I hope you are as excited as I am to go through all these sell orders. We're going to be covering market, limit, and stop orders, when to use them, how to use them and how to be a little strategic about when placing these orders and when the best time to place them are.
We're also going to briefly touch on tax implications, and most importantly, the content we're going to be covering today while focused on cryptocurrency, is really true for trading stocks, ETFs, and bonds. It's really applicable for any type of investment that you're planning.
Welcome back to the channel. I'm Brian Logan. I am so thankful that you were here before we dive into these sellers. Just a few things. First, we're going to be going through Coinbase Pro, which is the exchange I use for my own personal accounts. So you're going to see the live trades of each of these different cell types today. If you also want to get involved with Coinbase Pro I put a link below where you can get a free $10 worth of Bitcoin for signing out.
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The second thing is the disclaimer. I'm not a financial professional or advisor. So everything in this video is my opinion and based on my experiences, so be sure to do your own research and check into these things before making any financial decisions, especially related to cryptocurrency.
We're going to be working under the assumption today that you currently own a cryptocurrency that you're looking to sell. There is something called short selling, where you don't actually have to own the coin before selling it. I'm going to touch on that a little bit at the end of the video. It's pretty limited in the cryptocurrency space, but just wanted to make you aware that the majority of the conversation today is that assumption that you currently own something, and you're looking to sell it in the future.
I'm really excited to be going through this with you all so let's jump on over to the computer and we'll talk through all of these orders and I'll show you how to place them.
All right, so this is an overview of all three different types of orders, market, limit and stop. We're going to be going through each one of these and referring back to this visual as we go.
So let's start with market first. This is the simplest to understand, just like on the buy side, a sell market order just means you're willing to sell your cryptocurrency right now. This is the same order that's used if you're just using Coinbase or more simplistic type exchanges where you don't have the option to choose limit or stop orders.
So let's jump over to Coinbase Pro now and show you what this looks like. So here we are in Coinbase Pro. If this is the first time you're seeing point based pro, I've actually got tutorials that you can go through that explains everything that's going on on this page and how to fund the account and how to really first get started with Coinbase. I'll link those videos above now so you can check those out.
For now, we're going to jump right into these orders. I currently own Bitcoin in Ethereum, so we're going to use those coins as examples today. The first thing I'm going to do is change our market to Ethereum, which is listed here over to the left hand side.
If you remember, this is our graph of what's going on with the Ethereum. I typically change this to one day because I'm not a day trader on the left hand side of the screen is our order book where we can place both our buy and sell orders. We're going to jump down to our order form and go over to sell. Here is the market limit and stop that we're going to be going through today. Remember, market is just looking to sell at whatever the current prices.
I actually don't want to sell in ether right now, but for the purposes of the video and to show you guys what it looks like, we're going to go ahead and do it. We're just going to do a really small amount, so I'm going to do .001 ether, only about $2.00. When I place this order, it's going to immediately fill at whatever price is available. So let's do it. All right now you can see what happened is down here in the open order area and the fill. So we sold .001 of Ether at this price a very small fee which is again why you use Coinbase Pro.
More on that in my previous videos and then you can see in our fill order that it was executed immediately. So that is a market order. If you're trying to get out immediately, quickly you use a market order.
Now let's talk limits. A sell limit order is saying sell at my
price as the price of the coin goes higher.
Let's jump down to the graphic to show you an example of a sell limit order. So this is a graph of Ethereum. Let's assume this is today. This yellow bar here and then we bought Ethereum. On this day at about $1850.00, so that's equivalent to about the top of this yellow line here. Now want to make sure that we are able to take profits from this trade.
Now the reason to place a sell limit order is if you're not watching the market all the time or you have a lot of different investments and you don't want to potentially miss the opportunity to take some profit off, so that's where a sell limit order comes in handy, and a sell limit order will only fill once the price of the coin reaches your specified price. So you can essentially place this order and forget about it. I
In this example as well as out in the real world, it's good common practice to place your sell limit order somewhere around a resistance level that you've seen historically, and resistance level means just an area where the stock or the coin has previously been to and found some resistance, meaning it hasn't broken through there or it had some issues from a price perspective getting through this level. Price tends to obey these ideas of support and resistance lines.
And while it's not 100%, it's a helpful guide when thinking through setting your sell limit orders. So in this example we can see a resistance forming around the $2,330 level, so this might be a great place to put a profit taking order, with the assumption that the coin will continue to go up and hit this price. So to take advantage of that price, movement and lock in profit.
