In crypto trading activities, market orders and limit orders may be terms that you often hear.
However, there is one type of order that offers a more strategic approach, namely the Stop Limit Order.
For those of you who want to manage risk more optimally and determine entry or exit points in a more planned manner, this article will discuss the meaning of Stop Limit Orders, how they work, and tips for using them effectively.
What is a Stop Limit Order?
Stop Limit Order is a type of order in digital asset trading that combines two main elements, namely Stop Order and Limit Order.
This type of order allows users, including members on crypto exchange platforms such as INDODAX, to manage risk more measurably, both in taking profits and limiting potential losses.
In its application, users determine two prices, namely Stop Price and Limit Price. A new order will be active when the market price touches or passes the Stop Price.
After that, the order changes to a Limit Order and will only be executed if the market price is at the specified Limit Price or better.
In this way, traders have more control over the execution price, and can avoid the risk of slippage, which is a condition where an order is executed at an unexpected price due to rapid market movements.
For example, if you want to sell Bitcoin when the price drops to Rp800,000,000, but are only willing to sell it at a price of Rp790,000,000 or higher, then you can set the Stop Price at Rp800,000,000 and the Limit Price at Rp790,000,000.
Stop Limit Orders are suitable for traders who want more control in volatile crypto market conditions. However, it is important to understand that the execution of this order is not guaranteed.
If the market price never reaches the Stop Price or moves too quickly to pass the Limit Price, the order will not be executed.
Therefore, the use of Stop Limit Orders should be accompanied by careful consideration of market dynamics.
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How Stop Limit Orders Work
Stop Limit Orders work by combining two prices specified by the user, namely the stop price and the limit price.
When the market price touches or passes the stop price, the system will automatically activate the limit order according to the specified price.
However, it should be understood that even though the order has been activated, execution still depends on market conditions, especially whether there are buyers or sellers willing to transact at the limit price.
For example:
- Stop Price: IDR800,000,000
- Limit Price: IDR790,000,000
If the price of Bitcoin (BTC) touches IDR800,000,000, the system will place a sell order at IDR790,000,000.
However, if the market price immediately drops past IDR790,000,000, for example, it drops to IDR780,000,000, then the order will not be executed, because no transactions can occur at the specified limit price.
This indicates that the use of Stop Limit Orders does not guarantee that orders will always be executed.
TranslatorWhen to Use a Stop Limit Order?
A Stop Limit Order is an appropriate strategy to use in certain situations where control over the execution price is a priority. Here are some conditions that make using a Stop Limit Order a wise choice:
1. Avoiding Excessive Losses
A Stop Limit Order allows you to set a minimum selling price so that you can limit your potential losses without having to accept a market price that could be much lower during a sharp decline.
2. Setting Take Profit Targets in a Volatile Market
When market conditions are highly volatile, a Stop Limit Order helps lock in profits at a certain price level.
By setting a stop price and limit price, you can sell the asset when the price hits the target, but still keep the execution from happening below the desired price.
3. Avoiding Execution Prices Below a Set Limit
In situations where you don’t want the asset to sell below a certain minimum price, a Stop Limit Order provides protection by only allowing executions at or above the limit price that has been set.
4. More Planned Entry and Exit Strategies
Traders who prioritize careful planning in every transaction will be greatly helped by Stop Limit Orders.
With this type of order, you can design entry and exit points based on technical analysis and risk management, not just based on emotions or momentary reactions to price movements.
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How Stop Limit Orders differ from other orders
To understand how a Stop Limit Order works more fully, it is also important to compare it to other order types, such as Market Orders and Limit Orders.
Each has its own characteristics, especially in terms of execution triggers, prices used, and slippage risk. Here is a table of the differences:
| Order Type | Execution Trigger | Execution Price | Slippage Risk |
| Market Order | Immediately when the order is shipped | Current market price | High: can be far from the expected price |
| Limit Order | When the market price touches the limit | At the limit price or better | Low, but can wait a long time to execute |
| Stop Limit Order | When the market price hits the stop | As per the specified limit price | Low, but may not be executed if the market price exceeds the limit price |
Basically, Market Orders are suitable for those who want to trade immediately without waiting for a certain price, although the risk of slippage is high. Limit Orders give you control over the execution price, but may not be executed immediately.
