Back to Blog

Bitcoin Trailing Stop Limit Order: Definition & How It Works

A trailing stop limit order is a limit buy or sell order that is triggered once a cryptocurrency touches a trailing amount set by the user. A stop-limit is a combination of a stop order and a limit order. 

July 30, 2020
Blog
Share:

Introduction

A stop order is an order to buy or sell when a cryptocurrency reaches a specified stop price. When the stop price is reached, the order triggers, depending on the order type, it may submit a market order or a limit order.

The disadvantage, like any market order, is that the execution price is not guaranteed. A stop trigger may submit an order, but execution depends on available liquidity and market conditions.

A buy-stop order is entered at a stop price above the current market price. A sell-stop order is entered at a stop price below the current market price. Stop orders are commonly used as stop-market orders and stop-limit orders.

One advantage of a stop order is that it can trigger automatically when the stop price is reached, without constant manual monitoring. There is typically no fee to place an order; trading fees apply when an order executes. A key disadvantage of stop orders is that the execution price is not guaranteed. In fast-moving markets, the fill price for a sell-stop order may differ from the stop price (sometimes materially) due to slippage. The selling and stop prices are likely to be different, often lower than expected. In highly volatile markets, rapid price moves can trigger stop orders sooner than expected.

Example of Trailing Stop Limit Order

If Bitcoin is trading at $10,000, a market order does not guarantee a fill at exactly $10,000. The trader could get a price higher or lower than $10,000, depending on the time the order is filled. In cases of illiquidity or in times of extremely volatile Bitcoin prices, placing a market order may result in a fill price that is significantly different from $10,000.

For example, imagine an investor bought Bitcoin at $10,000. The price of Bitcoin is now trading at $11,000. However, to limit any losses from a plunge in the price of Bitcoin in the future, or to lock in a gain the investor places a sell order at a stop price of $10,500. If an adverse event occurs causing Bitcoin to fall, the investor’s order will be triggered when prices drop to the $10,500 mark.

How to Place a Trailing Stop Market Order on Ndax

  1. Log in to Ndax and open the TRADE screen.
  2. Select your CRYPTOCURRENCY/CAD pair using the grey arrow in the upper-left area of the trade screen.
  3. Click BUY (green) or SELL (red).
  4. Select STOP from the order type options.
  5. Enter Order size.
  6. Enter Stop price (the price that triggers the stop order).
  7. Click Place buy/sell order.
     

If you are based in Canada and looking for a Canadian Bitcoin exchange, then take a look at  Ndax. Ndax is an easy-to-use, beginner-friendly exchange that can give you easy access to trade Bitcoin and other cryptocurrencies like Ethereum, XRP, Litecoin, Cardano, Dogecoin, EOS, and Stellar.