Why should I use a Stop-Limit order?
Sometimes you will find yourself in a situation where you want to buy an asset, but you are not confident enough that it will keep going up.
In a situation like this, you might want to wait and see if the price manages to break through an important resistance zone first, and only then place a buy order.
Sure, this way, you buy at a higher price and pay more. But the fact that the resistance has been broken just moments ago makes it much more likely that the price will keep going up, while before there was a good chance, it will reverse and go back down again after touching the resistance.
When is the best moment to use a Stop-Limit order?
Let’s say the price of BTC/USDT has been bouncing up and down within 8700 – 9000 range for quite a few days, now while the current price is at 8932.
In this scenario, you probably don’t want to buy at 8932, since there is a high chance the price will reverse and start going down again once it’s close to 9000.
So instead of buying low at 8932 and risking a reversal at 9000, you prefer to wait until the resistance gets broken before you buy in at a higher price (at ~~9032). So you are basically willing to wait and pay more later, so you can confirm that the price range has been broken, first.
The downside of “Momentum Trading” is, traders need to follow the price action very closely, so they have to stare at the chart all day. They need to very precisely catch the exact moment their TA confirms a coming outbreak so that they can place a momentum order just right after. A few moments later, they might have already missed the opportunity because the breakout already started.
In a situation like this, a “Stop-Limit Order” can be beneficial to set up your coming trades in advance.
You configure the price of a future Limit Order, WHICH IS PLACED ONLY IF/WHEN a set (Trigger-)price is reached. (In most cases that would be after resistance/support is broken)
In principle, you are willing to pay a higher price a bit later after having more confidence that it will keep going up on the price direction in exchange for having more confidence in the price trend.
How to configure a Stop-Limit order on Pionex?
Stop-Limit is one of the advanced order in the manual trade. You can use it to buy or sell while the only parameter you’ll need to set is “Trigger Price” and “Buy/Sell Price”.
For example, I’d like to wait for the price to break $9450 and set a limit buy order at $9550. The setup will look like the below screenshot.
Click the “BUY” button, and you’ll see an active Stop-Limit order.
The Stop-Limit order will be triggered once the price reaches $9450.