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Trailing Stop-limit Order on Bitbns

Doesn't it bother you when you come back after a long vacation to find that you have missed a lucrative buy/sell opportunity? Trust us, it bothered us too, so we added Trailing Stop-limit Order on Bitbns, which is the answer to all your prayers.

While tapping the market without active monitoring is a matter of luck, minimising risk is something always under your control. Before we explain what a Trailing Stop-limit Order is, let us first understand what a Stop-limit Order is. Trailing Stop-limit Order is a more secure version of Stop-limit Order with even lesser risk.

What is a Stop-limit Order and how does it work?

Stop-limit Order is a type of conditional trade order, which is executed only when a certain condition is met. The condition in a stop-limit order is that the order is executed only when the market reaches or crosses a certain price point. This certain price point is called Trigger Price. Your order is always executed between the Trigger Price and Target Price. The reason why you should be using stop-limit orders is that you must always take measures to not buy at a very high price or minimise your loss when you are not around to monitor the market. Essentially, a stop-limit order is composed of two components:

  • Target price
  • Stop or trigger price

Target Price: The maximum price that you are willing to pay/receive when you are buying/selling a cryptocurrency, respectively.

Trigger Price: The price point, which when touched or crossed by the market, releases your order in the open order book. Once your order is in the open order book, it is visible to other traders. Examples

Stop-limit Buy Order

Price
Current Market PriceRs.100
You want to buy when the market crossesRs.110
Maximum price you are willing to payRs.114
Your order executed betweenRs.110 - 114

Quite apparently, stop-limit buy order saved you from purchasing the cryptocurrency before the price went too high.

Note: Your order may not be executed if the market goes directly above Rs.114, without touching trigger price or a price point between Rs.110 and 114.

Stop-limit Sell Order

Price
Current Market PriceRs.110
You want to sell when the market crossesRs.108
Minimum price you are willing to sell forRs.106
Your order executed betweenRs.108 - 106

Clearly, stop-limit sell order allowed you to sell your cryptocurrency before the market fell too low.

Note: Your order may not be executed if the market falls directly below Rs.106, without touching the trigger price or a price point between Rs.108 and 106.

That is how an ordinary stop-limit order works.

Trailing Stop-limit Order - What makes it different?

A Stop-limit Order on Bitbns comes with stop-limit trail interval for extra downside protection.

What is a Stop-limit Trail Interval?

When we say trail interval, we mean the price by which the trigger price and target price would change to execute your order at the best possible price, only when the market moves towards profit. When the market starts moving towards loss, trail interval ensures trigger price and target price do not change, thus, reducing risk to bare minimum. In short, by including a trail interval, you automate your order to keep reducing loss as much as possible or even make a profit. Hence, a trailing stop-limit order is composed of three components:

  • Target price
  • Stop or trigger price
  • Trail interval

Now let's see how trail interval makes a stop-limit order better, using the same values we assumed to understand an ordinary stop-limit order.

Examples

Stop-limit Buy Order

As per the example we discussed for ordinary stop-limit buy order, the current market price is Rs.100, trigger price is Rs.110 and target buy is at Rs.114. Nothing much changes, except that there is a trail interval of Rs.0.10 or 10 paisa. Once you define the trail and confirm the order, either of the two things will happen:

  • When the price moves up:

    As the price moves up, it moves closer to the trigger price. If the market doesn't go down at all and hits the trigger price, your order would be executed somewhere between Rs.110 and Rs.114 at the best offered price.

Price
Current Market PriceRs.100
You want to buy when the market crossesRs.110
Maximum price you are willing to payRs.114
Your order executed betweenRs.110 - 114
  • When the price goes down:

    When the price goes down, your trail would make sure it is updating your trigger price and target price. The more the market falls, the lower your trigger price and target price.

Change in Price (market falls by 10 paisa)Change in Price (market falls by 50 paisa further)Change in Price (market falls by Rs.1 further)
Current Market PriceRs.100Rs.99.90Rs.99.40Rs.98.40
You want to buy when the market crossesRs.110Rs.109.90Rs.109.90Rs.108.40
Maximum price you are willing to payRs.114Rs.113.90Rs.113.40Rs.112.40
Your order executed when the market moves down, stops, reverses and reaches trigger price.Rs.110 - 114Rs.109.90 - 113.90Rs.109.40 - 113.40Rs.108.40 - 112.40

Advantage (when using Trailing Stop-limit Buy Order): Whenever the market moves down, trail ensures your trigger and target price are updated to reduce the buy price for you, and executes your order at best buy price. And whenever the market moves up, your trailing stop-limit buy order behaves like a normal stop-limit order.

Stop-limit Sell Order

As per the example we discussed for ordinary stop-limit sell order, the current market price is Rs.100, trigger price is Rs.108 and target sell is at Rs.106. Again, nothing much changes, except that there is a trail interval of Rs.0.10 or 10 paisa. Once you define the trail and confirm the order, either of the two things will happen:

  • When the price moves down:

    As the price moves down, it moves closer to the trigger price. If the market doesn't move up at all and hits the trigger price, your order would be executed somewhere between Rs.108 and Rs.106 at the best offered price.

Price
Current Market PriceRs.110
You want to sell when the market crossesRs.108
Minimum price you are willing to sell forRs.106
Your order executed betweenRs.108 - 106
  • When the price goes up

    When the price goes up, your trail would make sure it is updating your trigger price and target price. The more the market goes up, the higher your trigger price and target price become, thus ensuring sell at the highest price possible.

Change in Price (market rise by 10 paisa)Change in Price (market rise by 50 paisa further)Change in Price (market rise by Rs.1 further)
Current Market PriceRs. 110Rs. 110.10Rs.110.60Rs.111.60
You want to sell when the market crossesRs.108Rs.108.10Rs.108.60Rs.109.60
Minimum price you are willing to sell forRs.106Rs.106.10Rs.106.60Rs.107.60
Your order executed when the market moves up, stops, reverses and reaches trigger price.Rs.108 - 106Rs.108.10 - 106.10Rs.108.60 - Rs.106.60Rs.109.60 - 107.60

Advantage (when using Trailing Stop-limit Sell Order): Whenever the market moves up, trail ensures your trigger and target price are updated to reduce the loss even more, and execute your order at best sell price. And whenever the market moves down, your trailing stop-limit sell order behaves like a normal stop-limit order.

Conclusion:

If you observe, ordinary stop-limit orders limit only the specific amount of loss you define while placing the order. On the contrary, trailing stop-limit orders automatically update your order values to limit the maximum loss possible or even turn the whole trade profitable, if and when there is a possibility. Hence, trailing stop-limit orders are more intelligent and advanced compared to ordinary stop-limit orders.

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