Summary

Almost every experienced trader in the crypto market agrees that risk management is the vital part of any trading style. Beginners who have just come to the market often neglect this rule, but understanding comes to them in due course. In this article, we explain why taking your losses and profits is so important for successful and stable trading. The main course of this article centered on describing how you can use Bitsgap stop loss & take profit combined to improve your risk management.


Stop Loss & Take Profit is the type of security order that is set to close a trade automatically. Stop-loss limits the possible losses, while take-profit helps you to get profit when the price reaches the desired level. The primary objective is to control the trade in offline mode. For example, if a user cannot consistently be near the computer, or opens a long-term position, such orders are useful and even irreplaceable. After all, in the absence of a trader, the market can turn quickly and go in the opposite direction, and in a short time, the profitable transaction will become unprofitable. Stop-loss will help you to minimize losses in this situation. The same goes for take-profit order when at some point, a strong move can bring a good profit: the take-profit will help you to fix it before the market rollbacks in the opposite direction.


Stop Loss

A Stop-Loss order is an order that does not appear the order book until the market triggers a specified price level. This order used as a risk management tool to limit losses on open positions. When the price reaches the specified price level, a market order to sell or buy (depends on the trading side) will trigger. The price level for stop loss can be removed, changed, or added at any time while the position is still open.


Take Profit

A Take-Profit order is another conditional order, and the difference is that it does appear in order book if the price moves in a favorable direction. This time it is used as a tool to close a position and leave the market with profit. When the market is going above entry buy price, a limit order to sell or buy will trigger for the amount specified in the initial configuration. The price levels for taking profit can be removed, changed, or added at any time while the position is still open.


Important: You can place up to 2 Take-Profit levels and assign % amount for each. The second limit order placed only after the first is filled.


Trailing Stop

A Trailing Stop is a stop order that can be set at a defined percentage away from entry buy price. A user can place a trailing stop for a long position below the purchase price, and for short position, above the selling price. The primary purpose of trailing stop is to move stop-loss position as long as the trade continues to profit and advances in the favorable direction


For instance: if the market price rises, the stop-loss price rises by the trail amount, but if the price falls, the stop-loss price doesn't change and remain still.


Long trade (Buy side)

In a Long (Buy) position, a trader makes a buy order for with confidence that the market price is going to rise. A trader expects the growth of the currency pair to make a profit. To open a long position, please navigate to the trading window and specify the price and volume you want to use in trade. When you are ready, select SL/Take Profit and hit the Buy Order Settings button.


A new window will show up where you can assign price levels and complete your configuration for this trade:

  1. You can change the entry buy price and volume
  2. Set up your Stop-Loss level and if needed enable trailing stop. Your stop loss price should be lower than the purchase price
  3. Pick up to 2 Take-Profit levels and select amount for each level. Your take profit prices should be higher than the purchase price. Please, make sure that the amount meets exchange minimum order requirements, and you have enough balance while the position is open
  4. You can skip stop loss or take profits by clicking on the switch


When you confirm the opening of a long position, the first operation will be a buy limit order. After buy order is filled, a position will be added in Positions tab. There you will be able to edit your profit and loss levels, as well as close or cancel any open position. On the chart of the selected currency pair, you can see where your critical levels at with option to move them if needed.


Short trade (Sell side)

Traders open Short (Sell) positions when they assume that the market will shift in a bearish trend or there is a correction incoming in the upward market. To open a short position, please navigate to the trading window and specify the price and volume you want to use in trade. When you are ready, select SL/Take Profit and hit the Sell Order Settings button.


A new window will show up where you can assign price levels and complete your configuration for this trade:

  1. You can change the selling price and volume
  2. Set up your Stop-Loss level and if needed enable trailing stop. Your stop loss price should be higher than the selling price
  3. Pick up to 2 Take-Profit levels and select amount for each level. Your take profit prices should be lower than the selling price. Please, make sure that the amount meets exchange minimum order requirements, and you have enough balance while the position is open
  4. You can skip stop loss or take profits by clicking on the switch


When you confirm the opening of a short position, the first operation will be a sell limit order. After sell order is filled, a position will be added in Positions tab. There you will be able to edit your profit and loss levels, as well as close or cancel any open position. On the chart of the selected currency pair, you can see where your critical levels at with option to move them if needed.


Close open position and Cancel all orders

There are two ways of leaving the market - close position and cancel orders. Both can be used at any given time. The main difference is what should be done with the funds used in the open position. To access the Close Position menu, please click the highlighted cross (cancel) symbol.


Here you have two options:
1. You can close the position, which will place an instant sell or buy (depends on the trading side) market order for assets you used in this particular trade.
2. Alternatively, you can cancel all related orders and keep the funds.


Example #1 (Close position): I have a short position open, and it already brings me a profit. I think that the market is about to go back in an upward trend and I would love to repurchase my BTC as soon as possible. I will go with an option to Close Position and use my USD to place a market buy order for BTC instantly.

Example #2 (Cancel position): I have a long position open, and my initial goal was to get some little profit with a quick trade. I realized that there is a more promising opportunity if I use my purchased BTC, and trade it for some other altcoin. However, if I close my position, it means that all BTC will be sold back to USD which is something I don't need. I can use an option to Cancel Position which will cancel all related orders, and I will keep BTC on my account.


More information

Can I use my existing base currency to open a long position with SL and TP?

  • No. You have to open a new position with entry buy price and purchase the asset you want to trade.

How often do you update prices and move trailing stop?

  • We refresh prices every 5 seconds which is an optimal experience for live trading. This rate also protects your trailing stop from being incorrectly moved due to quick market manipulation and price shadows.

I have opened a new position, but the balance is still available. Is everything correct?

  • Everything is correct. Your funds are not used in order if there is no opportunity to complete it at a wanted price. As soon as the price is about to trigger your take profit, the system will place a limit order. For stop loss, we monitor the order book, and if the top position on buy/sell side (depends on your direction) is your stop loss, the system will place a market order to guarantee its filling.

My first TP is partially filled, but the SL did not sell everything. Why?

  • When the first TP is filled fully or partially, we remove it from the order logic and reserve a second TP amount for SL. This is a rare case but could happen if there was not enough demand or supply for a particular asset.

Is there are any scenarios when SL & TP doesn't work?

  • Maintenance on an exchange, not able to deliver API command
  • User's API does not work or if there is a restriction to trade
  • Funds in the position were withdrawn or used for other open order
  • Service shut-down