Stop Loss
An order that automatically sells or closes a position when the price reaches a preset level to help limit potential losses.
A stop loss is a trading order designed to reduce downside risk by triggering an action when an asset’s price hits a chosen level. In crypto trading, it is most often used to sell a coin or token, or close a leveraged position, if the market moves against the trader. For example, if someone buys Bitcoin at $60,000 and sets a stop loss at $57,000, the order may be triggered if the price falls to that level.
Stop losses matter because crypto markets can move quickly, including while a trader is away from the screen. They help define risk before entering a trade and can make decisions less emotional during sharp price swings. However, they do not guarantee an exact exit price: in fast or illiquid markets, the final execution price may be lower or higher than the stop level due to slippage. A stop loss is a risk management tool, not a guarantee against losses.
Other terms in Crypto Trading
Basis Trade
A trading strategy that seeks to profit from the price gap between a crypto asset’s spot price and its futures or perpetual contract price.
Funding Rate
A periodic payment between perpetual futures traders that helps keep the contract price close to the spot market price.
Leverage Trading
Leverage trading is using borrowed funds to open a larger crypto position than your own capital would normally allow.
Limit Order
An order to buy or sell a cryptocurrency only at a specified price or better.