Stop-losses and trailing stops
How a stop-loss caps an ordinary loss, why it cannot stop a rug, how fees move your real stop, and how a trailing stop follows a winner up.
Words in this lesson
On this page
A stop-loss is a planned sale below your buy price. It answers the question every trader avoids: at what point was I wrong? Decide it before you buy, because once the coin is falling your brain will find reasons to wait.
What a stop-loss can do, and what it can't
A stop-loss turns slow bleeds into small, planned losses. It is not a guarantee. On most platforms a server watches the price for you and sends a sell when your level is crossed. In a fast crash, the next price it can sell at may be far below your level. In a rug pull, where the liquidity is pulled or insiders dump everything at once, there may be almost nothing left to sell into.
No tool can promise otherwise. Whoever runs your stop, a coin that crashes in a single moment can still fill below your level. That is why the first lesson told you to size as if the coin can go to zero.
Fees move your real stop
A 30% stop that loses more than 30% (made-up numbers)
You buy with 0.5 SOL and set a stop-loss at a 30% drop in price. Your platform takes 1% on each side.
- Step 1: The buy fee is 0.005 SOL, so 0.495 SOL goes into the coin.
- Step 2: The price falls 30%. Your coins are now worth about 0.3465 SOL.
- Step 3: The sell fee takes 1% of that, so you get back about 0.343 SOL.
- Step 4: Your real loss is about 31.4%, plus the network fee and tip on both trades.
That is why some tools set the stop on your result after fees instead of on the price. In Trenchpilot, the stop-loss watches what the position is worth to you after fees, so the level you set is the loss you are capping. Whatever tool you use, find out which of the two it does.
How tight?
Too tight and ordinary swings shake you out. A memecoin can drop 20% and recover inside a minute, so a stop at 10% down sells plenty of trades that would have worked. Too loose and each loss is so big your winners can't pay for it. There is no number that is right for everyone. Your journal, in the next lesson, shows you which level fits the way you trade.
Trailing stops
A trailing stop follows the price up and never moves down. You set a distance, measured from the highest point the coin reaches after you buy. While the coin climbs, the stop climbs with it. When the coin falls that distance from its peak, it sells.
A 25% trailing stop on a runner (made-up numbers)
You buy at a $40k market cap with a trailing stop 25% under the highest point.
- Step 1: At the start the stop sits at $30k, 25% under your entry.
- Step 2: The coin climbs to $100k. The stop moves up to $75k.
- Step 3: It climbs to $160k. The stop moves up to $120k.
- Step 4: It turns and falls. The stop sells at about $120k, 3x your entry, if the sale fills near that level.
A fixed take-profit at 2x would have sold at $80k. The trailing stop let the run continue and still kept most of it. The cost: on a coin that rises a little and wobbles, a trailing stop can sell before the real move starts. Many traders use both, taking their initials with a fixed step and trailing the rest.
The time stop
Some traders add a time stop: if the coin has done nothing within a set time, they sell and move on. Attention is a memecoin's fuel, and a coin that gets none often fades as the crowd moves elsewhere. A time stop frees your SOL for the next idea.
Check what you learned
0 of 5 answered
Finished reading? Tick it off and your progress is kept in this browser.
This guide is for learning. It is not financial advice. Most memecoins go to zero and most people who trade them lose money. Only ever trade what you can afford to lose.