Everyone knows that in the crypto market, losing money is very easy, but making it back is exponentially harder. That’s why understanding what a stoploss is and knowing how to use it is truly a vital skill for any trader.

There was a time I didn’t pay much attention to stoploss either. I just hoped that the price would turn back up, but in reality, the market is never kind enough. It wasn’t until I lost a significant amount that I realized the importance of having a “safety net” when trading.

A stoploss is simply an automatic order to sell an asset when the price drops to a predetermined level. For example, you buy Bitcoin at $30,000 and set a stoploss at $28,000. If the price falls to $28,000, the order automatically triggers and sells everything, preventing further losses. It sounds simple, but its effectiveness should not be overlooked.

Why should you use a stoploss, and why is it so important? First, it helps limit your losses on each trade. Second, it frees you from the pressure of constantly watching the chart. Third, it forces you to follow a trading discipline instead of acting on emotions. I’ve realized that traders with discipline tend to survive longer in this game.

There are two basic types of stoploss. The first is a fixed stoploss — you set a specific price, and it stays there until triggered. For example, buying Ethereum at $2,000 and setting a stoploss at $1,800. The second is a trailing stop — this one is smarter, as it automatically adjusts when the price goes up. If you set a trailing stop at 5%, when Ethereum rises from $2,000 to $2,100, the stoploss will automatically move up to $1,995. This method helps protect your profits when the market is good.

What should you consider when setting a stoploss? Don’t place it too close to the purchase price, because small fluctuations can trigger unnecessary orders. Rely on technical analysis to find important support/resistance levels. Also, since the crypto market is constantly changing, you need to review and adjust your orders regularly to stay aligned.

Most crypto exchanges today support stoploss orders. The general process is: select the asset pair you want to trade, choose the stop-limit order type, enter the trigger price (stop price) and the desired selling price (limit price), then confirm. The limit price is usually a little lower than the stop price to ensure the order gets executed.

There’s no such thing as a stoploss without risk. But with a stoploss, at least you have some control over that risk. That’s the difference between a trader who survives and one who loses money. So if you’re not yet used to using a stoploss, now is the time to start.