Stop-Loss

What is Stop-Loss?

A stop-loss order in crypto futures is a type of order that is placed with a futures broker to automatically close a futures position at a specific price, known as the "stop-loss price." The purpose of a stop-loss order is to limit potential losses on a futures position.

When a trader enters a futures contract, they are essentially making a bet on the future price of an asset. If the price of the asset moves in an unfavorable direction and the trader wants to limit their losses, they can place a stop-loss order. For example, if a trader buys a futures contract at a certain price and wants to limit their potential losses to 5%, they can place a stop-loss order at 5% below the purchase price. If the price of the asset falls to that level, the stop-loss order will automatically close the position, preventing further losses.