Complete Guide to Stop Loss and Take Profit: Essential Strategies for Perpetual Contracts

The stop loss and take profit are two fundamental orders that every trader must master when trading perpetual and futures contracts. These tools allow you to manage risk intelligently and automate your exit strategies. While take profit ensures you close winning positions at predetermined levels, stop loss protects your capital by limiting losses when the market moves against you.

What are Stop Loss and Take Profit?

Take Profit (TP): An order that executes automatically when the price reaches a preset level, allowing you to secure gains without constantly monitoring the screen. When triggered, it closes your position at the established market price.

Stop Loss (SL): Acts as a financial safety net. It triggers when the price falls to a critical level you have defined beforehand, automatically closing your position to prevent larger losses. This is especially crucial in volatile markets where movements can be rapid and unpredictable.

The true power of these orders lies in their ability to be configured simultaneously before executing your main trade, saving you time and reducing emotional errors during tense moments.

Two Ways to Execute Your Orders: Full Position vs. Partial Position

Modern trading systems offer two different approaches to implementing your stop loss and take profit:

Option 1: Full Position

This method closes your entire position with a single stop loss or take profit order. It is the simplest and most direct:

• Only one TP/SL order is executed per open position
• When the activation price is reached, your entire position is closed via a market order
• Ideal for traders seeking simple, definitive exits

Example: If you have 1 BTC long and set a take profit at $42,000, when the price hits that level, the entire BTC position will close.

Option 2: Partial Position

This more sophisticated approach allows multiple stop loss and take profit orders within the same position:

• You can place several take profit and stop loss orders simultaneously
• Each order closes only the specific amount you designate
• When a partial TP/SL order executes, the opposite order (SL if TP was hit, or TP if SL was hit) is automatically canceled
• Supports market and limit orders for greater flexibility in execution prices

Example: With 1 BTC open, you might set a partial take profit for 0.5 BTC at $40,000, another for 0.3 BTC at $44,000, and keep 0.2 BTC with a stop loss at $35,000 to stay exposed to upside potential.

How These Orders Work in Practice

Let’s consider a real scenario illustrating how stop loss and take profit operate together:

Scenario 1: Multiple Active Orders Simultaneously

Imagine Bitcoin’s current price is $40,000, and you hold 1 BTC long. You set three TP/SL orders:

Order A (Partial Take Profit):

• Quantity: 0.5 BTC
• Activation: $42,000
• Type: Market order (partial take profit)

Order B (Partial Take Profit):

• Quantity: 0.3 BTC
• Activation: $45,000
• Type: Limit order at $45,500

Order C (Total Stop Loss):

• Quantity: 1 BTC (full position)
• Activation: $36,000

When the price rises to $42,000, Order A triggers, closing 0.5 BTC at market price. You now have 0.5 BTC remaining. Orders B and C remain active.

If the price then reaches $45,000, Order B activates, placing a limit order at $45,500. If executed, it closes those 0.3 BTC and automatically cancels Order C. If the price drops to $36,000, Order C executes, closing the remaining 0.2 BTC at market.

Scenario 2: Adding Volume to an Existing Position

Suppose you already have 1 BTC with a take profit at $42,000. You then place a limit buy of 1 BTC at $38,000 with a new take profit at $43,000 and a stop loss at $35,000.

When this order executes, your position increases to 2 BTC, and you now have two independent TP/SL orders: the original and the new. Increasing volume does not affect existing TP/SL orders; instead, new orders are added according to the new volume.

How to Activate Your Orders: Multiple Reference Options

Most modern platforms let you choose what variable triggers your stop loss and take profit orders:

• Price-Based: Activates when the market price hits your set level exactly
• ROI (Return on Investment): Activates if your position gains, for example, +10%, or loses, e.g., -5%
• Absolute P&L: Based on real profit or loss in dollar terms, not percentage

Each method has advantages depending on your trading style and leverage level.

Frequently Asked Questions about Stop Loss and Take Profit

What happens if the price moves too fast and skips my stop loss level?
The system uses the mark price (which includes a weighted index from multiple sources) to trigger the stop loss, not just the last traded price. This offers some protection against manipulation or extreme jumps, though in highly volatile markets, risk remains.

Why can I set a stop loss below my liquidation price?
The system allows strategic flexibility. However, it’s critical to understand that a stop loss worse than your liquidation price will not execute if liquidation occurs first. Review these levels carefully before confirming orders.

What is the maximum number of TP/SL orders I can have simultaneously?
In partial position mode, most platforms allow multiple orders (typically up to 20). In full position mode, only one order per position is permitted.

What if my position is very large and exceeds the maximum order size?
When closing a very large position that exceeds the maximum order size, the system automatically divides the closure into multiple successive orders. During these partial closures, the remaining amount stays exposed and could be liquidated.

Why do I see my stop loss at the same level as my liquidation price?
This usually happens when using very high leverage (close to the maximum). Extreme leverage minimizes the maintenance margin, causing the liquidation price and potentially your calculated stop loss to coincide or be very close. It’s a sign you are operating with maximum risk.

Mastering stop loss and take profit transforms your ability to manage risk and protect your capital. These mechanisms are not optional for serious traders but essential tools that differentiate those building sustainable wealth from those losing money during volatility spikes.