Definition ∞ Stop-loss orders are automated instructions to sell a cryptocurrency when its price falls to a specified level. This type of order is placed with an exchange to limit potential losses on a trading position. Once the market price reaches the predetermined stop price, the stop-loss order becomes a market order and is executed at the best available price. It serves as a risk management tool to protect capital from significant downturns.
Context ∞ The placement of stop-loss orders is a standard practice for managing risk in volatile cryptocurrency markets. Large clusters of stop-loss orders below key support levels can create cascading sell-offs if triggered, exacerbating price declines. Traders and analysts frequently discuss the strategic placement of these orders in relation to market structure and potential liquidation zones.
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