Bitstamp Exchange Adds Stop Orders and Trailing Stop Orders

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Bitcoin traders on the Bitstamp exchange platform may want to take note.

New features are available that allow traders to better control their moves in the market: stop order and trailing stop order.

And if you are like me (not a trader), you’re probably asking yourself, what’s a stop order and trailing stop order? Bitstamp explains:

[blockquote style=”2″]An order to buy or sell bitcoins when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor’s loss or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.[/blockquote]

Bitstamp provides a pretty example of a stop order by making the assumption you have ten bitcoins that you’ve purchased previously for $400, now worth $480.

With a profit of $80 per coin, you’re in a good place. But if you’re about to go away on holiday for a week, the odds are you might not have access to the web. And given the fact that bitcoin can be volatile, you surely don’t want to make sure you don’t lose what you’ve made.

And so you set up a stop order for $450 for your ten bitcoins.

What you have essentially set up is an order that will automatically sell off those ten bitcoins should the price go below $450, therefore protecting your profits.

A trailing stop order allows for greater flexibility, however. Bitstamp says:

[blockquote style=”2″]For example: Market price of bitcoin is $480 and you placed a Stop Sell Order at $450, which is in our case $30 below the current market price. Suppose price of bitcoins suddenly increases to $550. You are now in chance of “locking in” even bigger profit by manually repositioning your Stop Sell Order to higher price. [/blockquote]

That particular feature can be toggled with the ‘trailing stop’ check box in the Stop Sell section.

So there you go, some more tools to play with if you’re an avid trader. You can read Bitstamp’s blog post on the new features here.