How to properly set stop loss and take profit: a complete guide for spot trading

When trading cryptocurrencies on the spot market, every trader faces the question: how to protect their profits while limiting losses? The answer lies in two key tools — stop loss and take profit. These orders allow you to automatically close positions at predetermined prices, which is especially important in volatile cryptocurrency markets.

Why are stop loss and take profit necessary in spot trading

A stop loss is an order that triggers when a certain price level is reached and automatically sells assets, protecting you from further losses. In other words, when the price drops below your comfort level, the position is closed before losses become critical.

Take profit serves the opposite purpose. This tool locks in your profit at the right moment by automatically selling assets when a target price is reached. Instead of waiting for an even higher price, the trader can be confident that gains will be secured at the right time.

Together, stop loss and take profit form a reliable risk management system, allowing you to automate trading and avoid emotional reactions to market fluctuations.

Differences between TP/SL, OCO orders, and conditional orders

On the Gate.io platform, several types of orders are available for risk management, each with its own features when managing assets.

TP/SL order (Take Profit / Stop Loss)

When placing such an order, your assets are reserved (blocked) immediately, even if the trigger has not yet been activated. This means you cannot use these funds for other operations until the order is triggered. This approach guarantees that the order will be executed at the right moment.

OCO order (One-Cancels-the-Other)

When placing an OCO order, only one side’s margin is engaged (either for take profit or stop loss). If one of the orders is triggered and executed, the other is automatically canceled. This makes more efficient use of your funds. Additional details about OCO orders are available in the dedicated guide.

Conditional order

Here, the logic is fundamentally different. Assets are not blocked until the trigger is activated. Only when the price of the underlying asset reaches your set trigger price will the assets be reserved, and then a full order will be triggered.

How to set stop loss and take profit on spot: two methods

Method 1: Direct placement from the order window

The most common way is to set stop loss and take profit directly when opening a position.

Using this method, you specify three parameters:

• Trigger price — the level at which the order should trigger
• Order price — the price at which the order will be executed (for limit orders)
• Position size — the amount of the asset to sell

Assets are blocked at the moment of placing the order. As soon as the last trade price reaches your trigger price, the system will automatically perform one of two actions:

If you choose a market order: The position will close immediately at the best available market price. All market orders follow the IOC (Immediate or Cancel) principle — if part of the order cannot be executed due to insufficient liquidity, it is automatically canceled.

If you choose a limit order: Your order will enter the order book and wait for execution at the set price. If the market offers a better price, the order will be executed immediately. However, if the price does not reach your level, the limit order may remain unfilled.

⚠️ Important note: Traders should exercise caution when using limit orders, as their execution depends on price movement and liquidity. Make sure to set realistic prices for your stop loss and take profit.

Real trading example

Suppose the current BTC price is 20,000 USDT. Here’s how the system might work in different scenarios:

Market stop loss for selling

You set a trigger at 19,000 USDT. If the price drops below this level, your position will be sold immediately at the best available market price. No delays — this is pure protection against further losses.

Limit take profit for buying

Trigger: 21,000 USDT, order price: 20,000 USDT. When the price reaches 21,000 USDT, a limit buy order enters the order book. If the market surpasses 20,000 USDT, the order will be executed at your price.

Limit take profit for selling with a premium

Trigger: 21,000 USDT, order price: 21,000 USDT. When the trigger activates, the system checks the current best bid. If it is 21,050 USDT (above your set price), the order will be executed immediately at 21,050 USDT. If the market is below 21,000 USDT, the order will queue for execution.

Method 2: Pre-setting TP/SL with a limit order

A more advanced method is to set stop loss and take profit in advance, before your main position opens.

When placing a limit order to buy (or sell), you can simultaneously prepare TP and SL orders. After the limit order is filled, TP and SL are automatically activated with pre-set parameters.

This works on the logic of OCO orders — only one side’s margin is used, and if one order triggers, the other is automatically canceled.

Scenario in action:

1. You place a limit buy order for BTC at 40,000 USDT for 1 BTC.
2. Simultaneously, you set:
   • Take profit limit: trigger 50,000 USDT, order price 50,500 USDT
   • Market stop loss: trigger 30,000 USDT

Scenario 1: Price rises

Your buy order executes at 40,000 USDT. The price continues to rise and hits 50,000 USDT. The take profit triggers, and a sell order is placed at 50,500 USDT in the order book awaiting execution. The stop loss is automatically canceled — risk is managed effectively.

Scenario 2: Price falls

After buying, the price starts falling and hits 30,000 USDT. The stop loss triggers, and your 1 BTC is sold immediately at the best available market price. Losses are limited, and the take profit order is canceled automatically.

Key limitations and requirements

Rules for spot trading:

• If you set TP/SL for a buy order, the trigger price for TP must be above the limit order price, and SL below.
• If you set TP/SL for a sell order, the trigger price for TP must be below, and SL above.
• The order price cannot exceed the set limit (e.g., with a 3% limit, the buy order cannot be above 103% of the trigger).
• If, after executing the main order, the total does not meet minimum requirements, TP/SL may not be placed.
• Limits for limit and market orders differ — if the position size exceeds the maximum for market orders, placement will be rejected.

The main rule: set stop loss and take profit correctly

Successful spot trading depends on discipline. Remember:

• Stop loss prevents catastrophic losses
• Take profit locks in gains when you’ve earned them
• Both tools work automatically, freeing you from emotional decisions

Proper use of these orders turns spot trading from a game of luck into a systematic risk management process. Start with small positions and gradually refine your strategy, and you will find that stop loss and take profit become your best helpers in the volatile world of cryptocurrencies.