Are you thinking about putting your money into Ethereum? While Bitcoin is the first thing that comes to mind when talking about cryptocurrency, it’s worth noting that Ethereum still holds on strongly to the number two position in terms of total market cap. Instead of being a medium of exchange, Ethereum is a platform which can be used to develop different kinds of applications with smart contracts. This coin should sit on top of your list if you want a coin that has stood the test of time. Here you will learn how you can use stop losses when trading Ethereum.
The first thing you should know is that there are two kinds of stop orders. The first is a start – market orders and the second is stop – limit orders.
This type of stop order occurs when the price of Ethereum hits a particular point. If Ethereum’s current price is $500, you can decide to place a buy stock market order for $525. If Ethereum’s price reaches $525, the market order is executed. This is usually used to increase your holdings before the price goes up even further.
You can also use a stock market order when selling Ethereum. This is an excellent way to reduce your losses in case the price goes down suddenly. For example, you can set the sell stop orderat $490 so you can limit your losses if you purchased Ethereum at $500.
This type of stop order works in a similar fashion, but its application is different. Your goal when placing a limit order is to purchase Ethereum at the price you are willing to pay and sell it for the price you are willing to accept.
Take this example: Ethereum has been trading around $500 for a few weeks. You may decide to increase your holdings, so you can make a huge profit in case the price goes up in the future. You can place a buy limit order at $510. This allows you to gain more coins before the price increases.
You can also use a sell limit order to reduce your losses in case the price of Ethereum falls. For instance, a sell limit order at $490 means your portfolio wouldn’t be hurt as much in case the price goes down lower than this amount.
Getting Started with Stop Losses
At first, using stop losses may prove confusing especially for beginners. You should understand, however, that most cryptocurrency exchanges offer this feature. Also, you can use a cryptocurrency trading robot like Ethereum Code which allows you to use stop losses and other risk management features. This program also uses complex trading algorithms and predictive analytics to help you formulate educated decisions.
The best thing about using stop losses is that you no longer must worry about your emotions when trading. Sometimes, it feels tempting to keep your coins even if nothing indicates a price increase in the future. Stop losses is an excellent solution to increasing your gains and minimizing your losses at the same time.