Stop-Limit or Stop-Market: Which one should I use as a Stop-Loss?

To be able to choose between the type of stop-loss you would like to use, here is a simple guide on the two types of stop-losses offered on CoinPanel: Stop-Limit and Stop-Market.

Stop-losses are designed to help every trader to limit the amount of money lost on a single trade. Let’s take a look below at how these orders work.

What is a Stop-Limit order?

Using the limit order as the underlying order type, stop-limit orders are made up of two prices — the trigger price and the limit price. When the cryptocurrency hits the trigger price, the limit will then become active. Since limit orders are only filled at the order price or a better price if available, stop-limit orders are not always filled.

How to set a Stop-Limit order:

In fact, it would be safer for you to set the trigger price a bit higher than the limit price (for sell orders) or a bit lower than the limit price (for buy orders). This increases the chances of your limit order getting filled after the stop-limit is triggered.

On CoinPanel, when you are using the Place Order tab, you need to click on Sell > Stop-Limit.

Please note that if your Trigger price is higher than your Limit price, given normal market circumstances (not extreme volatility) your order will fill near your Trigger price since a Limit order always sells at the Limit price or better (higher).

Since the orders may not guarantee to be filled, you may not always get out of a losing trade if the market moves too quickly in the undesired direction. Subsequently, if the order doesn’t get filled, you may then be exposed to even more significant losses.

What is a Stop-Market order?

Alternatively, you can choose to use a stop-market order, which is generally known as a stop-loss order. A stop-market order is also meant to protect you when the market moves unfavorably, but it only requires one designated price. 

Due to the fact that stop-market orders use market orders as their underlying order type when the cryptocurrency hits the designated stop price, the order will execute as a market order. This means that you can get out of your losing trade, which could be used if you worry about losing your capital when the market moves unfavorably.

Which one should I choose?

A stop-market order triggers a market order when the trigger price is reached. For stop-losses to protect you when the market is dropping fast, stop-market order is safer because it will fill immediately. However, with a stop-market order, you might pay higher prices caused by slippage. If you are not worried about slippage, we recommend using stop-market orders.