How to Set a Stop Loss on Robinhood for Your Crypto

Published: 1st December, 2023 | Last Updated: 30th May, 2024

Markos Koemtzopoulos

Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.

In this brief guide, I will walk you through how to set up a stop-loss order when trading crypto assets on Robinhood. 

how to set a stop loss on robinhood crypto

Steps to set up a stop-loss order for selling crypto on Robinhood

Here is what you need to do:

  1. Open the Robinhood app and go to the crypto coin that you want to set your stop loss on.
  2. Click on Trade
  3. Click on Sell
  4. Navigate to the top right corner and change the order type to either a stop order or a stop limit order.
  5. Enter your stop price. This is the price at which your order will be triggered.
  6. Enter the time in force. This is how long your order will be good for. You can set it to Good till close, Good till canceled, or Extended hours.
  7. Enter the amount of cryptocurrency you want to sell.
  8. Review your order and click submit.

Here are some additional tips:

  • If you are setting a stop order, make sure you set your stop price a little bit below the current price. This will help to prevent your order from being triggered by short-term market fluctuations.
  • If you are setting a stop limit order, you will need to enter a trigger price and a limit price. The trigger price is the price at which your order will be triggered, and the limit price is the maximum price that you are willing to sell your crypto for.

Also see How to Sell Crypto on Robinhood.

If you plan on buying back crypto for a short position you would do the opposite. However, Robinhood does not allow you to short crypto

I teach trading basics and how not to lose your money in my Elemental Crypto course. Check it out. Others are leaving great reviews.

What’s a stop-loss order

A stop-loss order is a special type of order that allows you to set a specific price at which to sell or buy an asset. The specific price is known as the limit price.

stop loss graph explainer
When the price drops to the stop loss a market order to sell/buy kicks into place

Example

For example, let’s say you purchased Bitcoin at $40,000 per coin, and you want to limit your potential loss to 5%. You can set a stop loss order at $38,000, instructing the exchange to automatically sell your Bitcoin if its price reaches or falls below this level.

Setting a stop-loss order is essential in minimizing potential losses and protecting your investments. It allows you to set a predefined price level at which your cryptocurrency will be automatically sold if the market goes against your position.

A stop-loss order is also called a stop order, a limit order, or a stop-limit order. They are all more or less the same thing. 

There are two types of stop-loss orders

Stop-loss order types

  1. Sell Stop-Loss Order: If you own a crypto coin and want to limit potential losses, you can place a sell stop-loss order below the current market price. If the market price falls to or below this price price, the order is triggered. The crypto is then sold at the prevailing market price.
  2. Buy Stop-Loss Order: If you have sold (shorted) a security and want to limit potential losses, you can place a buy stop-loss order above the current market price. If the market price of the security rises to or above the specified stop-loss price, the order is triggered, and the security is bought back at the prevailing market price to cover the short position. However, you short selling crypto on Robinhood is not possible so you would need to move your assets to a crypto exchange.

Should I use a stop-loss order when trading crypto?

Yes, definitely I wouldn’t recommend you do it any other way.

Setting a stop loss order is a crucial step in managing risk.

If you have a short-term horizon and plan on trading in and out of cryptocurrencies then you will be much better off if you use a stop loss.

A stop loss allows you to take frequent small hits when the market moves in the wrong direction. This way you avoid losing everything in one go. The idea is to outpace those smaller hits with less frequent bigger wins. This is how professional active traders trade. 

By using a stop loss order, you can avoid emotional decision-making and protect your capital from significant losses.

Another advantage of using a stop loss order is that it allows you to automate your trading strategy.

Where should I set my stop loss levels?

Placing stop loss levels too close to the current market price can result in premature execution. Most people tend to use 15-20% as their stop loss level.

Here are some factors you should consider to make the decision a little more scientific:

  1. Identify key support and resistance levels on the price chart. You can also use the moving average for this. Set your stop-loss just below support for long positions and just above resistance for short positions. 
  2. Consider the volatility of the asset you are trading. More volatile assets may require wider stop-loss levels.
  3. Use the Average True Range indicator to gauge the average price movement of an asset and set the stop-loss accordingly

Robinhood order types

There are four types of orders you can use when buying or selling crypto on Robinhood 

1. Market orders

When you place a market order you buy or sell the crypto at the current market rate. This is the default buy order whenever you buy crypto on Robinhood or any other broker or exchange

Sell orders are for when you want to sell and buy orders are for when you want to buy. 

2. Limit orders

You use a limit order when you want to buy or sell at a specific price. For example, say you own bitcoin but only want to sell if it goes above $100,000. You could check your phone every day to see if the price has reached $100,000 or you could automate the process by setting a limit sell order with a limit price of $100,000. This order will only sell the amount of Bitcoin you specify at $100,000 or better. If Bitcoin never reaches that price Robinhood will never execute the sale. And if it can’t sell the whole amount it will sell as much as it can. This is why you could end up with a partially complete order. 

