How to Use Take-Profit and Stop-Loss on the Spot Market: A Complete Guide

2026-02-21 21:14:26

For any trader, risk management is the foundation of sustainable profit. Two key tools in this are take-profit and stop-loss orders, which allow you to automatically lock in profits or limit losses even if you step away from the screen. A take-profit triggers when the price reaches your desired profit level, while a stop-loss protects your capital in unfavorable market movements.

Why do you need take-profit and stop-loss orders for risk management

Cryptocurrency market volatility requires strict discipline. Emotional decisions often lead to missed profits or excessive losses. That’s where take-profit and stop-loss orders become your reliable helpers.

Take-profit allows you to lock in gains automatically when the market moves favorably. Instead of guessing when to exit, you set your target price in advance and let the system execute the order.

Stop-loss protects against catastrophic losses. It prevents a small loss from turning into a significant one due to a sudden price move.

Types of orders: comparing take-profit and stop-loss with other tools

Not all position management tools work the same way. Understanding the differences will help you choose the best for your strategy.

Order Type	Asset Usage	Feature
TP/SL Order	Assets are locked immediately upon placement	Provides precise control, but funds are frozen until triggered
OCO Order	Used only on one side of margin	More flexible for margin management; when one order triggers, the other is automatically canceled
Conditional Order	Assets are not used until trigger	Most economical in terms of locking funds, but requires preconditions

An OCO (One-Cancels-the-Other) order works on the principle: if one part of the strategy triggers, the other is immediately canceled, preventing accidental double execution.

How take-profit and stop-loss orders work in practice

How does this system operate in real life? When placing a take-profit and stop-loss order, you specify three key parameters:

Trigger price — the level at which the order activates
Order price — the price at which the order is placed (for limit orders)
Size — the amount of assets to be executed

The execution process varies depending on the order type.

Market order: instant execution

When the last trade price reaches your trigger price, a market order triggers and is executed immediately at the best available price. This guarantees execution but not a specific price.

All market orders follow the IOC (Immediate-or-Cancel) principle: any part of the order that cannot be filled immediately due to insufficient liquidity is automatically canceled. If there isn’t enough liquidity for full execution, part of the order may be lost.

Limit order: price control

A limit order offers more control. After the trigger activates, the limit order is placed into the order book and waits for execution at your specified price.

If the current bid/ask price at trigger time is more favorable than your order price, execution occurs immediately at the best available price. But if the market doesn’t reach your target, the order remains in the book waiting.

Important note: traders often find that limit take-profit orders don’t trigger. This happens because execution depends both on price movement and liquidity. If the price jumps past your limit level, the order may not be filled at all.

Direct placement of take-profit and stop-loss orders

The simplest way is to place take-profit and stop-loss orders directly from the trading interface, bypassing the creation of a preliminary limit order.

Example 1: Market stop-loss

Suppose you hold Bitcoin bought at 20,000 USDT. To protect against a drop, you set:

Trigger price: 19,000 USDT
Execution type: market order

If BTC drops to 19,000 USDT, the stop-loss triggers automatically, and your Bitcoin will be sold at the best available market price. You get protection, though the final price may differ from 19,000 USDT.

Example 2: Limit take-profit

Now, set a take-profit at a profit target:

Trigger price: 21,000 USDT
Order price: 20,000 USDT

When BTC reaches 21,000 USDT, a limit sell order at 20,000 USDT is placed into the order book. If the price continues upward, the order will execute once it drops back to 20,000 USDT. But if the price reverses earlier, your order may not be filled.

Example 3: Limit take-profit at the best available price

Most favorable scenario:

Trigger price: 21,000 USDT
Order price: 21,000 USDT

When the price hits 21,000 USDT, the system checks the current best ask price. If it’s 21,050 USDT (above your limit), the order executes immediately at 21,050 USDT — you get the best possible price. But if the price drops below 21,000 USDT, the order remains pending at 21,000 USDT.

Pre-setting take-profit and stop-loss with limit orders

A more advanced technique is to place a limit order and simultaneously set TP/SL parameters that activate only after the main order executes.

This saves margin and provides greater flexibility. When placing a limit order, you can specify take-profit and stop-loss parameters. After the main order fills, both orders are automatically placed with your parameters.

This approach aligns with the OCO principle: if the take-profit triggers, the stop-loss is automatically canceled, and vice versa.

Practical scenario

A trader plans to buy Bitcoin at 40,000 USDT and prepares the entire strategy:

Main limit order: buy 1 BTC at 40,000 USDT
Pre-set take-profit: trigger at 50,000 USDT, limit sell at 50,500 USDT
Pre-set stop-loss: trigger at 30,000 USDT, market sell

Success scenario: price rises to 50,000 USDT, the take-profit triggers. The limit sell order at 50,500 USDT is placed in the order book, and the stop-loss is automatically canceled. If the price continues above 50,500 USDT, the order executes at the best available price.

Protection scenario: price drops to 30,000 USDT, the stop-loss triggers. 1 BTC is sold at the best market price, protecting you from further losses. The take-profit order is canceled at that moment.

Critical point: if the take-profit limit order triggers, the stop-loss is immediately canceled—even if the limit order isn’t fully filled yet. In case of a sharp price rebound, this may leave you unprotected. Careful monitoring is required.

Important restrictions and rules for take-profit and stop-loss orders

Platforms impose several rules for safety and system stability:

Price level restrictions:

When buying with a limit order and attaching TP/SL for sale, the trigger price for take-profit must be above the purchase price, and the stop-loss trigger below.
For selling, the TP trigger must be below, and the SL trigger above the order price.

Percentage limits: Each trading pair has a maximum deviation from the current price. For example, BTC/USDT might have a ±3% limit. The TP trigger for buy orders cannot exceed 103% of the trigger, and for sell orders, it cannot be below 97%.

Minimum sizes: If after executing the main order the remaining amount doesn’t meet the platform’s minimum order size, TP/SL orders may not activate.

Differences between market and limit orders: Market orders often have a smaller maximum size than limit orders. When attempting to pre-set TP/SL for large limit orders, the system may reject the request if the size exceeds the market order limit.

Understanding these restrictions is critical for effective use of take-profit and stop-loss orders and prevents surprises during order execution.

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