A stop loss take profit pair is two exit orders placed around a trade: the stop loss closes the position if the price moves against you past a level you chose, and the take profit closes it when the price reaches the gain you aimed for. Together they decide in advance where you accept a loss and where you take a result, so you do not have to decide under pressure while the market moves. They are useful tools, not guarantees: in a fast market an order can be filled at a worse price than the one you set.
In brief
- A stop loss closes a trade at a loss level you set beforehand; a take profit closes it at a target level.
- Place them before you enter, size the position so that the stop costs an amount you can accept, and remember that a stop is triggered at your price but may be filled at another one when prices jump.
- They reduce the work of watching the market, not the risk of the market.
In this article · 9 min read
- Stop loss take profit: a short definition
- How a stop loss take profit pair works
- Stop market or stop limit?
- What the numbers say
- Where to place the levels
- Advantages and limits
- Where this fits: manual orders and automation
- How to start, step by step
- Checklist before you open a trade
- Frequently asked questions
- Sources
Stop loss take profit: a short definition
According to FINRA, a stop order becomes a market order when the stop price is reached, so it is executed at the current market price, which may be very different from the stop price. A stop loss is simply a stop order used to limit a loss: a sell-stop sits below the current price to protect a long position, and a buy-stop sits above it to protect a short one, as the Wikipedia article on exchange orders explains.
A take profit is the opposite end of the same idea: an order that closes the position when the price reaches a target. On Kraken, for example, a take profit order is triggered when the last traded price touches the trigger price and then executes as a market order, with taker fees.
How a stop loss take profit pair works
- You enter the trade. For example, you buy at a price of 100.
- You place both exits. The stop loss goes below the entry, say at 95; the take profit goes above it, say at 110. For a short position the two sides are swapped.
- The price decides. If it falls to 95, the stop is triggered and the position closes at a loss. If it rises to 110, the take profit closes it at a gain.
- The other order is cancelled. Many platforms link the two as a one-cancels-other (OCO) order, so when one fills the other disappears. Kraken's guide to conditional orders, dated 19 June 2026, describes exactly this behaviour on its futures platform.
In this example you risk 5 to try to gain 10: a reward-to-risk ratio of 2 to 1. With that ratio, and before fees and slippage, you would need to be right on roughly one trade in three just to break even. A wider target is not automatically better, because the price has to travel further to reach it.
Stop market or stop limit?
| Stop market | Stop limit | |
|---|---|---|
| What happens when triggered | A market order is sent | A limit order is placed at your worst price |
| Exit | Very likely, at any price | Only if the price is reachable |
| Price | Can be far from the stop | Never worse than your limit |
| Main risk | Slippage in fast markets | The order may not fill at all |
FINRA's notice lists the trade-off. A stop order may be triggered by a short-lived price change, and the price may later return to its earlier level. Adding a limit price gives more certainty on the price, but the order may not be executed at all if the market moves past it. Neither type is better in every case: it depends on whether you care more about getting out or about the price you get.
What the numbers say
Stops are not as common as people think. In a 2017 paper analysing trading data from 2014 to 2016, economists at the Commodity Futures Trading Commission (CFTC), a futures-market regulator, found that stop orders accounted for between 0.3% and 2% of transactions in three large futures markets (WTI crude oil, E-mini S&P 500 and 10-year government note futures). Between 95% and 99% of the executed stop orders in those markets were stop-limit orders. The authors give a reason: a plain stop loss turns into a market order when triggered, and if the market is falling fast it can execute far below the trigger price.
These are professional futures markets and not crypto, so read the figures as an illustration of the trade-off, not as a measure of what crypto traders do.
Where to place the levels
There is no single correct answer, and anyone who offers one is guessing. These are the methods people commonly use:
- A fixed percentage. For example, a stop 5% from the entry. Simple, but it ignores how much the asset normally moves.
- A volatility distance. A stop placed further away for an asset that swings a lot and closer for one that is calm, so that normal noise does not trigger it.
- A technical level. Below a recent low or a support zone for a long position, above a resistance zone for a short one.
- The loss you can accept. Decide first how much of your account you are willing to lose on one trade, for example 1%, then work backwards. If the stop is 5% from the entry and you accept losing 1% of the account, the position can be about 20% of the account.
Two cautions. First, a stop that is too tight is triggered by ordinary price moves and you pay fees again and again. Second, never move a stop further away just to avoid being stopped out: that undoes the reason you set it.
