Hi, in this post I’m just going to show you how you can place a Stop-Loss and a Take-Profit on the same Binance position at the same time. For many of you, this will sound basic, but in my case, I struggled for a while to figure out how to do this. Not being a big fan of trading, I occasionally play around with small amounts on recommended crypto positions.
Stop-Loss, Take-Profit – What’s that ?
Before we get started, a little basic explanation in relation to these two terms. When you buy a cryptocurrency or a stock on a trading platform, you buy it at a certain price. Depending on the fluctuation of this price, you will eventually want to sell your position.
For this, there are the Stop-Loss and Take-Profit, two risk management tools that aim to add protection to your investment. In both cases, it is an instruction to end a trade at a specific value.
- Stop-Loss (SL) : Lower price limit -> it defines your limit of loss
- Take-Profit (TP) : Upper price limit -> it defines your profit
Imagine that you bought a crypto at 100.00 CHF. You don’t want to spend all day in front of the screen and you want to automate two actions:
- Sell if the price has dropped by 10.- CHF -> To limit your loss
- Sell if the price has increased by 50.00 CHF -> To take your profit
So you can set up a SL at 90.00 CHF and a TP at 150.00 CHF. In this way, you limit your loss to 10.00 CHF on this position and you are satisfied with a gain of 50.00 CHF. Easy, isn’t it?
Using the OCO order on Binance
If you want to place a SL and a TP on one position and with only one order on Binance, you can use the OCO (One Cancels the Other) order. The operation of this order is relatively simple and convenient if you want to place only a TP and a SL in a very fast way. The first thing to know is that as soon as the SL or TP is reached, the remaining order is cancelled.
An OCO order is composed of 4 parameters:
- Price : corresponds to the TP, the value at which you want to sell to take a profit from a price increase
- Stop : corresponds to the SL, the value at which the “limit” parameter will be triggered
- Limit : is executed if the price of the asset (your crypto) falls below the value specified in the “Stop” parameter
- Amount : quantity of your assets allocated on the OCO order
Do not confuse the “Stop” and “Limit” parameters. It is possible to set it to the same value.
Let’s say you bought 1100 XTZ tokens on the XTZ/USDT pair.
- The buying price was 2.1 USDT
- You want to sell 500 XTZ if the price reaches 2.2 USDT
- You want to sell 500 XTZ if the price drops to 2.0 USDT
This is what your order in Binance would look like:
As soon as the OCO order is placed, it will generate two separate open orders for you.
We can see two orders for the XTZ/USDT pair, the first one being the SL whose trigger condition is if the price is smaller than or equal to 2.0 USDT. The second order is the TP if the price reaches 2.2 USDT.
Practical and easy, no?
Difference between Stop and Limit
If you are new to trading, these two terms can be confused. Although in our example, the two parameters may have the same value, they do not have the same functionality. It’s important to understand the nuance.
Imagine that you have purchased one Bitcoin (BTC) for $17,500. You decide to secure your BTC in case the price drops below $17,000.
- Stop = 17’000 $ -> Trigger price of the order
- Limit = 16’985 $ -> Selling price
If the price of BTC falls below $17,000, the sell order at $16,985 will be activated. Your BTC will therefore be sold at $16,985. As we can see, although the “Stop” and “Limit” prices can be the same, why is it advisable to leave a small gap between these two values?
Leaving a gap, adds an extra security, as it often happens that the liquidity of a crypto pair, for example BTC/USDC is so big, that the limit sell order doesn’t have time to be executed. To avoid this, it is therefore advisable to set the “Stop” price slightly higher than the “Limit” price. This will allow the limit sell price to be executed directly after the stop is triggered.
Limitation of the OCO order
Although very practical to start with, the OCO order has its limits.
- If you cancel one of the two OCO orders, the pair, so both orders will be cancelled.
- The quantity of tokens of an OCO order is the same for the SL and the TP
- You don’t have the possibility to put several TP
Taking these limitations into account, this type of order can be very interesting.
As I told you, I am not an expert in trading or Binance, but I thought it would be interesting to share this basic information with you, who may be a beginner like me. Each trading platform has its own particularities. In my case, for the little volume I trade in crypto, I decided to use Binance for the wide variety of crypto it offers and the huge community that exists.
If you want to get started and make small trades like me, I invite you to create your account on Binance using one of the links I put in this post or by clicking below or by scanning the QR code.
If you use one of these links to sign up, you and I will receive 10% commission on our investments.