How Stop Loss Protects Your Deposits
Hi All Bybiters!
In my Bybit Talk session today, I will share and talk about Stop Loss and how Stop Loss can protect your deposit.
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Stop Loss? Why not.
Stop Loss is not losing, it's about Risk Management, risk reward and keeping your deposit safe.
So, what is a Stop Loss or Stop Order?
A Stop Loss order is designed to limit a trader’s loss on a trade they are in, you can set and decide your Stop Loss based on your risk reward on your trading plan. Every trade activity has a risk and reward, when you decide to open position make sure you're set your risk reward percentage.
When you do technical analysis you need to plan how many percentage lose and how many percentage you win. For example you set your risk reward, loss 20% and win 80% .
Setting a Stop Loss order for $200 below or above the price at which you open a long or short position will limit your loss to $200 and when you win the trade you should set take profit when it reaches the profit of $800.
For example, let’s say you just open LONG position BTC at $10,000. Right before opening the position you enter a Stop Loss for $9,800. This means that if BTC falls below $9,800, your position will then be closed at the prevailing market price. That will be the same when you open SHORT position, you just open SHORT position of BTC at $10,000. Right before opening the position you enter a Stop Loss order for $10,200. This means that if BTC rises above $10,200, your position will then be closed at this price.
When you are starting out in day trading, using a stop loss is important. Before entering a trade, the trader must know when he or she needs to get out if the trade goes against him.
"In 10x trades if you use a stop loss and you lose 1x trading chance you still have 9x trades to cover your loss"
With Bybit, you can run your strategy trading plan as well, because in Bybit you can set your Stop Loss and Take Profit before you open the position.
In your Trading Plan it is important to have 3 things:
1. Technical Analysis
2. Fundamental Analysis
3. News
None is most important, they all work together. Fundamental factors shape sentiment, while technical analysis helps us visualize that sentiment and apply a framework to create our trade plans. Stop Loss is important when your technical analysis not working properly because of news, when you open a short and a good news is announced, your trade will be bullish following the news, or when you open a LONG position as part of your Technical Analysis, and the bad news about the asset is announced, the price will fall following the news. This is why Stop Loss is important.
Types of Stop Loss:
Stop-Loss Order: If the market price reaches or crosses through the Stop price, your order is sent to the exchange as a market order.
Stop-Limit Order: A Stop-Limit order combines a Stop-Loss order with a Limit Order. To place a Stop-Limit order, you enter two prices: A Stop Price and a Limit Price. If the market reaches or goes through the Stop Price, your order becomes a Limit Order.
Trailing Stop: A Trailing Stop is a more flexible variation of a normal exit order. A trailing stop will allow a stop order would follow the last traded price based on a pre-set distance and direction and will automatically move to lock in the profit or stop loss.
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