# TP and SL

By [FlendCryptoClub](https://paragraph.com/@flendcryptoclub) · 2025-08-07

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**Trap your profits and minimise loss**

Ever lost your profi table trade because you didn't close at the right time? Or get liquidated surprisingly? Crypto volatility is a double edged sword of LAMBO or VILLAGE depending on what side you're caught on.

Stop loss SL and Take profit TP is not a new term to traders with some experience, albeit it is often swept under the rug. As a short term trader, these orders are very important for cutting your loss and avoiding profi t reversal in a running trade.

**Stop loss order**

A stop loss order is pre-set order to sell/close a position at a particular price. Aimed to cut loss on a trade, preventing further loss. Let's say you open a long position on bitcoin at $10,000 and set stop loss order at 5%, the trade will automatically sell at $9,500, cutting your loss at $500.

Long term traders deride SL because it can cut you out just before a reversal, but day traders shouldn't do without it. It is very important.

**Take profit order**

This order closes your trade in profit when it reaches a pre-set price. It is set to cashout accumulated profit in case of reversal. Going by our above portfolio, setting a TP at 10% will close the trade at $11,000 securing a 10% profit.

**Where to set SL and TP in your trades**

There are factors to consider before setting these orders. Not doing it right can lead to missing out on profit or incurring avoidable loss. The following techniques are used to determine order range.

1.  First and foremost is accessing your risk tolerance. How much are you investing into the trade?, how much of it can you afford to lose?, what is your goal for entering the trade?, with these in mind, it is easy to find a spot on the chart that will suit you to cut out loss or trap gains.
    
2.  Use key support and resistance levels to set SL and TP orders. Support level mark where the index price tends to reverse upwards after a decline and vice versa. In case of SL, set a little below key support level to be safe from breakdown. TP orders should be set near the resistance levels to avoid getting caught in a reversal. It is true a breakout may occur, but no one can predict the market.
    
3.  **Risk -reward ratio:** Using risk to reward ratio is one of the best ways to point out SL and TP points. Risk to reward ratio simply implies the ratio of your risk to your reward. I'll explain with example. If you open a position on bitcoin at $50,000 and analysis show that support(SL) is $47,500 and resistance(TP) is $55,000.
    

*   Reward= Entry — resistance =$5000
    
*   Risk= Entry — support= $2500 According to the calculations above, your risk reward ratio
    
*   RRR is, 1:2. It can go to 1:3 depending on the results of your analysis. Main point is, let your reward be higher than your risk.
    

Traders set SL and TP at a percentage of their capital. SL can be set to 2% while TP set to 5% or 10%. Entirely dependent on your risk appetite

**In conclusion**

Managing risk is first step to becoming a profitable trader over time. Using stop loss order will keep your loss at knee level. Some benefits associated with using these orders are countless. A few are:

1.  It prevents big drawdown. It will save you from getting liquidated in a volatile market and prevents wiping out capital.
    
2.  It reduces emotional trading. Setting automated orders that fi ll on its own is better than manually doing it as we can be swayed into the wrong direction by emotion and FOMO.
    
3.  Saves time and energy. It will save the stress of visiting the charts always since it will fill automatically
    
4.  Improve strategy. Using SL and TP will make it easy to track trades and improve strategies that don't work
    

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*Originally published on [FlendCryptoClub](https://paragraph.com/@flendcryptoclub/tp-and-sl)*