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How to Set Stop Loss in Futures Trading

2024.08.12 MEXC
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In futures trading, the stop-loss function helps traders limit losses and control risks. By setting stop-loss prices, you can ensure a timely exit from positions when the market moves in an unfavorable direction, thereby avoiding further losses.

1. Definition


In futures trading, stop-loss refers to executing trades to close positions and limit further losses when the price reaches a certain level. In futures trading, stop-loss is usually set at a certain price or percentage. Once the market price touches or surpasses the set stop-loss point, the trade will be automatically executed.

2. Stop Loss Methods


2.1 Fixed Amount Stop-Loss


Specifies a fixed amount as the stop-loss point. For example, if you open a position in a futures pair: you can set a stop-loss point, and once the futures price falls to the stop-loss point, your position will automatically be closed to limit your losses.

2.2 Percentage Stop-Loss


You can set a percentage stop-loss based on your risk tolerance. For example, you can set an automatic sale of an asset when its price drops to 10% below your purchase price.

2.3 Technical Indicator Stop-Loss


You can use technical indicators to set stop-loss points. For example, you can use technical indicators such as moving averages, support lines, resistance lines, etc., to determine stop-loss points.

2.4 Progressive Stop-Loss


This divides the stop-loss point into multiple stages and gradually reduces the stop-loss point. This can help you adjust the stop-loss point more flexibly during market volatility.

3. User Guide (MEXC Website)


3.1 Flash Close


Flash close refers to executing trades based on the counterparty's closing price and implementing "Best 30 Bid" transactions: your closing order can swiftly match counterparty prices within a range of 30 bids, with any remaining unfulfilled portion automatically converted into a limit order.

3.2 [Close Long] / [Close Short]


You need to set the [Price] (market price or last price) and [Quantity] (25%, 50%, 75%, and 100%).

3.3 [One-Click Close]


This will cancel all limit orders and close all positions with market orders (subject to market conditions, your operation may not be 100% successful).

[Reminder]


Using [Market Price] to [Close Long] / [Close Short] positions can also achieve the purpose of active stop-loss.

3.4 [Limit Order]


  • Since closing long/short positions with [limit orders] can only be completed at the last price or at a price better than the last price (i.e., in a profitable scenario);

  • Therefore, after opening a position, using a [limit order] to close positions cannot achieve the purpose of stop-loss.

  • As shown in the diagram below: when opening a long position in BTC/USDT, setting a stop-loss with a [limit order] ([order price] at 65000 USDT) cannot be executed below the last price (average execution price at 66972.7 USDT).


3.5 [Trigger Order]


  • You can precisely set the [trigger price], [price], and [quantity] (adjustable ratio);

  • [Limit orders] for closing long/short positions can be executed at the last price or at a price better than the last price (i.e., in a profitable scenario), or at a price worse than the latest price (i.e., in a loss scenario);

  • As shown in the diagram below: when opening a long position in BTC/USDT, using a [trigger order] allows you to set both long and short [closing positions]; therefore, when the [average execution price] is less than the [average opening price], the order can also be triggered to achieve the predetermined [stop-loss].


3.6 [Trailing Stop Order]


  • [Trailing orders] allow precise settings for [Trail Variance] ([ratio] or [price distance]) and [quantity] (adjustable ratio);

  • [Trailing stop orders] for [close long]/[close short] positions can only be completed at a price worse than the last price (i.e., in a loss scenario);

  • As shown in the diagram below: when opening a short BTC/USDT position, after using a [trailing stop order], existing positions are completed at a price around 10% worse than the last price (64924.7 USDT).



3.7 Post Only


  • [Post Only] orders are similar to [Limit Orders] for closing long/short positions: they can only be completed at the last price or at a price better than the last price (i.e., in a profitable scenario);

  • Therefore, after opening a position, closing it with a [Post Only] order cannot achieve the purpose of stop-loss;

  • As shown in the diagram below: when opening a long position in BTC/USDT, setting stop-loss with a [Post Only] order ([order price] at 65000 USDT) results in the order being canceled.


3.8 [Take Profit] / [Stop Loss]


The [Take Profit] / [Stop Loss] feature can be set both before opening a position and edited after opening. For specific details, read: Setting Take-Profit and Stop-Loss for Futures Trading.

4. Summary


On the MEXC Futures trading platform, you can set stop-loss conditions according to your risk preferences, trading strategies, and market conditions: usually in the form of price or percentage settings. You can also manually execute stop-loss orders to close positions and limit losses. The stop-loss feature helps control risk and prevent further losses from expanding. However, in real futures trading, different market sentiments may trigger different stop-loss behaviors: for example, when there are favorable or unfavorable fundamental factors (such as industry news), traders may actively close existing positions. Therefore, more stop-loss techniques need to be accumulated through actual trading experience.

Disclaimer: This information does not provide advice on investment, taxation, legal, financial, accounting, or any other related services, nor does it constitute advice to purchase, sell, or hold any assets. MEXC Learn provides information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and exercise caution when investing. The platform is not responsible for users' investment decisions.

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