exchange.
Once you have chosen the exchange, go to the buy and sell module. There you should select the “Market Stop” option, which will allow you to use this type of order. In this option you will find the following data entries:
- Price, which is fixed as Market. This means that the asset will be bought or sold using the market value of the asset within Bitfinex. You can see the value on the chart at all times.
- Quantity, which refers to the amount of cryptocurrencies you will buy or sell during the transaction.
- Total, which indicates the total value of the purchase or sale in USD (or the active and selected token pair).
To use with maximum effectiveness this type of orders remember to choose a good stop value. Especially according to the resistance or support levels you have examined in the cryptocurrency pair you are trading. This will inexorably lead you to a technical analysis of the market and trends. All this, in order to choose the best value in this case.
Did you like this content?
If you think this Atani post is interesting, share it!