Stop Loss & Trailing Stop Loss are important additions to LiveTrader as they allow traders to create even more powerful automated trading strategies.
The development roadmap of LiveTrader is determined by the community, so when Stop Losses were added, it quickly became the #1 feature suggestion on our roadmap, and for good reason.
What is a Stop Loss?
A Stop Loss is a very important part of any trading strategy, they safeguard trades from losing a potentially catastrophic amount of money by ensuring there’s a maximum amount of acceptable loss.
This becomes invaluable when trading cryptocurrency automatically, as most times you won’t be around to manually sell your position if it’s going south, or if you’ve gain profits before a market reverses and trends downwards.
For example, if you were to configure a Stop Loss at 10%, and you were trading Bitcoin (BTC/USDT) on Binance, and you entered at 11,550. The Stop Loss would trigger if the price decreased below 10,395. Without a Stop Loss in place, Bitcoin could continue to fall well below 10,000 which would mean your trade’s performance could be -30% rather than being limited to just -10%.
What is a Trailing Stop Loss?
While a Stop Loss sets the Stop Price to a fixed percentage below your initial entry price, a Trailing Stop Loss constantly follows the market, adjusting the Stop Price to the provided percentage below the highest price during that trade.
For example, if you were to configure a Trailing Stop Loss at 10%, and you were trading Bitcoin (BTC/USDT) on Binance just as before, and you entered at 11,550. If the price increased to 13,250 then over time decreased, your Stop Price would still be set at 11,925 (10% lower than the high of the trade), meaning if you were to exit at a 10% trail, you would still profit $375 due to the trailing stop following the price dynamically.
Is a Stop Loss or Trailing Stop Loss easy to use?
To configure a Stop Loss manually on your exchange it can be troublesome as you’d need to set your limit price, stop price, and trade amount. We’ve taken all of that complexity away and all you need to do is configure the Loss Percentage.
You can see how easy it is to add a Stop Loss or Trailing Stop Loss to your trading strategy below.
Adding a Stop Loss to an Automated Strategy
The strategy started out as -15.13% before a Trailing Stop Loss was applied due to the strategy waiting too long to sell due to the configured indicators. Once the Trailing Stop Loss was applied the strategy’s performance increased to +22.24%.
Is there a benefit to using a Stop Loss in an automated strategy?
Due to the volatility of most cryptocurrency markets, adding a Stop Loss to a strategy ensures you limit your risk in the event of a downward trending market.
You should still have confidence in your trading strategy when your bots buy or sell shouldn’t be affected by adding a Stop Loss, but the addition of a Stop Loss will prevent excessive losses should the market reverse and your strategy not signal a sell before your open position is sold.
It not only allows you to limit your losses but also allows you to lock in your profits with the Trailing Stop Loss.
Stop Loss & Trailing Stop Loss are great additions to any strategy and can be used right now on LiveTrader via Backtesting, Paper Trading, and Live Trading.
Which feature would you like to see added to LiveTrader next? Our roadmap is driven by our community, so if there’s something you’d like to see, let us know and it may be added soon.