Bitstamp perpetual contract stop profit and stop loss tutorial

Using Bitstamp's perpetual contracts, traders can protect against market volatility by setting stop profit orders to sell at a predetermined higher price and stop loss orders to buy at a lower price, safeguarding their trades and maximizing returns.

Nov 09, 2024 at 11:53 am

Bitstamp Perpetual Contract Stop Profit and Stop Loss Tutorial

Introduction

Perpetual contracts are a type of derivative instrument that allows traders to gain exposure to the price of an underlying asset without having to own it physically. They are similar to futures contracts, but they do not have an expiration date, so they can be held indefinitely.

Stop profit and stop loss orders are two of the most important risk management tools available to traders. A stop profit order is an order to sell an asset when it reaches a certain price, while a stop loss order is an order to buy an asset when it reaches a certain price. These orders can help to protect traders from losses if the market moves against them.

How to Place a Stop Profit Order

To place a stop profit order on Bitstamp, follow these steps:

1. Log in to your Bitstamp account.
2. Click on the "Trading" tab.
3. Select the perpetual contract you want to trade.
4. Click on the "Stop Profit" tab.
5. Enter the price at which you want to sell the contract.
6. Click on the "Place Order" button.

How to Place a Stop Loss Order

To place a stop loss order on Bitstamp, follow these steps:

1. Log in to your Bitstamp account.
2. Click on the "Trading" tab.
3. Select the perpetual contract you want to trade.
4. Click on the "Stop Loss" tab.
5. Enter the price at which you want to buy the contract.
6. Click on the "Place Order" button.

Note: You cannot place a stop profit or stop loss order while the market is closed since the liquidity is low and the order may not execute properly.

Example

Let's say you are bullish on Bitcoin and you want to buy a perpetual contract with 10x leverage. You believe that the price of Bitcoin will continue to rise, but you also want to protect yourself from losses if the market moves against you.

You could place a stop profit order at $10,000 and a stop loss order at $9,000. This means that if the price of Bitcoin rises to $10,000, your contract will be automatically sold, and if the price of Bitcoin falls to $9,000, your contract will be automatically bought.

Conclusion

Placing stop orders is one of the best ways to manage your risk and protect your profits when trading perpetual contracts on any exchange, and this guide especially caters to the process on Bitstamp.