Take profit and stop loss: what are they and why are they needed

In cryptocurrency trading in 2025, risk management remains the key to success. Stop loss and take profit are not just terms. They are lifebuoys. They automatically close positions with specified loss or profit parameters 🛡️

What is Stop Loss and Take Profit

Two pending orders. Two protective functions:

• automatic closing of positions
• work even when you sleep

How stop-loss works 📉

Stop Loss — stops losses. A simple idea. The market went the wrong way? The order will trigger itself.

Example: Bought crypto for $1000. Risk - maximum 20%. Set a stop at $800. Price drops? The trade will close automatically. It seems obvious, but many forget to do this 🔒

How take profit works 📈

Take Profit — takes profit. Did the coin rise to the desired price? The order will trigger.

Example: Your coin is worth $1000. You want a 20% profit. Take profit at $1200. Goal reached — position closes. No "what if it rises more" 🚀

The difference between instruments

Both close trades automatically. But the goals are different. One protects against a crash. The other takes profit.

The ratio of stop-loss to take profit

Traders use different proportions:

• 1:1 — equal chances
• 1:2 — profit twice as much as risk
• There are other options

Have you chosen a strategy? Stick to it. The market is fluctuating. Your plan — no 🧠

How to calculate Stop Loss and Take Profit in 2025

The modern approach has become more complex. It's not that simple.

Stop loss calculation based on ATR

ATR measures market fever. It helps to adjust stops.

Formula: Stop Loss = Entry Price - (ATR × Multiplier)

The multiplier is usually 2-3. It depends on your bravery.

Example: ATR = 50 points. Multiplier = 2. Stop loss at a distance of 100 points. The math is simple 🔢

Calculation based on a percentage of the deposit

The risk formula is popular in 2025:

Formula: Position Size = (Risk Amount) / (Distance to Stop × Point Value)

Example: You risk 2% of $10,000 ($200). Stop at a distance of 100 points. Price per point $1. It comes out to 2 lots. Seems logical 🧮

How to correctly set orders

Order of actions:

1. Choose a pair
2. Determine the size
3. You consider the levels
4. Decide — one order or both

Automatic trailing stop

Trailing stop is a "smart" stop loss. It follows the price. It protects not only the deposit but also the profit 🌊

Example: Bought for $1000, stop at $900. Price rose to $1100? Trailing raises the stop to $1000. Now you are safe.

Common mistakes in calculations

People often make mistakes. Even in simple things:

1. Trading without a stop is a gamble. Not the best idea 🚫

2. Too close stop — the market breathes. Micro-stops burn out quickly 📊

3. Emotional decisions — "Oh, it seems like it's going to bounce soon!" Don't change the plan on the go 😱

4. Arbitrary levels — "I will set the stop at a nice number". No, it doesn't work that way.

Why is take profit important for beginners? 🌱

Beginners are emotional. Take profit helps:

• Take profit without panic
• Do not deviate from the plan
• Don't be greedy
• Achieve stable results

In the cryptocurrency market of 2025, volatility is still high. It seems surprising, but many traders still ignore these tools. And that's a mistake. Properly set stop loss and take profit are not just functions. They are a philosophy of survival in trading 🔥