TL;DR- You can only do this on Coinbase Pro. Don’t fret- if you have a Coinbase account, you can use your same credentials and bank account for no additional setup cost or effort. Once on Coinbase pro, switch over to the Sell command and select Stop. Set your stop and limit. Stop losses have pros and cons.
For the full walkthrough, scroll below or use the ‘Jump to Section’ and go to ‘How to enable a stop loss on Coinbase’.
Can you set a stop loss on Coinbase?
Yes!!!! You’ll only be able to do this if you’re using Coinbase Pro. If you’re only using Coinbase, don’t fret! Your same login credentials can get you set up on Coinbase Pro instantaneously. Just go to Coinbase Pro and use your regular Coinbase login.
What’s a stop loss again?
A stop loss prevents you from losing too much of your investment on a trade if the market goes south. I have found stop losses to be particularly useful in the cryptocurrency market, given its enormous volatility. Cryptocurrency investing is already insane enough- any measures that can be taken to offset losses and lock in gains are valuable.
Stop loss example
You buy 1 Ethereum at $4500 and set a stop loss for $4300.
The price of Ethereum drops to $3800 the next day.
Instead of losing $700, you only lost $200 because you set a stop loss at $4300- that is, Coinbase sold your Ethereum at $4300 and gave you $4300 of USDT. Coinbase will be cashing you out in USD or whatever your set fiat currency is on the Coinbase platform.
Drawbacks to stop losses and take profits
For the above example, let’s say Ethereum on briefly went south of $4,300 before rocketing up to $6,000 in a matter of hours while you were at work. You’d be stuck with your $4,300 while other hodlers would be sitting on the $6,000 Ethereum. Don’t think this is crazy- it literally happens all the time. Timing the market is next to impossible.
Likewise, let’s say Bitcoin blew past $65,000 and went to $100,000. You’d be stuck with your $65,000 while other hodlers would be sitting on $100k bitcoin. For them, it’d be Lambo time but you’d be stuck in an F-150. (I love F-150s, no hate here).
Since the golden rule of investing is to never lose money, I personally feel that stop losses are more powerful than take-profits are.
In this example I’ll set a stop loss on Coinbase Pro desktop on a small amount of Bitcoin I own.
How to enable a stop loss on Coinbase
1. First things first, you’ll need to buy the cryptocurrency and actually own it before you can pick a stop loss point. Get your Coinbase Pro account funded, and buy a cryptocurrency.
2. Use the Select Market drop down to navigate to the cryptocurrency trading pair you’re planning to set a stop loss for if you’re not already on that trading pair. You will see the amount of crypto you already hold next to the crypto’s ticker (BTC for Bitcoin).
3. On the left side of the screen you’ll see the Order Form. Underneath Order Form text select the Sell box. Don’t worry, we’re not going to sell your crypto right now, we’re setting the conditions for a stop loss. Select the Stop option where you can choose between Market | Limit | Stop.
4. This is where people get a little mixed up. We have three items underneath the Sell command:
- Stop Price
- Limit Price
The Stop Price is the price you’d like the stop loss to be triggered. The Amount is the amount of that crypto you’d like sell once the price of the cryptocurrency hits the stop loss mark. The Limit Price is the lowest possible price you’re looking to sell the cryptocurrency for.
The Limit Price will often need to be lower than the Stop Price because Coinbase may not have enough time to complete your order before the price falls lower.
Because of this, it’s good to set your Limit Price to 0.5%-2% lower than the stop price to guarantee your crypto sells after the Stop Price is triggered.
Enter the Stop Price you’d like your crypto to trigger a sell at. In this example, Bitcoin is sitting around $57,000 as of this writing, so I’ll set a Stop Price trigger at $49,500 in case Bitcoin falls below the $50k support level. I’m doing this because I believe if Bitcoin falls below $50k support, it’s likely to fall much lower quickly.
Then enter the amount of the crypto you’d like to sell in the Amount field if the Stop Price is reached. I will put only a small amount if Bitcoin here as an example. If you’d like to do the Stop Loss for all your holding, hit Max.
Next, enter a Limit Price or 0.5%-2% lower than your Stop Price. For our $49,500 Stop Price in this example, I’ll enter something between (1-0.98)*49,500= $48,510 and (1-0.995)*49,500= $49,253.
5. Hit the Place Sell Order button and if crypto drops suddenly someday soon, smile as you watch the world burn and walk away with your money!
If your stop loss does trigger, be sure to keep an eye on the market and looking for buying opportunities. As Warren Buffett said- “whether it’s socks or stocks, I like to buy things on sale.” Money is made when you get a good deal on some crypto. Until next time- stay on the righteous path!