1. Understanding TP/SL Strategies
Take Profit (TP) and Stop Loss (SL) are essential exit strategies in margin trading that help traders manage risks and lock in profits under varying market conditions. Here's how these strategies work in different scenarios:
Long Position Scenarios
Take Profit:
Scenario 1: Aiming for a set profit above the average entry price.
Example: You bought 1 BTC at $60,000. To realize a 15% profit, set a TP at $69,000. When BTC reaches this price, your trade closes automatically, securing your profit.
Scenario 2: Aiming for a possible smaller loss.
Example: You bought 1 BTC at $60,000. Now the price is at $50,000. You don’t want to realize the loss now because you think the market will bounce back a little bit. In this case, you can set a TP at $55,000, when BTC reaches this price, your loss will be -$5,000 instead of -$10,0000.
Stop Loss:
Scenario 1: Limiting potential losses by setting a maximum loss threshold.
Example: With the same BTC bought at $60,000, setting an SL at $54,000 (10% below entry) limits your loss if the price falls.
Scenario 2: Aiming to protect the profit.
Example: With the same BTC bought at $60,000. Now the price is at $70,000. You feel that the potential profit is still very big but you also want to make sure you at least secure some of the profit if the market drops. In this case, you can set a SL at $65,000, when BTC reaches this price, your profit will be $5,000 instead of $0 or even lower.
Short Position Scenarios
Take Profit:
Example: You sell 1 BTC at $60,000. Aiming for a 15% profit, set a TP at $51,000. This closes your position profitably when BTC drops to this level.
Stop Loss:
Example: For a BTC short sold at $60,000, an SL at $66,000 caps your potential loss if the price unexpectedly rises.
2. Setting a TP/SL Strategy
To implement a TP/SL strategy on an existing position, log in to your XREX App and follow these steps:
Click on Trade.
Click on Margin.
Find the position you wish to implement the TP/SL strategy and click the TP/SL button at the bottom.
Identify your position's average entry price and decide on the strategy you wish to implement.
If you wish to implement both the Take profit trigger and Stop loss trigger, tick the boxes of both options.
Decide on your profit goal and acceptable loss limit. Fill in the price respectively and press Confirm.
Your TP/SL Strategy has been successfully implemented.
3. Calculating TP/SL Targets
We provide a calculator for you to calculate your unrealized profit and loss before setting your TP/SL trigger price. The formula for unrealized P&L is:
Unrealized P&L = (entry price - exit price) * position size - fees
Before filling in the price, you can always click on By Profit Rate beside the column. Adjust your TP/SL based on the calculated unrealized P&L percentage and desired outcomes.
4. Correcting Mistaken TP/SL Prices
If you set a TP/SL price incorrectly, you can always quickly adjust or cancel the TP/SL setting through the trading interface. As a reminder, kindly double-check the figures before finalizing settings to avoid errors.
5. Common Issues When Setting TP/SL
You may encounter issues setting TP/SL due to several reasons. Check out the scenarios below to find out more detailed rules and potential errors.
Violating platform-specific trigger price rules.
Long Position:
The TP price should be higher than the current price.
The SL price should be lower than the current price and higher than the liquidation price.
Short Position:
The TP price should be lower than the current price.
The SL price should be higher than the current price and lower than the liquidation price.
Reminders will be displayed on the interface if any of these rules are violated. These rules are designed to prevent incorrect pricing and ensure a smooth experience when implementing a TP/SL strategy.
Existing conflicting orders.
If an order was supposed to close your existing position, it would be a conflicting order to TP/SL settings. You must cancel the conflicting orders to proceed with TP/SL settings. In such situations, the system will prompt you to cancel these orders. Click Yes to cancel and set up the TP/SL strategy, or click No to keep the original settings.
Take Profit and Stop Loss strategies are critical for managing risks and securing profits in margin trading. By understanding how to set and adjust these strategies, traders can enhance their trading performance and reduce potential losses. Always ensure to double-check your settings and be aware of any platform-specific rules to avoid common issues. If you have any questions, please do not hesitate to contact us via chat or support@xrex.io.