Advanced Trading: Bitcoin Trailing Stop Limit Order
A trailing stop limit order is a limit buy or sell order that is triggered once a cryptocurrency touches a trailing amount set by the user. A stop-limit is a combination of a stop order and a limit order. With this order type, you will need to enter two price points, a stop price, and a limit price. If the market value of a cryptocurrency reaches the stop price (first price point), it automatically creates a limit order (second price point), as long as it happens within the designated duration of time.
A trailing stop limit order allows a trader to specify a limit on the maximum possible loss if the price of a cryptocurrency goes down, without setting a limit on the maximum possible gain. A trailing stop has the benefit of letting a trader ride the market up, and can get them out when it falls. Using a trailing stop limit order allows a trader to maximize their profits and gives them added control over their losses.
A sell trailing stop limit order moves with the market price, and will continually recalculate the stop trigger price at a specified amount below the market price, based on a designated dollar or percentage trailing amount.
The limit order price is also continually recalculated based on the limit offset. As the market price rises, both the stop price and the limit price rise by the trail amount and limit offset, but if the stock price falls, the stop price remains unchanged, and when the stop price is hit, a limit order is submitted at the last calculated limit price.
Example of Trailing Stop Limit Order
For example, imagine that you purchase Bitcoin at $10,000, and you want to limit your potential losses. If you set a trailing stop limit order with the trailing amount 10% below the current market price of $10,000, then the stop price will be $9,000 ($10,000 - $1,000). Then you designate a limit price offset below the trail stop price. If you designate your limit offset as $1,000 then that is subtracted from the trail stop price to calculate the limit price. Therefore, in our example, the limit price would be $8,000 ($9,000-$1,000).
In our example using a 10% trailing stop on a $10,000 price for Bitcoin, the trailing stop price is initially $9,000 ($10,000 - $1,000). If the price of Bitcoin does not rise above $10,000 after the original order is executed, the stop loss will remain at $9,000. Using a $1,000 limit offset, the limit price will be $8,000 ($9,000 - $1,000). If the price of Bitcoin rises to $11,000, then the spot price will increase to $9,900 ($11,000 - $1,100), 10% below $11,000. Using a limit offset of $1,000, our new limit price will be $8,900 ($9,900 - $1,000).
How to Place a Trailing Stop Market Order on NDAX
- · Login to https://ndax.io/
- · Once you log in you will be redirected to your dashboard
- · Click TRADE on the left-hand side of the screen
- · On the trade page, click BUY (Green button) or SELL (Red Button) on the right side of the screen
- · Click the small GREY ARROW in the upper left corner of the screen to pick the CRYPTO/CAD pair.
- · Click the small GREY ARROW on the pop-up to display the dropdown list of Advanced trade orders.
- · Click on TRAILING STOP LIMIT
- · ENTER ORDER SIZE
- · ENTER LIMIT PRICE
- · ENTER STOP PRICE (the specified price when the order will turn into a limit order)
- · Click PLACE BUY/SELL ORDER
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