We would put a sell limit order in for $2330, which means based off of the price that we bought Ethereum which is about $1850. We would profit around $480 per coin, or about a 25% win, which is crazy in the stock market world, a 25% swing. But in the world of cryptocurrency, that's not as crazy.
I like to think about a Sell Limit order as a profit taking order. Let's jump over to Coinbase Pro and now show you how to place one of these.
So we're back over in Ethereum now on Coinbase Pro and we're going to zoom in a little bit on this daily chart, which is the example that we were showing in the previous slide. I made that slide a few days ago, so you can actually see the price of Ethereum has now increased since making that slide. So we bought in the example around 1850 and we're looking to place that sell limit order or that profit order up here around the $2330
To do that, we're going to come back over to our order form on the left hand side of the screen. We're going to make sure cell is selected. We're going to jump over to limit, and now Coinbase Pro or whatever platform you're using requires two pieces of information. The first one is how much you're wanting to sell, so let's go ahead and .01 ether, and then what price you're hoping to sell it at.
So again, we're going to do $2330, which is right around that resistance level. So now you can see the fee and the total amount we're selling. Let's go ahead and place the sell order, so once you click that button you will now see in the open order section, not in the fill, because it's not a market order and it didn't immediately. We can see that we have a sell order for .01 ether for $2330 out on the market and it's open. That means our order is on this orderbook now, waiting to be filled as the price increases up to that $23130. At this point you would now wait and hope that the price increases to your profit target.
And that's the basics around the sell limit order. Now let's go
back and talk about stops. Sell stop orders are some of the most common orders
that you typically hear about, because you often heard of the phrase stop loss
order and that's what these are. It's selling at my price as the price of the
coin goes lower, so let's dive a little bit more into these stop orders.
So here we are a sell stop order the stop loss order, the loss reduction order. We're trying to limit the amount that we could lose on a trade, so let's look at this example. This is Ethereum again and the same chart so actually we're going to assume just like before that this is today we bought at that $1850 and now we want to place a stop loss order so that if the price of the coin falls, we don't lose too much.
A best practice in pro tip for placing stop loss orders or these sell stop orders is to place that order below a support line. So similar to how we were thinking about those stop limit orders of placing that profit order above resistance. For stop loss orders, we want to place the stop typically below a support level and the idea behind that is that if there is a support level, the price may naturally fluctuate down into that support level, which would be characteristic with the coin, since that's how it's previously performed and we don't want to be stopped out at that point.
We want to be stopped out if it moves past that support level, so that's what you can see in this chart below. You can see that previously in the past there was some support around the $1700 or so. So as we look at where we bought, we kind of bought off of that $1700 support level or so. When we think about a stop loss order, we want to be sure that our Stop loss is below that $1700.
This is just my strategy in the way I see a lot of professional successful traders trade. You can certainly place your stop order wherever you see fit closer to the price that you bought farther away from the price that you thought. This is just the way that I trade and I think is a pretty good balance between too close and too far away.
So with that we would like to place a sell stop order under that $1700 somewhere maybe at $1687.00 in this example. Now you may be asking why $1687? Great question. So in my own personal experience and what I've seen from other traders and just the way that prices typically work is that many orders will be placed at common numbers, round numbers, zeros and fives, so it's good practice to actually put yourself stop orders below very common prices. The reason for this is let's say, a lot of people like $1690.00. It's a nice round Number. There might be so many sell orders there that the price actually gets pushed down to that level, knowing that there's a lot of people willing to sell and your order would get triggered, but by placing it at $1687 you might actually get the chance to stay in the trade without risking much more. And by remaining in the trade, you might be able to take advantage of a continued price movement up.
Now with that, let's jump over to Coinbase Pro and place a sell. Stop or stop loss order right so we are back in Coinbase Pro. We're going to jump back to our chart over here just because I like to reference this chart just like I did in the example. So again that day we bought it's this large green bar and we're looking to place a stop below that $1700 mark around $1687, so to do that, we're just going to come over to our sell orders. We're going to move from limit to stop and we're going to begin to fill out this information. So the first thing is the stock price. So this is that $1687.
This is the price where our order will go on the market and look to be filled. So traditionally a stop order becomes a market order once it hits your price. So in this instance our stock price is $1687. That means if the price of the Ethereum were to hit $1687.00 it would become a market order and fill almost instantly, which is good because when you're trying to get out of something you want to get out of it.