Meanwhile, a Stop Limit Order is a strategic solution for those who want a combination of both: an automatic trigger when a certain price is reached, with your own minimum/maximum price limit.
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Benefits and Risks of Stop Limit Orders
In the world of crypto trading, Stop Limit Orders offer a balance between price control and risk management. However, just like any other strategy, this type of order also has advantages and disadvantages that need to be understood before use.
Advantages
1.More Accurate Price Control
With a Stop Limit Order, you can set a specific price for execution. This gives you complete control over the minimum (when selling) or maximum (when buying) price you want to receive.
2.Reduced Risk of Slippage
As orders will only be executed at your specified limit price or better, the risk of slippage, especially during times of high market volatility, is minimized.
3.Supports Protection Strategies and Profit Targets
This type of order is suitable for those who want to implement a disciplined risk management strategy, either to secure profits (take profit) or limit losses (stop loss).
Risk
1.Potential Failure to Execute
If the market price crosses the stop price, but goes straight through the limit price without touching it, then your order may not be executed at all. This is common when prices move very quickly (gaps or sharp spikes).
2.Less Optimal in Markets with Low Liquidity
In markets with low trading volume, the chances of getting a price at the limit may be lower, which means your order may be held or not executed.
How to Use Stop Limit Order on Indodax
Buat kamu yang ingin mulai menggunakan Stop Limit Order di INDODAX, langkah-langkahnya cukup sederhana. Fitur ini tersedia di tampilan Pro dan bisa kamu akses dengan mudah lewat browser atau aplikasi. Berikut ini panduannya:
1. Enter Pro View
Open INDODAX and enter Pro Trading mode to access full features including Stop Limit Order.
2. Select Asset Pair
Determine the asset pair you want to trade, for example BTC/IDR, ETH/IDR, and others.
3. Select the “Stop Limit” Tab
On the order page, locate and select the “Stop Limit” order type. This is where you will set the price and amount of the asset you want to trade.
4. Enter Stop Price and Limit Price
- The Stop Price is the trigger price for the system to activate the order.
- The Limit Price is the specific price at which your order will be placed once the stop price is reached.
5. Enter the Number of Assets
Decide how many assets you want to sell or buy according to your strategy.
6. Click “Submit Order”
Once all the parameters are filled in, click the “Submit Order” button to activate your order instructions.
As an additional tip, always make sure you monitor market conditions and pay attention to order volume before using a Stop Limit Order.
Basically, in highly volatile or low-liquidity markets, you need to be extra careful as orders may not be executed as expected.
Conclusion
Well, that was an interesting discussion about Stop Limit Order is the Key to Safer Trading which you can read in full at the crypto academy at INDODAX Academy.
In conclusion, Stop Limit Order is one of the important strategies that you can use to set execution prices more precisely in trading activities.
While it doesn’t guarantee that the order will always be executed successfully, especially when the market is moving very fast, this feature still provides advantages in managing risk and keeping the trading plan under control.
By understanding how it works and when to use it, you can be better prepared for the volatile dynamics of the crypto market.
At the end of the day, Stop Limit Orders are not just about technique, but also about discipline and strategy to make every trading decision you make more targeted and safe.
And, not only can you gain insight into economics and investing, here you can also find the latest crypto news around the blockchain and crypto world.
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FAQ
1.What is a Stop Limit Order?
A Stop Limit Order is an order that only activates when the price reaches the stop level, then places a limit order at a specific price.
2.Can a Stop Limit Order fail to execute?
Yes, it can. If the market price crosses the limit price without any transactions, the order will not be executed.
3.What is the difference between Stop Limit and Stop Loss?
Stop Loss is executed directly at the market price, Stop Limit only places a limit order after the price touches a certain level.
4.Is this feature available on Indodax?
Yes, you can use Stop Limit Order in Indodax Pro view.
5.When should you use Stop Limit Order?
When you want price protection during volatile markets without the risk of executing too low or high.
[DISCLAIMER: All forms of crypto asset transactions have risks and have the opportunity to experience losses. Keep investing according to independent research so that you can minimize the level of loss of the crypto assets being traded (Do Your Own Research / DYOR). The information contained in this publication is provided generally without obligation and for informational purposes only. This publication is not intended to be, and should not be considered as, an offer, recommendation, solicitation or advice to buy or sell any investment product and should not be transmitted, disclosed, copied or relied upon by any person for any purpose. [/alert]
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