The Capital
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The Capital

Choosing Between Stop Losses and Mental Stop Losses In Cryptocurrency Trading

Time and money are of the essence

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You must have known by now that the cryptocurrency market is extremely volatile. Prices can change in the blink of an eye and sensitive to headline news that any time a legacy entity of influence invests in digital assets, for example, expect a price movement. As in other exchanges such as the stock market or forex, you need a major amount of time to keep watch for what gains you, together with what cause you losses. As the market moves, you cannot but be involved emotionally with your decisions to your detriment especially when you lose discipline and get stuck with revenge trading. That is why the automated stop-loss mechanism was invented to save you precious time rather than looking at the charts all day and all night and release you from too much emotional involvement.

But mind you, there are traders who are not into automated stop-loss, but instead, do mental stop losses. How is that? Well, with a little background check, they have been the veterans that they are in the trading field, and with their long years of experience dealing with stress and anxieties, they learned how to breathe with the market.

Depending on your style and strategy, you may opt to use stop a stop loss rather sparingly as you move from trade to trade before even thinking of doing a mental one. But why not? You can try. Just be sure to invest with allowable funds you can afford to lose.

Stop Loss is a Safety Net

A stop loss is an order that you place at a specified price which will execute automatically once it reaches your buying or selling price point. If you opted for a long on a trade, you may place a sell stop loss below your buy-in price. If you are into margin trading or shorting on a trade, you may set a stop loss sell order above your buy-in price. After that, you may want to think of other things than the charts without fear of losing the trade in case it goes against your strategy.

Stop Loss as an Advantage

Traders most of the time are of the thought that markets will favor them so they do not favor placing stop losses. But most of the time it doesn’t favor them. So, placing a stop-loss order is essential in living a wholistic life doing things that do matter to you, releasing you from stress by being glued to your charts and APIs, especially when you have not yet nurtured a culture of trading discipline.

Want to Try Mental Stop Loss?

Applying a mental stop loss in your strategy involves the mental capacity to remember the price point you set before opening a trade. While the automated stop-loss does the thinking, this time it is you who will activate yourself to make a stop loss when you see your trade is moving below your buy-in price. The problem here is as you watch the charts dip, you may already want to panic and lose your strategy while affected by impending losses. It can be good for you if a major price dip returns to a desirable level raking you profits. Better yet, do backreading to see how the previous dips behaved so your can make intelligent decisions, one by setting a trailing stop loss underneath the previous dips to spare yourself from a potential sharp reversal.

Analyze Chart Behavior

Due to the extreme volatility of the cryptocurrency market, stop losses are triggered prematurely more often than not. It is, therefore, recommended that you set stop losses per chart since charts fluctuate differently like 2–3% to one, and 10-to 15 % to another. It is important to backread the chart history of how the candlesticks fluctuated in their dips and consolidations before rallying so you can better decide on your next move.

Please Be Guided Too by the Order Book

Order books are excellent references for orders from exchanges that record buyers and sellers in the crypto market at any given time. Analyzing the buy and sell walls can lead you to properly place your stop loss. When long on a trade, it is recommended that you place your stop loss a few percentages behind high buy walls.

Chances Are

Analyzing past chart behavior and coupling it with an order book analysis will give you an intelligent stop loss positioning and lowering the chance of premature stop loss before a rally. Not referring to these two strategies can jeopardize your manual stop losses. It is good to try practicing mental stop losses on a demo account. And if you choose to do it live, try it with small currency amounts.


Newbies to crypto trading are highly advised not to get into mental stop losses. You will have your time with that. As of now, do not spend more time than money on a trade. Automated stop losses can save you both time and money and more freedom to move from trade to trade. Stress besides.

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Wallex Trust & Custody

Wallex Trust & Custody

WallexTrust is a technology-driven financial trust service providing financial solutions for the new digital economy.