**: The Deception of Stop Loss**
Stop loss isn't designed to protect your money; it's actually made to make you lose money. If you believe setting a stop loss will shield you from losses, you're mistaken.
**: Understanding Stop Loss with an Example**
Let's say you bought 1000 STRK coins at $2.5 each, totaling $2500. You set a stop loss at $2, thinking your maximum loss would be $500. However, you wake up to find you've lost $1250. How did this happen?
**: The Reality of Stop Loss Function**
A stop loss is basically a sell trigger. When the price hits a certain point, it automatically sells your coins at the market price. So, if your stop loss is set at $2, once that price is reached, a market order is placed to sell your coins. If the market is volatile or has low trading volume, your coins might sell for much less than $2.
**: The Mechanics Behind Stop Loss**
When the price hits your stop loss level, your stop loss order becomes a market order. If there aren't enough buyers at your set price, your order gets filled at the next available price, which might be lower than your stop loss price.
**: Risks and Limitations**
- **Market Volatility**: High volatility can cause prices to move quickly past your stop loss level.
- **Liquidity Issues**: Low trading volume can lead to big price swings, making your stop loss trigger at a lower price.
- **Manipulation**: Sometimes, large traders can manipulate prices to trigger stop losses and benefit from it.
**: Conclusion**
While stop loss can help manage risks, it's not always reliable. Traders should be cautious and understand the risks involved, especially in volatile or low-volume markets. It's best to use stop loss along with other risk management strategies and stay alert to market conditions.
