Every trade has an exit, whether it’s planned or not. Stop-loss and take-profit orders let you set yours in advance. Find out how traders choose stop-loss and take-profit levels, how the main order types behave and what crypto's 24/7 market does to the plan.
A stop-loss order is an instruction to exit a trading position when the asset price reaches a predetermined level. The aim is to limit potential losses. For a long position, the stop-loss is set below the entry price; for a short position, it’s set above it.
A take-profit order works in the opposite direction, because the aim is to capture a potential gain. So, for a long position, the take-profit is set above the entry price; for a short position, it’s set below it.
The point is to make the decision in advance – calmly – rather than leaving the decision to real-time price movements.
If you set both, some platforms let you link them as a One-Cancels-the-Other (OCO) order, so when one fills the other is cancelled automatically. If they're placed as separate orders, check that the second one is cancelled after the first executes.
When a stop-loss is triggered, it can lead to either a market order or a limit order.
Stop-loss market order | Stop-loss limit order | |
What happens at the trigger | Converts to a market order | Activates a limit order |
Main trade-off | Greater execution certainty, less price control | Greater price control, less execution certainty |
Fast-market risk | May fill away from the trigger price | May not fill at all |
Learn more about how orders interact with liquidity in a crypto order book.
Crypto markets never close. A token can drop 5% on a Sunday night while you're asleep. An exit level set in advance caps how far a trade can move against you before it's closed.
Exit levels also give you numbers to work with, like how big your position might be and how the upside compares with the downside. The catch? The exit price itself isn't guaranteed. In a sharp move, a stop can fill well below where you set it and a limit order might not fill at all.
Liquidity is a big consideration, too. Trading conditions can become thinner during quieter periods, including some weekends, which can contribute to wider spreads or sharper, short-lived price moves.
Stops and targets are also only one piece of managing risk. How much you put into each trade and how many assets you spread it across, counts just as much.
There's no magic number for a stop-loss. Here are five common ways traders choose one.
A popular approach is to let the chart decide. The idea is to put the stop where, if the price gets there, your reason for taking the trade no longer holds. Useful markers include:
Our guide to reading crypto candlesticks explains how to identify recent highs and lows.
Set a stop too tight and an ordinary wobble can knock you out of the trade. Average true range (ATR), a measure of how far a coin has moved on an average day recently, is one way to judge what counts as ordinary.
A token that swings 6% on a quiet day will usually need a wider stop than one that moves 1%.
A percentage-based stop sets the exit a fixed distance from the entry price, such as 5% below it for a long position. It's simple maths, but one percentage doesn't fit every token.
The ‘7% rule’ is a widely known trading rule of thumb that refers to exiting a position after its price falls 7% below the purchase price. However, the rule was developed for stock trading rather than crypto. A 7% stop might get hit within an hour on a small, jumpy token, yet sit well outside Bitcoin's usual daily range.
Round numbers and recent highs or lows often attract a lot of trading activity. If many traders place orders around the same price, the market may move through that level quickly. This can affect how a stop-loss behaves when it is triggered.
A stop-loss doesn’t guarantee that a trade will close at the exact stop price. If the market is moving quickly or there aren’t many buyers and sellers available, the order may execute at a different price. This difference is known as slippage.
For that reason, the distance between the entry price and stop-loss shouldn’t be treated as an exact maximum loss.
Picking a target works much the same way: Start with the chart, then check the numbers.
A common starting point is the price where rallies have stalled before, such as:
These areas are sometimes called resistance or supply zones. They can be useful reference points because they show where selling activity has increased in the past, but they don’t guarantee that the price will stop or reverse there.
A risk-reward ratio compares how far the take-profit is from the entry price with how far the stop-loss is from the entry price. For example, suppose a trade has:
The potential gain is twice the potential loss, giving a 2:1 reward-to-risk ratio.
Note: A good-looking ratio isn't the same as a good trade. It compares two distances on a chart. It says nothing about how likely the price is to reach either one and it doesn't guarantee a profit.
A fixed take-profit sets one price at which the position is intended to close if the market moves favorably. A trailing stop moves with the price instead. For a long position, the stop can rise as the asset price rises, but it doesn’t move back down when the price reverses.
The trade-off is that a fixed target provides a clear exit price, while a trailing stop allows the position to stay open for longer if the favorable price move continues.
