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When Should I Exit?

  • Writer: Lara Hanyaloglu
    Lara Hanyaloglu
  • Feb 19
  • 2 min read

In trading, knowing when to exit a trade is just as important as knowing when to enter. That’s where stop-loss and take-profit orders come in. These tools allow traders to automatically limit losses and lock in profits, removing the need for constant market monitoring. Whether you're trading crypto, stocks, or forex, setting these orders can help protect your capital and improve your strategy.


✅ What Is a Stop-Loss Order?

A stop-loss order automatically sells your asset when the price drops to a predetermined level. It helps traders avoid big losses by closing the trade before it falls too far.


Example of Stop-Loss in Crypto Trading:

  • You buy Bitcoin (BTC) at $50,000.

  • You set a stop-loss at $48,000.

  • If BTC drops to $48,000, your position automatically sells, protecting you from further losses.


Why Use a Stop-Loss Order?

  • Protects Your Portfolio: Prevents large losses in volatile markets.

  • Reduces Emotional Trading: Stops you from holding a losing trade out of hope.

  • Works Automatically: Even if you're not watching the market, the trade closes for you.


🚀 What Is a Take-Profit Order?

A take-profit order automatically sells your asset when the price reaches a target level, securing your gains before the market reverses.


Example of Take-Profit in Crypto Trading:

  • You buy Ethereum (ETH) at $2,500.

  • You set a take-profit order at $3,000.

  • If ETH reaches $3,000, your position automatically sells at a profit.


💡 Why Use a Take-Profit Order?

  • Locks in Gains: Ensures you don’t miss out on profits.

  • Prevents Greed: Helps avoid the temptation of waiting too long for even higher prices.

  • Reduces Stress: No need to manually monitor price movements.


Example: Stop-Loss and Take-Profit Together

  • You buy Bitcoin at $50,000.

  • You set a stop-loss at $48,000 (max loss = $2,000).

  • You set a take-profit at $55,000 (target gain = $5,000).

  • If BTC drops to $48,000, you exit automatically, avoiding further loss.

  • If BTC rises to $55,000, you secure your profit before a potential price drop.


📈 Finding the Right Levels for Stop-Loss and Take-Profit

🔹 Support & Resistance Levels: Place your stop-loss below support and take-profit near resistance.

🔹 Volatility Consideration: Adjust your stop-loss based on market conditions (tight stop-loss in low volatility, wider in high volatility).

🔹 Risk-Reward Ratio: Aim for a 1:2 or 1:3 ratio (risk $100 to gain $200 or $300).


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