A stop order is a conditional order consisting of a stop trigger price and a subsequent market or limit order. Once the stop trigger price is reached, the specified market/ limit order will be placed automatically.
Why Use a Stop-Type Order Instead of a Regular Limit or Market Order?
In Cornix, stop-type orders are utilized for:
Stop-Loss Orders: To limit potential losses.
Entry Orders for Breakout Trades: To enter the trade when the asset price breaks through a specified level.
Trailing Entry and Trailing Take-Profit Orders.
1. Stop-Loss Example
Suppose we purchase ETH at a market price of $1,500, aiming to sell it at a profit if the price rises. To manage risk in case the market declines, we set a stop-loss order at $1,400.
If we place a regular sell limit order at $1,400 (below the current market price) it would execute immediately at the current market price, as selling at the market price is more favorable than at $1,400.
To ensure the sell order is placed only when the market price drops to $1,400, we use a stop-type order with a stop trigger price of $1,400. Upon reaching this trigger price, a limit or market order is placed.
2. Breakout Example
The same principle applies to a buy stop order for a breakout trade.
A breakout refers to when the asset price moves above a resistance area for a long position, or below a support area for a short position.
Assume we want to buy Bitcoin (BTC) only if its price trends upward. If BTC's current market price is $30,000 and we aim to buy at $32,000, placing a regular buy limit order at $32,000 (above the current market price) would result in immediate execution at the current market price, as buying at the market price is more favorable than at $32,000.
To activate the buy order only when the market price reaches $32,000, we use a stop-type order with a stop trigger price of $32,000. Once this trigger price is met, a limit or market order is placed.
Configuring Stop-Type Orders in Cornix
Some exchanges permit selecting between market or limit orders for stop-type orders, while others offer only one option. In exchanges that support both, you can specify your preference in your Signals Bots configuration.
Setting the Stop Type
Navigate to the stop or advanced section in your configuration and choose the stop type market or limit. If the exchange doesn't support this selection, the option won't be available in your configuration.
Limit Price Reduction
If you set limit as the stop type, you'll need to set a 'limit price reduction'.
For example, with a limit price reduction of 5% (0.05) and a stop-loss trigger at $15, a limit sell order would be placed at the price of $14.25, which is 5% below the stop trigger price of $15.
