The cryptocurrency market is highly volatile – prices can change by 5–10% within minutes.
That’s why it’s important to use tools that help protect your capital and automate profit-taking.
Two of the most effective tools are stop-loss (SL) and take-profit (TP).
In this article, we’ll explain step by step what they are, how they work, and how to apply them in practice.
What is a Stop-Loss?
A stop-loss (SL) is an order given to the exchange to automatically sell or close your position if the price falls to a certain level.
It protects you from excessive losses.
Example:
You buy Bitcoin at €50,000.
You set a stop-loss at €48,000.
If the price falls to €48,000, the position is automatically closed.
Your maximum loss = €2,000.
➡️ Without a stop-loss, the price could keep falling, for example to €42,000 – your loss would then be €8,000.
What is a Take-Profit?
A take-profit (TP) is the opposite – it automatically locks in profit once the price reaches your target.
It ensures you don’t wait too long and lose profit if the market reverses.
Example:
You buy Bitcoin at €50,000.
You set a take-profit at €55,000.
If the price reaches €55,000, the system sells and you secure €5,000 profit.
➡️ Without TP, you might hope for further growth, but if the market suddenly drops, your profit can vanish.
How Do SL and TP Work Together?
The safest way is to use both at the same time – this is called an OCO order (One Cancels the Other).
OCO allows you to place both SL and TP for one position. Once one is triggered, the other is automatically cancelled.
Example:
Enter BTC at €50,000.
Set SL at €48,000 (–€2,000 loss).
Set TP at €55,000 (+€5,000 profit).
If price hits €55,000 → trade closes in profit.
If price drops to €48,000 → trade closes with limited loss.
Why Are They Important?
Capital protection – without SL, the market could wipe out your account.
Removes emotions – no guessing when to sell, it’s automatic.
Peace of mind – no need to watch charts 24/7.
Discipline – you know in advance how much you’re willing to risk and how much you aim to gain.
Practical Examples
1. Scalping / Day Trading
Buy ETH at €3,000.
Set SL at €2,950 (–€50 loss).
Set TP at €3,100 (+€100 profit).
➡️ Small risk, but the goal is to take quick profits several times a day.
2. Swing Trading (days or weeks)
Buy BTC at €45,000.
Set SL at €42,000 (–€3,000).
Set TP at €55,000 (+€10,000).
➡️ SL and TP keep you on plan for a multi-day or multi-week trade.
3. Long-Term (HODL with protection)
Even long-term investors use a trailing stop-loss – it automatically moves up as the price rises.
Example:
Buy BTC at €20,000.
Set trailing SL at 10%.
When BTC reaches €40,000, the SL will move up to €36,000 – guaranteeing profit if the price drops.
Common Mistakes with SL and TP
Stop-loss too close – normal price fluctuations may hit SL before the market moves in your favour.
Not using SL at all – the biggest beginner’s mistake. Eventually, the market punishes you.
Unrealistic TP – too ambitious targets mean trades never close in profit.
Moving SL/TP out of emotion – if the plan was –5% risk, don’t shift SL lower hoping for a miracle.
Conclusion
Stop-loss and take-profit are like a seatbelt and brakes in a car – trading without them is risky.
They help you:
protect your capital,
secure profits,
maintain discipline.
👉 Beginners should always use SL and set realistic TP targets.
👉 Experienced traders often combine them with technical analysis and trailing SL.
Remember – neither SL nor TP guarantee profit, but they do guarantee that you won’t lose more than you are prepared to risk.