Fixed take-profit | Trailing stop | |
How it works | Targets a predetermined exit price | Adjusts its stop as price moves favorably |
Best suited for | Setups with a defined price objective | Strategies designed to remain open during an extended move |
Potential advantage | Exit level is defined in advance | Can remain open if price continues moving favorably |
Potential drawback | Further gains are missed after the position closes | A temporary reversal may trigger the stop |
The following example uses round figures to show how stop distance, potential downside, potential upside and position size can fit together. It’s for illustration only and doesn’t constitute a trade recommendation.
Suppose BTC is trading at $60,000 and you enter at that price, set a stop-loss at $57,000 and a take-profit at $66,000. In this example, the stop-loss sits below a nearby support area, while the take-profit is placed near a previous resistance level.
Start by measuring the distance between the entry price and the stop-loss: $60,000 − $57,000 = $3,000 per BTC.
That means the stop is $3,000 below the entry price. If the position closed at exactly $57,000, the price move would represent a $3,000 loss for each full BTC held, before fees and slippage.
Next, measure the distance between the entry price and the take-profit: $66,000 − $60,000 = $6,000 per BTC.
The target is therefore $6,000 above the entry price. If the position closed at exactly $66,000, that would represent a $6,000 gain for each full BTC held, before fees and other trading costs.
The risk-reward ratio compares those two price distances: $6,000 potential gain ÷ $3,000 potential loss = 2. That gives a 2:1 reward-to-risk ratio.
So, you're aiming to make twice what you're prepared to lose. Whether the price gets to either level is another matter.
Suppose your account contains $10,000 and your chosen risk budget is $100, or 1% of the account. With $3,000 between the entry price and the stop-loss: $100 ÷ $3,000 = approximately 0.033 BTC.
At these assumed prices, a 0.033 BTC position would lose approximately $100 if it exited at exactly $57,000. In practice, fees and slippage could change the final amount. A stop-loss market order may also execute below $57,000 during a rapid price move.
That's why stop placement and position size go together. Move the stop further away and you'd need a smaller position to keep the same $100 at risk. Bring it closer and the position can be bigger.
A few quirks of crypto can throw off even a well-placed stop.
Crypto doesn't close for nights or weekends, so the biggest move of the week can happen while you're asleep. That's much of the appeal of setting exits in advance – the order keeps working without active monitoring.
Not everyone trades on weekends and holidays, so there are fewer orders waiting at each price. A stop that triggers then may have to work through several price levels to fill. The result is wider spreads and more slippage, for targets as well as stops.
Crypto markets can experience brief, sharp price moves that reverse quickly. On a candlestick chart, these sudden moves may appear as long wicks – the thin lines above or below the candle body showing how high or low the crypto asset traded during that period.
A flash wick is the extreme version – a token’s price plunges and bounces back within minutes, sometimes inside a single candle. If your stop sat inside that dip, it still fired, even though the low lasted only moments.
This is where the ATR check from earlier earns its keep.
For leveraged positions, a stop-loss and liquidation are separate mechanisms. A stop-loss is your call; an exit order you set yourself. Liquidation happens when the trading venue closes a leveraged position because there isn’t enough collateral supporting it.
Learn more about leverage in crypto and liquidity in crypto markets.
These are the mistakes that come up repeatedly:
Stops and targets work best when each trade is one small part of a wider portfolio and not a make-or-break bet.
The 7% rule is a common stock-trading rule of thumb that refers to exiting a position after it falls about 7% below the purchase price. It isn’t a crypto-specific standard and differences in volatility mean a fixed 7% stop can behave very differently from one cryptocurrency to another.
There’s no universally correct risk-reward ratio. Ratios such as 1.5:1 or 2:1 are sometimes used as reference points, but the appropriate ratio depends on the trading setup and market conditions. The ratio compares planned potential gain with potential loss; it doesn’t show how likely the trade is to succeed.
A trailing stop moves with the market when price moves favorably, rather than staying at one fixed level. For a long position, the stop can rise as the asset price rises and then trigger if the price falls by the specified amount.
One approach is to divide a chosen risk amount by the price distance between the entry and stop-loss. For example, if the risk amount is $100 and the stop is $2,000 away from the entry price, the calculated position size would be approximately 0.05 units before fees and slippage.
Important Information: This is informational content sponsored by Crypto.com and should not be considered as investment advice. Trading cryptocurrencies carries risks, such as price volatility and market risks. Past performance may not indicate future results. There's no assurance of future profitability. Before deciding to trade cryptocurrencies, consider your risk appetite.
