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RE: Understanding Coinbase/GDAX ETH crash and how to protect your investments

in #gdax7 years ago

Great post and a very important topic especially for non-professional traders who have no idea whatever who they give their money to and how it's 'managed'.

To sum up your article and make it short and sweet:

You do not use stop-loss orders in volatile markets PERIOD. The reason being that as soon as the decline in market price is anything less than ultra smooth you will end up in a position where your order becomes a trade when the market reopens which it potentially does at a SIGNIFICANTLY lower price. The logic being that at reopen the order checks for market price and triggers because the stop-loss price has been breached. It then sells everything at the next best highest price (like 11 cents instead of 9).

If that option converts your GDAX stop-loss into a stop-limit that'd be good but I'd carefully read the fine print on that given the reputation of these exchanges.

People please for the love of god do not let an exchange manage or store your crypto! That's calling for disaster. Keep it offline, buying and selling is just as easy only this type of stuff cannot happen.

If you are a professional trader and do this every day, day in day out and fiddle with some chunk on an exchange fine. But then you would NEVER use a stop-loss order in an unstable and volatile market such as cryptos.

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Thanks for your comment, I'm glad that it was insightful.

I think that stop-loss and stop-limit, when used correctly, can, in fact, save a lot of money when let you leave in the first wave ensuring most of your profit. You need to know what you're doing or this tool can be even more dangerous than hold.

Absolutely true, buy and hold would be my suggestion for non-traders anyway but that's just me.

Thing is Coinbase is just a sketchy disaster, no customer support, throttling users when price is down so they can't buy and generally just unstable as hell.

Someone once said buying gold is flying in a 747 and buying silver is flying in an F-16 - same speed but vastly different flight experience. Cryptos is about 10 times worse than an F-16 in terms of volatility. If you know that and act accordingly you're good.