• By setting take-profit and stop-loss orders, futures traders can prepare for sudden market changes and sharp sell-offs during volatile periods.
• In BitMart futures trading, take-profit and stop-loss orders primarily serve two purposes: ensuring profits with take-profit orders and limiting losses with stop-loss orders.
• When placing take-profit and stop-loss orders on BitMart futures, three key factors are typically considered: take-profit and stop-loss price (also known as the trigger price), execution price, and the type of take-profit and stop-loss order.

BitMart futures traders use tools like take-profit and stop-loss orders to trade efficiently and reduce potential losses. By setting these orders, traders can pre-plan their exit strategies, avoiding the stress of making emotional decisions.

However, there is no one-size-fits-all method for setting take-profit and stop-loss orders on BitMart futures. Each strategy has its pros and cons, depending on market conditions and the user's specific goals.

This article explores the different types of take-profit and stop-loss orders available on the BitMart futures platform and what each type offers to futures traders.

What is a Take-Profit and Stop-Loss Order?

In BitMart futures trading, setting take-profit and stop-loss orders is mainly to limit losses with stop-loss orders and ensure profits with take-profit orders. When placing these orders on BitMart futures, three key factors must be considered: take-profit and stop-loss price (also known as the trigger price), execution price, and the type of take-profit and stop-loss order.

The trigger price is the price at which the buy or sell order is activated. You can choose to set the latest price or the mark price as the trigger price and control the execution price by selecting the type of take-profit and stop-loss order.

If you choose a market take-profit and stop-loss order, it will be executed at the best market price in the order book. If you place a limit take-profit and stop-loss order, it will be executed at the preset price or a better price.

Trigger Price Types: Mark Price vs. Latest Price

The trigger price can be either the latest price or the mark price. In BitMart futures, the latest price refers to the most recent transaction price of the futures, while the mark price refers to the estimated fair value of the futures.

Setting the latest price as the trigger for a take-profit and stop-loss order ensures that the trigger price is closer to the execution price. However, this does not guarantee the avoidance of forced liquidation, as the liquidation price is always the mark price.

To avoid forced liquidation when placing a take-profit and stop-loss order, it is best to set the mark price as the trigger price since the mark price is always consistent with the liquidation price of the futures . However, this also means that the execution price of your order may differ more from the trigger price.

For example, your limit take-profit and stop-loss order may not be executed at all because the mark price is an average price and cannot be used for transactions. Especially during high volatility periods, the gap between the latest price and the mark price may widen.

In summary, setting the latest price as the trigger price for a take-profit and stop-loss order may result in a price closer to the actual execution price but does not ensure against forced liquidation. Therefore, setting the mark price as the trigger price is better to avoid forced liquidation.

Order Types: Market Order vs. Limit Order

In BitMart futures, the type of take-profit and stop-loss order determines the type of order the system will place when the asset reaches the take-profit and stop-loss price. There are two types: market take-profit and stop-loss orders (market orders) and limit take-profit and stop-loss orders (limit orders).

When choosing a market take-profit and stop-loss order, you only need to set the take-profit and stop-loss price. After triggering this price, the system will automatically execute the order at the current best price.

When choosing a limit take-profit and stop-loss order, you need to set both the take-profit and stop-loss price and the limit price. The order will be executed at the set limit price or a better price. After the asset reaches the take-profit and stop-loss price, the system will match your order in the order book.

However, the order will only be executed if the set price or a better price (usually closer to the latest price) is reached. If there are no orders in the order book within the limit price or better, the order will fail. To avoid this, the limit price should be lower than the trigger price.

As shown in the diagram below, take-profit and stop-loss orders have four different combinations, each with its advantages and disadvantages. Note that there is no perfect combination, and you can choose based on your preferences and trading strategy.

Important Facts about Take-Profit and Stop-Loss Orders

Not Foolproof Against Forced Liquidation
Even if you set the mark price as the take-profit and stop-loss price for a stop-loss order, it's important to know that take-profit and stop-loss orders are not foolproof methods to prevent forced liquidation. The liquidation price may change, and setting a stop-loss order cannot prevent forced liquidation.
Different from Limit Orders

Take-profit and stop-loss orders should not be confused with limit orders, as they serve different purposes. The former triggers when a certain price level is reached and executes according to the trend, while the latter is an order to buy or sell assets at a specific or better price.

Can Be Used for Opening and Closing Positions
Take-profit and stop-loss orders can be used for both closing positions and opening positions. Therefore, in addition to closing positions, you can also use take-profit and stop-loss orders to establish new positions in the market.

Orders May Fail for Various Reasons
The price difference protection feature may prevent the activation of take-profit and stop-loss orders when the latest price and mark price of the futures exceed the preset range, causing the order to fail. Meanwhile, limit take-profit and stop-loss orders may also fail if the set limit price cannot be matched in the order book.

Multiple Orders in the Same Contract
On BitMart futures, you can place multiple take-profit and stop-loss orders at different price levels within the same contract. For example, you can place an order with the latest price set as the trigger price to prevent excessive losses and another with the mark price set as the trigger price to avoid forced liquidation.

Orders May Not Execute at Set Prices
Market take-profit and stop-loss orders may execute at the next best market price, which may differ from the set take-profit and stop-loss price.

Conclusion

When opening or closing positions in futures, take-profit and stop-loss orders are excellent trading tools that can help you pre-plan exit strategies, minimize losses, and maximize gains. However, before choosing a combination of take-profit and stop-loss order types, it is best to understand the available combinations and assess how each will impact your strategy.