In cryptocurrency trading such as Bitcoin, drastic fluctuations in the market are the norm. This volatility brings potential benefits, and is accompanied by significant risks. Effective risk management tools are key to traders protecting principal and locking profits, where take-profit and stop-loss settings play a crucial role.

Take-profit orders are intended to be automatically sold when the asset price reaches the preset target and lock in book profits. Stop loss orders are automatically sold when the price falls to a certain level, limiting potential losses. A reasonable setting of strategies can help traders stick to trading plans when their emotions fluctuate and avoid making irrational decisions due to greed or fear.

However, the cryptocurrency market sometimes experiences momentary price fluctuations, a phenomenon often referred to as “pin.” In such extreme market conditions, many traders' stop loss or take-profit orders may be triggered unexpectedly, resulting in transactions at non-ideal prices. Understanding how to set up a stop-profit stop loss to deal with this type of situation is a concern for many traders.

Understand the setting of a stop-profit strategy

1. Fixed proportional take-profit: This is a simple strategy, which is to set a take-profit execution when the asset price rises by a certain percentage relative to the purchase price. For example, after buying, set a 20% increase in profit. This method is easy to understand and operate and is suitable for beginners.

2. Technical indicators take profit: Use technical analysis indicators to determine the take profit point. For example, when the price hits a key resistance level, falls below an important moving average, or when some oscillating indicators (such as RSI, MACD) send overbought signals, it executes a take-profit. This method requires some technical analysis knowledge.

3. Mobile stop-profit: also known as tracking stop-profit, it is a dynamic stop-profit method. Set a tracking range, and when the price rises, the take-profit level moves upward; when the price falls and touches the moving take-profit level, sell is executed. This strategy can help traders capture the rising market as much as possible while protecting existing profits.

Practical methods of stop loss strategy

1. Fixed loss ratio stop loss: Similar to fixed-profit, setting a maximum acceptable percentage of loss. When the price drop reaches this percentage, the stop loss sell is automatically triggered. This helps control the maximum exposure to a single transaction.

2. Stop loss based on technical points: Set the stop loss position below the key support level in technical analysis. For example, if the price falls below an important historical low, Fibonacci support level, or long-term moving average, execute a stop loss. This strategy believes that breaking below key technical levels may mean a change in the trend.

3. Stop loss combined with fund management: The stop loss amount is linked to the total transaction funds to ensure that the losses in each transaction will not have an excessive impact on the overall funds. For example, set a single transaction loss not exceeding 1% or 2% of the total funds.

"Pin" phenomenon and stop loss and profit

1. The reason for the occurrence of "pin": "pin" usually refers to a very long shadow line that appears on the K-line chart. The price quickly rises or falls to a certain extreme point in a very short time, and then rebounds quickly. This may be caused by the shortage of market liquidity, the execution of large orders in an instant, the technical problems of the trading platform, or the amplification of market sentiment at a specific moment.

2. Stop loss and take profit are triggered in the "pin": Because the price of the "pin" fluctuates greatly and is fast, if your stop loss or take profit order happens to be set in the price area touched by the "pin", the order will be triggered. This often means that your stop loss may be executed at a very low price, or the take profit may be executed at a very high price (but more often the stop loss is triggered, resulting in losses).

3. How to reduce the impact of "pin": It is almost impossible to completely avoid "pin" because it is an inherent form of extreme fluctuations in the market. You can try setting stop loss and take profit orders farther from the current price to avoid overly aggressive points. Using a Limit Order for stop loss or take profit (i.e., a stop loss limit order or take profit limit order), rather than a Market Order, can control the transaction price to a certain extent, but the disadvantage is that if the "pin" speed is too fast, your limit order may not be fully traded. Choosing a trading platform with better liquidity for trading may also reduce the impact of "pin" on orders.

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