They can help you tackle a falling market with poise.
One tool championed by TradeSanta is the trailing stop-loss. This means that a normal stop-loss order doesn’t need to be set manually every time a market trend takes a turn against a trader’s favor — across both long and short positions.
For someone who is holding on to Bitcoin while it appreciates, adding a 10% trailing stop-loss ensures that the bot continues to track the cryptocurrency as it rises in value. An order will only be triggered when BTC falls by more than 10% from its latest peak — helping to lock in some of the profits that have been accrued. This can help mitigate some of the losses that could have been incurred if a normal stop-loss order was in force.
When using this order type, it’s crucial to ensure that an adequate trailing distance has been established. It’s not unusual for Bitcoin to fluctuate by 5% in a single day, and a small percentage may result in assets being liquidated before they continue to travel upward again.
Of course, a normal stop-loss order can still have its uses, allowing you to specify exactly how much loss you would be willing to tolerate if prices fall.
Joseph Spezzano received a Masters Degree in computer science from The University of Massachusetts. Joseph has been working as a full-time blockchain programmer for the past 5 years. In his spare time, Joseph enjoys writing for CryptocurrencyInvestments.com and traveling.