3. Stop orders

A stop order is similar to a limit order except the stop price acts as a trigger to sell no matter what happens to the price after. In our previous price if you had set the stop price at $100K it would start the sale and continue selling even if the price were to dip back under $100K

4. Stop limit orders

These types of orders are also known as stop losses. Your stop price will trigger the order and the Limit price will ensure you don’t sell or buy below or above a certain threshold that you set. 

Buy stop limit order example

Say I want to buy 2 ETH if the price drops below $1,000 and I want to make sure I can buy them for 1,050 at most. I can set a stop price of $1,000 and the limit price at $1,050. When the price of ETH drops to $1,000 a limit order will be triggered to buy provided the price remains below $1,050.

Sell stop limit order example

Let’s assume I want to sell if ETH reaches $2,000 provided I can get more than $1,900 for it. When the price of ETH reaches $2,000 a sell limit order will trigger and will start selling my ETH provided the price of ETH does not fall below $1,900.

Other order types are not available on Robinhood

Take profit orders

These orders allow you to automatically sell your cryptocurrency at a predefined price level when it reaches or exceeds your desired profit target.

Trailing stop order

A trailing stop order is a type of order that is set at a percentage level below the market price for a long position or above the market price for a short position.

The key feature of a trailing stop order is that it automatically adjusts the stop price as the market price moves in a favorable direction, helping investors and traders lock in profits while limiting potential losses.

Unfortunately, Robinhood does not offer trailing stop orders. Check out my article on Binance Limit order vs Market order and Robinhood vs Binance for more.

Trailing stop limit orders

A trailing stop-limit order is a more advanced type of order that combines features of both a trailing stop order and a limit order. This order is used by traders and investors to manage their positions with more specific price control. Here’s how a trailing stop-limit order works:

  1. Trailing Stop Component:
    • Similar to a standard trailing stop order, the trailing stop-limit order allows you to set a stop price as a percentage or dollar amount away from the current market price.
    • As the market price moves in your favor, the stop price of the trailing stop-limit order adjusts accordingly, trailing the market price.
  2. Limit Order Component:
    • In addition to the trailing stop, a limit price is also set in a trailing stop-limit order.
  3. Order Execution:
    • When the market price reaches or surpasses the stop price, the order is activated.
    • Once activated, the order becomes a limit order. This means it will only be executed at the specified limit price or better.
    • If the market moves against you and reaches the stop price, but the limit price is not met, the order may not be executed.

Example:

  • You hold a crypto currently priced at $50.
  • You set a trailing stop-limit order with a 5% trail and a limit of $55.
  • If the token price rises to $60, the stop price also increases to $57 (5% below $60).
  • If the price then drops to $57, the order is triggered.
  • The order becomes a limit order, and it will only execute if the crypto coin price is $55 or higher.

About Robinhood

Robinhood is a registered broker dealer that is known for its commission-free trading of stocks, crypto, mutual funds, ETFs, and other financial products.

In addition, you can also trade options. However, options trading is not available for cryptocurrencies.

Robinhood makes money by sending order flow to market makers and this way it can offer traders a lower price compared to other brokers and crypto exchanges.

Market makers are entities that provide liquidity to exchanges and make money on both sides of the trade through a spread. They need a large amount of orders for this to work and this is why they pay Robinhood for supplying orders to them. 

To buy crypto on Robinhood you can transfer funds from your bank account or use a debit or credit card. There are not restrictions on day trading crypto on Robinhood.

Keep in mind that your crypto on Robinhood is not FDIC insured and does not have SIPC protection like your other securities have. This means that if you plan to hold a large amount of crypto for the long term you are better off moving your crypto to a hardware wallet. 

Also know that Robinhood reports crypto to the IRS.

See also what the colors mean on Robinhood when crypto trading.

Robinhood Stop Loss fees

You don’t get charged anything extra for using a stop-loss order. The only fees you need to account for when cryptocurrency trading is the network fees paid to the blockchain. 

Up Next

Kraken vs Robinhood: Learn Which is Best for You

Kraken vs Robinhood

Both Kraken and Robinhood are cryptocurrency exchanges that deal in digital currencies. And both are some of the best crypto exchanges in their respective niches. Although they have a lot in common, each is unique in terms of its target clientele. It is this uniqueness that differentiates them. In this article, I will tell you all you need to know about Kraken vs Robinhood. Read more.

Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.

Learn About a New
Coin Every Week

Learn About a New
Coin Every Week

Master Crypto Basics

Join over 7,300 subscribers. It’s free.

elementalcrypto newsletter benefits