# Stop Orders ## What is a Stop Order? {% embed url="" %} A stop order is a type of trade order that becomes a market order once a specified price is reached, known as the **stop price**. Unlike limit orders, which execute only at a predetermined price or better, stop orders trigger a trade when the market reaches the stop price, at which point the order becomes a regular market order that executes at the best available price. This feature allows traders to automate their trades based on market movements. There are two main types of stop orders: * **Stop-Loss Orders**: Used to limit potential losses by selling an asset once it falls to a certain price. * **Stop-Buy Orders**: Used to enter a position or buy an asset once it rises to a specific price. *** ### How Stop Orders Work #### Stop-Loss Order (For Selling) A stop-loss order is designed to minimise losses by automatically selling an asset once its price falls to a specified level.\ \&#xNAN;*Example*: If a trader owns Token A and wants to prevent a significant loss, they might set a stop-loss order at **$50**. If Token A’s price drops to $50, the stop order is triggered, converting it into a market order, and the asset is sold at the best available price. #### Stop-Buy Order (For Buying) A stop-buy order purchases an asset once its price reaches a certain level. This order type is often used when traders want to capitalise on upward momentum.\ \&#xNAN;*Example*: If Token B is trading at **$40** but a trader believes it will continue rising once it hits **$45**, they can set a stop-buy order at $45. The stop order triggers when the price reaches $45, and Token B is bought at the market price. *** ### Key Benefits of Stop Orders * **Automated Trading**: Traders don’t need to monitor the market constantly—once the stop price is reached, the trade is triggered automatically. * **Risk Management**: Stop-loss orders protect traders from large losses by selling when prices fall below a set threshold. * **Capitalising on Price Trends**: Stop-buy orders enable entry during upward momentum without constant monitoring. * **Execution Speed**: Once triggered, the order executes at the best available price, ideal for fast-moving markets. *** ### Example of Stop Orders in Action * **Stop-Loss Example**: A trader owns 100 tokens of Token C, currently priced at $30. They set a stop-loss order at **$25**. If the price falls to $25, the tokens are sold at the next available market price, limiting further losses. * **Stop-Buy Example**: A trader watches Token D at $20 and believes it will rally once it breaks $25. They set a stop-buy order at **$25**. If the price hits $25, the tokens are bought automatically, allowing them to ride the momentum. *** ### Stop Orders vs. Limit Orders * **Stop Orders**: Trigger a market order once the stop price is reached. Useful for protecting against losses or entering during momentum, but **do not guarantee exact execution price**. * **Limit Orders**: Execute only at a specified price or better. Guarantee execution price but may never fill if the market doesn’t reach the set price. *** ### Potential Risks of Stop Orders * **Price Slippage**: The actual trade price may differ from the stop price in volatile or low-liquidity markets. * **Gaps in Price**: In fast-moving markets, the price may jump beyond the stop level before the order executes, leading to worse-than-expected outcomes. *** ### How to Create a Stop-Loss Order 1. **Choose Stop**\ From the trading screen, choose **"Stop"** to start creating a stop order. 2. **Specify the Sell Amount**\ Enter the asset you want to sell and the amount.\ \&#xNAN;*Example*: Sell **MIN tokens** if the price drops further. 3. **Set the Stop Price**\ Define the price at which you want to sell.\ You can use predefined percentage options (e.g., 5%, 10%, 25%).\ \&#xNAN;*Example*: Sell if MIN drops **10% below the current price**. 4. **Set the Expiry Time**\ Choose when the order should expire. If it doesn’t trigger in time, assets are returned to your wallet. 5. **Place Order**\ Click **"Place order"** to proceed. 6. **Sign and Submit**\ Sign the transaction in your wallet and submit it on-chain. The stop order will now execute automatically if conditions are met. ### How to Create a Stop-Buy Order A stop-buy order is designed to help traders enter a position during upward momentum. Instead of buying an asset immediately, you set a trigger price above the current market price. Once the stop price is reached, the order converts into a market order and executes at the best available price. This strategy is commonly used when traders believe an asset will continue to rise once it breaks through a certain resistance level. Unlike a take profit order—which is used to **sell** and lock in gains—a stop-buy order is used to **buy** into strength. #### Example Suppose MIN is trading at **0.0469 ADA**. You believe that if it breaks **0.0494 ADA**, the trend will continue upward. You set a stop-buy order at **0.0494 ADA**. Once the price reaches this level, the order executes, and you purchase MIN automatically at the best available market price. #### Steps to Place a Stop-Buy Order 1. **Choose Stop**\ From the trading screen, select **"Stop"** as your order type. 2. **Specify the Buy Amount**\ Enter the asset you wish to purchase and the amount (e.g., buy MIN with ADA). 3. **Set the Stop Price**\ Define the trigger price at which the buy should occur.\ \&#xNAN;*Example*: Buy MIN when it reaches **0.0494 ADA**. 4. **Set Expiry**\ Choose an expiry time for the order. If the price doesn’t hit your stop price before expiry, your ADA remains in your wallet. 5. **Place Order and Sign**\ Confirm the trade, sign in your wallet, and submit it on-chain. The order will execute automatically when conditions are met. *** #### Stop-Buy vs. Take Profit * **Stop-Buy Order**: Enters a new position once the price rises to a chosen level. * **Take Profit Order**: Exits an existing position by selling once the price reaches a desired profit target. Both can be used together as part of a risk/reward strategy: * **Stop-Loss** to protect downside * **Take Profit** to lock in gains * **Stop-Buy** to catch upward trends