Stop-loss
Conditional order that automatically closes a position when price drops to a trigger. Foundational risk-management tool in trading and DeFi.
Aliases: stop loss, stop order
Stop-loss is an automatic instruction to close a position once price hits a trigger. It is insurance against the scenario where a trader cannot react in time or refuses to manually close a losing trade.
How it works
Baseline mechanic — stop-market:
- You hold a long on TON at 5.00 USDT with stop-loss at 4.80.
- The moment price touches 4.80, the order converts into a market sell.
- The position closes near 4.80, give or take some slippage.
Alternative — stop-limit:
- Same trigger (4.80), but the order becomes a limit at, say, 4.75.
- If price recovers above 4.75 the order fills; if it gaps below, the order stays unfilled.
Small distinction, big effect during fast moves
In a flash crash, stop-market guarantees an exit — possibly at 4.50 rather than 4.80 (bad fill). A stop-limit may not fire at all if price punches through the level.
Most traders pick stop-market for the execution guarantee.
Stop-loss on perpetuals vs spot
- Spot. Stop-loss closes a long position or, via a buy-stop, protects a short. Available on most CEXes and perpetual DEXs.
- Perpetuals. Critical because of leverage. At 10x, a 5% adverse move wipes half the margin. Without a stop-loss, liquidation can land faster than a manual click.
On TON DeFi, Storm Trade supports stop-loss on perpetuals; on spot DEXs (STON.fi, DeDust) the feature relies on keeper-bot limit-order infrastructure and is not universally available.
Where traders bleed money on stops
- Stops too tight. Routine volatility knocks the position out; a 0.5% stop is a stream of small losses.
- Stop hunting. Bots target clusters of stops near round numbers, sweep them, and let price reverse.
- Slippage on gaps. Real fill in fast moves is worse than the trigger.
Practical guidelines
- Place stops outside the noise band (typically >1% of 1H volatility).
- Avoid round-number prices (5.00, 100.00) — that’s where stops cluster.
- On perps, size the stop before liquidation, not after.
A stop-loss does not make a strategy profitable, but it guarantees that one bad trade does not blow up the account.