Take Profit and Stop Loss: Essential Tools to Protect Your Capital in the Cryptocurrency Market

If you are starting to trade cryptocurrencies, you probably have heard of stop loss and take profit. But do you really know what take profit is and how this tool can transform your trading strategy? Let’s uncover these two “guardians” of your capital in a practical and straightforward way.

The Basics: Understanding These Two Crucial Tools

Every serious trading platform offers pending orders that work automatically, without you being glued to the screen. What is take profit, in simple terms? It is an order you place in advance to sell your asset when it reaches a specific profit price. The stop loss does the opposite: it closes your position when the price drops to a pre-determined loss level.

The big advantage? These orders execute themselves, even while you sleep. The cryptocurrency market never stops, and you don’t need to be connected all the time.

Stop Loss: Your Shield Against Major Losses

The stop loss is basically a line of defense. Imagine you bought a coin for R$1,000. You calculate that you can withstand a drop of up to 20%, which would be R$800. You set a stop loss at this level. If the price plummets and hits R$800, boom — the order is executed automatically and you exit the position. No panic, no hesitation, no waiting for the situation to worsen.

Many beginners ignore the stop loss because they think “this time will be different” or because they trust their analysis too much. Big mistake. The market is unpredictable, and unexpected events happen. Using a stop loss is a sign of intelligence, not weakness.

Take Profit: How to Secure Your Gains

Now, what is take profit in practice? It is the happy opposite of the stop loss. You buy the same coin for R$1,000 and want to profit 20%, right? So you set a take profit at R$1,200. As soon as the price rises and hits this level, the order is executed and you pocket the profit — without waiting to earn more and lose everything along the way.

Why does this matter? Because the market is exciting. You see the price rising, want to earn more, leave the order open a little longer… and suddenly everything drops. Take profit prevents exactly that: it ensures you exit with the planned profit.

Different Ratios: 1:1, 1:2, and Beyond

Traders use different ratios between stop loss and take profit, depending on their risk appetite:

• 1:1: You risk R$$100 to gain R$$100 (20% loss vs. 20% gain)
• 1:2: You risk R$$100 to gain R$$200 (10% loss vs. 20% gain)
• 1:3: You risk R$$100 to gain R$$300 (5% loss vs. 15% gain)

There is no “correct” ratio. It depends on your strategy and risk tolerance. The important thing is to choose one and follow it strictly. Many beginners change their parameters midway out of nervousness — and that turns into a mess.

How to Properly Set Up Stop Loss and Take Profit

Step 1: Choose Your Pair and Quantity

Start by choosing which cryptocurrency to trade and how much you are willing to put at stake. Let’s say you want to buy 1 unit of a coin for R$1,000.

Step 2: Use Limit Order (For Take Profit)

To set a take profit, you will use a limit order to sell. Fill in:

• Selling price: R$1,200 (your profit target)
• Quantity: 1 unit
• Type: Sell

When the price reaches R$1,200, the transaction happens automatically.

Step 3: Carefully Configure the Stop Loss

For the stop loss, you use a “stop-limit” order. Fill in:

• Stop: R$$950 (price that activates the order)
• Limit: R$$950 (execution price)
• Quantity: 1 unit

Attention! Experts recommend leaving a small distance between the stop and the limit to avoid “slippage” (when the order isn’t executed because the price jumped too quickly).

Step 4: Use OSO to Set Both Simultaneously

Want to place stop loss and take profit at the same time? Use an OSO order (One Cancels Other). Fill in the four fields — price, stop, limit, and quantity — and both orders will be active. When one is executed (whether profit or loss), the other is automatically canceled.

Trailing Stop: The Professionals’ Technique

There is an advanced level called “trailing stop” (trailing stop). The concept is simple: as the price rises in your favor, you “pull” the stop loss upward along with it.

For example: you sold a coin and the price is falling (which is good for you). Initially, your stop loss was at R$800. But as the price drops to R$600, you move the stop loss to R$700, securing profit even if there’s a rebound. It’s a way to “lock in” gains while leaving room to earn more.

Mistakes You Should Avoid

Mistake 1: Not using stop loss

The classic excuse is “I’ll keep an eye on it.” Unexpected situations happen. News can cause sharp drops. Phone can slip from your hand. Using a stop loss isn’t cowardice, it’s smart risk management.

Mistake 2: Very tight stop loss

If you set a stop loss at -1%, any small normal fluctuation of the market can close your position. Markets oscillate. Use a stop loss that makes sense with the asset’s volatility.

Mistake 3: Messing with orders out of emotion

You set a stop loss at R$800, but see the price falling to R$$850 and get desperate. Then you manually change the stop to R$$900 again. Then change it again. And again. That’s an emotional trap. If your strategy was good when you planned it, it remains good now. Let the orders work.

Mistake 4: Not using take profit

The opposite side of the previous mistake. You gain 30% and want to wait for 50%. The price drops. You lose everything. Greed is as dangerous as fear. Use take profit to secure your gains.

Why Beginners Should Use Take Profit Mandatory

If you’re new to the market, emotion is your number one enemy. You see the price rising and want to stay a little longer. See it falling and want to exit quickly. Take profit removes this decision from your hands — it closes when it hits the target. Simple as that.

When a take profit order is executed, you can open a new position with less stress, knowing that previous profit is secured.

Pros and Cons of Both Tools

Advantages:

• Automatic execution, even offline
• Pre-planned control of losses and gains
• Removes emotion from the equation
• Allows using different risk/reward ratios

Disadvantages:

• You might miss out on larger gains if the market continues in your favor (but then comes the trailing stop)
• Requires prior planning — you can’t just “let it run”
• In highly volatile markets, slippage can occur (execution at a different price than expected)

Conclusion: Start Right Now

Stop loss and take profit are not optional tools — they are mandatory for any serious trader. Want to know what take profit is and how to use it? Start small: place a test buy order, set a conservative stop loss, and a realistic take profit. Watch how it works. Learn by doing.

The cryptocurrency market rewards those who plan and punishes those who improvise. These two orders are your plan. Use them well.