🟢There is a type of order called Stop-limit.
It is a type of order used in digital currency trading, which enables the trader to specify a specific price point to execute a buy or sell operation.
- This command is used to control risks.
- It allows the trader to execute buy or sell operations automatically when the market reaches a specific price point.
💧 Components of the Stop-Limit order:
1️⃣- Stop price:
- It is the price at which, when the market reaches it, the limit order is activated.
2️⃣- Limit price:
- It is the price at which the trader wants to buy or sell the currency after activating the Stop order.
3️⃣- Quantity:
- The number of units that the trader wants to execute in the purchase or sale process.
❄️ Illustrative example:
It is commonly used in the case of selling, but it is sometimes used in the case of buying as well.
🔢- In case of sale: 🔴
- If the trader owns a currency whose current price is $100
- He wants to limit losses in case the price drops,
- He can specify the Stop-Limit command as follows:
- Stop price: $90.
- Limit price: $88.
- This means that the sell order will be automatically triggered when the price drops to $90 or below,
- But it will sell for no less than $88.
🔢- In case of purchase: 🟢
- If the current currency price is $100
The trader expects the price to rise if it exceeds $110.
- He can specify the Stop-Limit command as follows:
Stop price: $110.
- Limit price: $112.
- This means that the buy order will be automatically activated when the price reaches $110.
- But the currency will not be purchased at a price higher than $112.
⭐️ Benefits of using Stop-Limit orders:
🥇- Risk management:
- This type of order is used to protect capital from large losses by setting certain prices to sell if prices fall.
🥈- Earning profits:
- It helps in executing buying or selling operations when achieving the desired profit without the need to monitor the market continuously.