Now, you may notice it looks a little different over here because there's a stop price, the amount, and then a limit price. So in Coinbase Pro, unfortunately you're not actually allowed to just do a stop loss order or stop or sell stop order. You have to do a sell stop limit order. Don't be concerned about this. We're going to go through what this means, and it's pretty straightforward.
Before we dive in, remember this is just with Coinbase Pro. Other
exchanges may allow you to actually set a style a sell stop order and when that
stop price gets hit it would execute as a market order and get filled almost
immediately.
So what does this sell stop limit mean? If we remember back a sell limit means that you're looking to sell the coin at or above a given price because you're trying to take a profit. In this instance, the same phrase works. You're looking to sell the coin at or above the limit price. The difference here is we're combining it with a stop loss order.
What this means is that when you think about placing these sell stop orders you want to place the limit order at or below your stop order because anything at that limit order and above is when you're looking to sell, but because you have a stop order, your trade won't execute until the Ethereum hits that stop order.
So if that was confusing, let's just look at the example on the page. So again we bought Ethereum on this day for $1850 and we put our stop ordering at $1687, which is below that $1700 resistance. But now we're required to put a limit order in, so we could put it in at $1687. But I like to place my limit orders just a little bit below my sell stop order and the reason for this is if I put my limit order right at $1687, more than likely it will fill as soon as Ethereum hits that $1687. But because it's a limit order it says it won't sell if the price continues to drop, and if for some reason the market is moving really really fast, there is a chance that you may not get filled right away at your price.
So by moving your limit order a little bit below your stop order, it allows Ethereum or the stock that you're trading to move a little bit and for you to still get filled. More than likely you'll get filled at the price you want, but this gives you a little bit of wiggle room and protection in case the market is moving really, really fast.
Alright, with that we're going to jump back into client based pro and finish placing our stop loss order. Alright, we're back, so we're going to place our stock price at $1687. Again, this is the price where we want our order to go live and where we're looking to sell Ethereum, we're going to put in how much we want to sell. I'm going to just stick to the .01. And then the limit price. So for the limit price we're going to look to be somewhere at $1687. Or again a little bit below so I'm going to go $1685, which allows me to have a little wiggle room to still get out of the trade in case the Ethereum is moving really, really fast and blows through that $1687.
So with that we're going to go ahead and place the sell order, and now you can see similar to the sell limit order we see the order on our open orders page. It is not filled because the price has not gone down to that $1687. But you will notice the status is actually active. So what that means is the order is actually not on the order book over here it will only be placed on the order book once the price $1687 has been triggered.
At that point it will go live and hopefully again it will be filled immediately. If not, we gave it a little bit of wiggle room down to that $1685.
And with that, we've covered all three main types of sell orders, market limit, and stop all right. That is, everything about sell orders. For those of you just starting out, you should now be armed with a lot of great information to help you start placing your first sell orders and those of you who are intermediate or advanced traders. Hopefully you learn something new to help elevate a new strategy or a better way to use sell orders in your trading alright, two last things before we finish. The first one is our favorite topic, which is taxes.
Now I am not a tax professional or accountant and taxes typically like to change all of the time, so be sure to check up on these. But for now, cryptocurrencies treated much like stocks where there's a capital gains tax whenever you sell your cryptocurrency. So what does that mean?
It basically means two things. One, if you hold the cryptocurrency for less than a year, your cryptocurrency will be taxed as income, which basically means that if you buy and sell Cryptocurrency within the same year now whatever your profit was, that will be added to your income just as if you earned it from a job and be taxed at whatever your income bracket is.
The 2nd way capital gains Tax works is if you hold your cryptocurrency for more than a year and then sell it, the tax rate is different. It's not ordinary income, it's usually between 15 and 20%.
But again, these rates change often, so be sure to just check into it before trading cryptocurrency.
The second thing and last thing I want to talk about is short selling. So currently on Coinbase Pro you can't actually short sale. In fact, there's a very few exchanges that allow short selling of cryptocurrency. Short selling is basically selling cryptocurrency that you don't own. You borrow it and then sell it and hope to buy it back at a lower price.
So this is an entire investment in trading strategy that works out really well for a lot of people, but I would encourage you to learn a whole lot more about it before diving into it, and I'm not going to spend any more time on that here because it's pretty limited in the cryptocurrency space, but if you have more questions, feel free to comment below about it.
And that's it for this video, I hope it was helpful! I hope you learn something new. Thank you so much for being here and watching these videos.
I'm Brian Logen.
Remember to stay healthy, love your family and elevate your wealth.
Thank you for breaking it down, I’m so new to this and have no clue what I’m doing but you cleared some things up.
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