Stop Loss is a strategy used to reduce or avoid the amount of loss you may experience in a transaction.
Think of Stop Loss as an "emergency brake" or "safety net". Before you buy an asset, you should determine your loss tolerance limit. If the market price falls to that limit, you decide to immediately sell the asset. The goal is to prevent small losses from turning into large losses. Without this strategy, traders often get stuck holding assets whose prices continue to decline in the hope that prices will rise again.
Indodax does not currently offer a Stop Loss feature, but you can apply this Stop Loss strategy automatically by using the Stop Limit feature, which eliminates the need to monitor price movements on the screen 24 hours a day to manually cut losses. The Stop Limit feature allows users to set a specific price, at which the system will automatically place your sell or buy order. Simply put, your order will not enter the market order book until the market price reaches the trigger price you have set beforehand.
To use this feature, you must understand two mandatory price parameters:
Stop Price is the price point that acts as an “Activator.” When the last market price touches this number, the system will automatically activate your order.
Limit Price is the specific price at which you want to execute a sell or buy transaction. Once the Stop Price is reached, the system will place a Limit Order at the price you set.
To make it easier to understand, let's look at an example of using Stop Limit to minimize losses (Stop Loss):
Nina has Bitcoin assets with a current market price of IDR 500.000.000.
Nina is worried that the price will fall (crash), and she decides to sell her assets at IDR 479.999.000 if the price falls to IDR 480.000.000 to prevent further losses.
Therefore, Nina's Stop Limit settings are:
Stop Price: IDR 480.000.000
Limit Price: IDR 479.999.000
The system will monitor the market price. If the price drops and hits IDR 480.000.000 (Stop Price), the system will automatically place Nina's sell order at IDR 479.999.000 (Limit Price) into the order book.