MetenaCrypto stop-loss: definition, placement, example
A price level set in advance, below which you sell to limit the loss on a position.
Definition
The stop-loss sets the maximum loss accepted on a position before you enter it. It can be an order placed on the exchange, executed automatically, or a threshold you commit to respecting by hand.
Its placement follows from the thesis and from the asset’s volatility. Too tight, it triggers on an ordinary move: on bitcoin, swings of 5% within a day are common. Too wide, it lets a loss run that the size of the position cannot absorb.
In crypto, a stop order does not guarantee the execution price. In a fast fall, the sale can go through well below the threshold. On an illiquid market, a wick lasting a few seconds can also trigger the stop before the price recovers.
Worked example
Ether bought at $3,000, stop at $2,550, or 15% below the entry price. For $10,000 of capital and a maximum loss of 1% per position, or $100, the position must not exceed $667.
In Metena
In Metena, you note a stop on each position and the app shows the distance between the price and that threshold. If the threshold is crossed and the position stays open, the deviation is recorded and your discipline score takes it into account. Metena places no orders.
Notify me at launchRelated terms
- Money management
- Managing the size of your positions and your exposure: how much to risk per holding, what reserve to keep, which limits never to cross.
- Invalidation condition
- The precise fact that would prove your thesis wrong and trigger your exit, for example “I exit if BTC closes two weeks below $20,000”. Writing it in advance stops you rationalizing it later.
- Take-profit
- A price level set in advance, at which you sell all or part of a winning position.
- Risk/reward ratio
- The ratio between what a position can lose you, down to the stop, and what it can gain you, up to the target.
- ATR (Average True Range)
- The average size of price moves over a period. It is used to gauge volatility and to set consistent risk levels.
Related guides
- Building a crypto strategy from A to Z
- Thesis, allocation, position sizing, entry and exit rules, testing: the parts of a written crypto strategy, in the order in which they are decided.
- When to sell your crypto: writing your exit plan
- Take-profit levels, stop, invalidation condition, rebalancing: four reasons to sell that should be written before buying, with worked examples.
Put these ideas into practice.
Write your strategy in a few minutes: Metena analyses it when you ask and explains each term in context.
Notify me at launchEducational content. It is not investment advice. Crypto-assets carry a high risk that can go as far as the total loss of capital.