Trading Exit Strategies to Avoid Unintended Positions II

Let’s revisit Ann’s case from the previous article. Ann holds 100,000 BTCUSD long positions with an entry price of $10,000. She sets a take profit at $10,200 and a stop loss at $9,800. While Ann is on vacation, the BTC price drops to $9,700 before it rebounds to $10,250.

Exit Strategy (Part II) – Take Profit & Stop Loss

In addition to applying the “Reduce Only” feature to a limit sell order, Ann can also choose to apply “Take Profit / Stop Loss” directly on the long position to properly exit it.

What is a Take Profit / Stop Loss order?

Take profit and stop loss are commonly adopted approaches where traders exit a position when the price reaches a pre-set level. You may achieve the purpose of taking profit or stopping loss by using a limit order or conditional order.

What we want to discuss here is specifically the “Take Profit / Stop Loss” feature that Bybit provides.

“Take Profit / Stop Loss” orders on Bybit are:

  • Conditional market orders;
  • Conditional price can be last traded price, index price or mark price;
  • Attached to a specific position. It will close the entire position once triggered. If the position is manually or forced closed, “Take Profit / Stop Loss” orders attached to it will be automatically cancelled.

When BTC price drops to $9,800, Ann’s stop loss order kicks in and closes the long position. Once the position is gone, the $10,200 take profit order will automatically be cancelled as well.

Similarly, a stop loss order will also be automatically cancelled if the take profit condition kicks in first.

“Take Profit / Stop Loss” can be set upon an existing position, and you can also set up the conditions when placing a new order on Bybit.

Exit Strategy (Part III) – Close on Trigger

Ann bought 100,000 BTCUSD contracts at $10,000. She plans to add another 50,000 contracts if BTC price drops to $9,500. She also wants to stop loss at $9,000 and take profit at $10,200.

If Ann uses a reduce only limit order to take profit, this limit order will only apply to the existing 100,000 long contracts. She won’t be able to take profit on the additional 50,000 contracts (if any)

To properly take profit and exit the position, Ann can

  • Set a “Take Profit” order on this long position directly;
  • Or set a conditional sell order of 150,000 contracts with the “Close on Trigger” feature.

What is Close on Trigger?

Similar to “Reduce Only” for limit orders, the “Close on Trigger” feature strictly closes a position once a conditional order is triggered.

150,000 Conditional Sell Order – Close on Trigger or Not?

1.If the BTC price drops to $9,500 and rebounds to $10,200:

Ann buys another 50,000 contracts at $9,500, giving her a total of 150,000 contracts. The conditional sell order will close her entire position regardless if she opts for the “Close on Trigger” or not.

2.If the BTC price rises non-stop from $10,000 all the way to $10,200, Ann doesn’t get a chance to increase her long position.

  • Without close on trigger: The conditional sell order will close her long position and also add 50,000 short contracts.
  • With close on trigger: The conditional sell order will only close her long position.

3.If the BTC price drops to $9,000 and stop loss kicks in, and then rebounds to $10,200.

  • Without close on trigger: Ann will end up with 150,000 short contracts at $10,200.
  • With close on trigger: Ann holds no position at $10,200.

How to set Close on Trigger?

Select “Conditional” order in the order tab. Set the order price, trigger price and quantity, and tick “Close on Trigger” at the bottom.