Some investors want to use stop-loss orders to protect themselves against the decrease in the value or on the other hand to ride an uptrend in the price when the price goes over a certain limit. A stop order can be set for the total bitcoin balance or a limited amount.
A stop-sell order is a sales order that is placed in case of a sudden price drop. If the price plummets under the set limit price the sales order is activated and the bitcoins are sold to prevent a higher loss. For example if the investor has purchased bitcoins at a 500€/btc price and he doesn't want to risk more than 200€ price drop, the stop order would be placed at a 300€/btc limit price.
A stop-buy order is a buy order placed in case the price suddenly starts to rise. With this order, the investor can join a starting price rally. If the investor believes that the price will start rising quickly after breaking 500€/btc, the investor can place a stop-buy order to 510€/btc so the coins are purchased automatically when the set price has been reached.
Please note that once the price surpasses the predefined price limit, the stop order becomes a market order. Thus the final execution price might significantly vary from the established stop order price. Stop orders affect the daily sales limit and thus a stop order will not be executed if the daily limit has been reached. The default limit is 30 bitcoins per day.
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