If you use leverage, there is a third point. Kraken's guide notes that a stop placed above your liquidation price gives a controlled exit, whereas if the price reaches the liquidation price the exchange closes the position and may charge an extra liquidation fee. On Kraken's futures platform, according to its order types page, stop orders are triggered by the index price by default, but you can choose the last trade price or the mark price. Check which trigger your platform uses.
Advantages and limits
Advantages
- A plan before the emotion. You decide the exit when you are calm, not in the middle of a fall.
- Less screen time. The order works while you sleep or work, if it rests on the exchange.
- A clear loss per trade. You know roughly what the trade can cost before you open it.
- Consistency. The same rules on every trade make results easier to review.
Limits and risks
- Slippage and gaps. If the price jumps over your stop, the order is filled at the next available price. Crypto trades around the clock, but thin order books and sudden news can still produce large gaps.
- False triggers. A short spike can hit your stop and the price may then recover.
- Crypto is volatile and leverage multiplies losses. A stop limits a loss, it does not remove the possibility of losing money. Past results do not guarantee future ones.
- Fees. A take profit that executes as a market order pays taker fees, and frequent stops add up.
- Take profit can cap a good trade. A fixed target closes the position even if the price would have kept going.
Where this fits: manual orders and automation
Setting stops by hand works if you check the market and keep to your rules. The hard part is the discipline: many people move their stops when a trade goes badly. That is one reason some traders prefer automation, where the same rules are applied every time. Our guide to the crypto trading bot explains how automated trading works, and the article on the AI trading bot looks at what artificial intelligence adds and what it does not.
Crypto Go Bot, which we built, places a take profit and a stop loss as real orders on your own Kraken account for every position, at the percentages you set. According to the bot's page, these orders rest on the exchange, so they stay in place even if the bot is switched off. The bot runs on your own server and uses an API key that can trade but not withdraw. It is still trading: losing trades are a normal part of it, a stop can be filled at a worse price in a fast market, and no setting rules out losses. If you are new to the exchange side, start with how to buy cryptocurrency safely.
How to start, step by step
- Learn the order types on your platform. Find out whether its stop is a market or a limit order, and what price triggers it.
- Decide the risk first. Choose the amount you can lose on one trade, then calculate the position size from it.
- Place the stop at a level that makes sense for the market, not at a number you can tolerate emotionally.
- Set the take profit at a target you have a reason for, and check the reward-to-risk ratio.
- Place both orders when you open the trade, and use a linked (OCO) order if the platform offers one.
- Start small. Use an amount you can afford to lose and low leverage, if you use any.
- Review. After each trade, note whether the stop or the target was hit and what the fill price was.
Checklist before you open a trade
- I know how much I will lose if the stop is hit, and I accept it.
- The stop is placed for a reason, and I will not move it further away.
- I know whether my stop is a market or a limit order.
- The stop sits above my liquidation price, if I use leverage.
- I have checked the reward-to-risk ratio of the take profit.
- I have counted fees and possible slippage.
Frequently asked questions
What is a stop loss take profit order?
It is a pair of exit orders: the stop loss closes a trade at a loss level you set, and the take profit closes it at a target gain. Many platforms link them so that when one is executed the other is cancelled.
Where should I place a stop loss?
There is no universal answer. Common choices are a fixed percentage from the entry, a distance based on the asset's volatility, or a technical level such as a recent low. Decide the loss you can accept first, then size the position.
Does a stop loss guarantee my exit price?
No. A plain stop order becomes a market order when triggered and can be filled at a different price, especially when the market moves fast. A stop-limit order controls the price but may not be filled at all.
How do I set a stop loss and a take profit on an exchange?
In most platforms, you open the order form, enter your position, then switch on the take profit and stop loss fields and type a trigger price for each. The details vary, so read your exchange's help page for its order types.
What is a good risk-reward ratio?
It depends on how often your trades win. With a 2 to 1 ratio you break even, before costs, if roughly one trade in three wins. A higher ratio helps only if the target is realistic for the market.
Should I use a stop loss in crypto?
Many traders do, because prices can move quickly and a pre-set exit removes the need to decide in the moment. It does not remove the risk of loss or of slippage, and in some situations, such as a very small spot holding you plan to keep for years, you may prefer not to use one.
Sources
- FINRA, Regulatory Notice 21-12, 18 March 2021 (stop orders in volatile markets)
- CFTC, Fett and McPhail, Stop Orders in Select Futures Markets, August 2017
- Kraken Learn, How to set conditional orders on Kraken: stop loss and take profit, 19 June 2026
- Kraken Support, Take profit orders
- Kraken Support, Derivatives order types
- Wikipedia, Order (exchange)
