A stop order is used by advanced traders when it is important to confirm the direction of the market before entering a trade. It will trigger a market order once a specified price has been reached.
Stop orders work in the opposite direction as limit orders: A buy stop order is placed above the market, and a sell stop order is placed below the market. Once the stop level has been reached, the order is automatically converted to a market order.
How do I use Stop Orders?
When selling - To Stop Loss
Commonly referred to as stop-loss orders, Sell Stop orders are useful for cutting losses in the event of a market crash. For example, you may wish to sell your coin after it drops below a certain price in order to prevent further loss. For example initiating this "Sell Stop" order will sell off your bitcoin in the event its value drops below $5,000:
Same as with limit orders, stop orders will remain in your "Orders" section until they are executed or canceled by you. When the trigger price is reached, the order will be converted to market sell order and executed.
When buying - To Confirm Market Uptrend
A buy stop order triggers the market order only if price reaches the stop level, allowing you to challenge price to reach a certain level. If price reaches the stop level, it can provide confirmation regarding the direction of the market. Traders often use key levels, such as support and resistance or Fibonacci levels, when choosing stop levels.
For example, you may be a bitcoin skeptic and only wish to buy some after it reaches $100,000. You would place the following Buy Stop order:
Once placed, this order will remain in your "Orders" section until executed or canceled by you. When the trigger price is reached, the order will be converted to market buy order and executed.
Note: Stop orders execute when the Last Price shown under the price chart rises or drops below your order threshold. Not when the orderbook or when the chart price matches your stop order.