Risk Management
How to Set Stop-Loss and Take-Profit in Crypto Trading
A stop-loss closes a trade when price moves against you; a take-profit closes it when price reaches your target. Setting both before you enter turns a guess into a plan. This guide shows the math with a Bitcoin example you can repeat in the [Crypto Stop-Loss Calculator](/crypto/stop-loss-calculator) and [Crypto Take-Profit Calculator](/crypto/take-profit-calculator).
By the MoneyTools Editorial TeamLast updated 7 min readEditorial Policy
What stop-loss and take-profit orders do
A stop-loss is an order to sell if price falls to a level you choose, limiting your loss. A take-profit is an order to sell if price rises to your target, locking in gains. On most exchanges you can set both when you open a trade.
Neither order guarantees an exact price. In fast markets, price can jump past your stop and fill at a worse level. This is called slippage.
The formulas
Money at risk = Account balance × Risk % Stop-loss (long) = Entry − Stop distance Position size = Money at risk ÷ (Entry − Stop-loss) Take-profit (long) = Entry + (Entry − Stop-loss) × Reward ratio
- Risk %
- Share of your account you accept losing on this trade
- Stop distance
- How far below entry your stop sits, in dollars
- Reward ratio
- Reward ÷ risk; 2 for a 1:2 risk-reward
Worked example: BTC long at $100,000
Worked example
$10,000 account, 2% risk, 1:2 risk-reward
- Money at risk: $10,000 × 2% = $200
- Stop-loss: placed 2% below entry → $100,000 × 0.98 = $98,000 (a $2,000 stop distance)
- Position size: $200 ÷ $2,000 = 0.1 BTC (a $10,000 position)
- Take-profit at 1:2: $100,000 + $2,000 × 2 = $104,000
- If stopped out: 0.1 × ($98,000 − $100,000) = −$200
- If target hit: 0.1 × ($104,000 − $100,000) = +$400
You risk $200 to aim for $400, before fees. Prices are illustrative, not a forecast.
Trade-plan table
| Item | Value | How it was found |
|---|---|---|
| Account balance | $10,000 | Your starting balance |
| Risk per trade | 2% = $200 | Balance × risk % |
| Entry price | $100,000 | Your planned buy price |
| Stop-loss | $98,000 | Entry − $2,000 |
| Take-profit | $104,000 | Entry + 2 × $2,000 |
| Position size | 0.1 BTC | $200 ÷ $2,000 |
| Max loss / target gain | −$200 / +$400 | 1:2 risk-reward |
Don't forget fees
Trading fees are charged when you enter and exit. At a 0.1% fee each way on a $10,000 position, you pay about $10 to enter and about $10 to exit, so a stopped-out trade loses closer to $220, and a winning trade nets closer to $380. See how fees change results with the Crypto Profit & Loss Calculator.
Tips for placing your levels
- Place stops where your trade idea is proven wrong — for example below a recent low — not at a random round number.
- If the right stop is far away, shrink the position so the dollar risk stays the same. The Crypto Position Size Calculator does this for you.
- Check that the reward is worth the risk with the Crypto Risk/Reward Calculator.
- Avoid moving your stop further away once a trade is open. That turns a planned loss into a bigger one.
- With leverage, make sure your stop is hit before your liquidation price — see Crypto Leverage Explained.
Crypto is very volatile and you can lose money even with a stop-loss. This guide explains the math only and is not trading advice.
Run your own numbers
Find a stop-loss price that limits a loss to the amount you choose.
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