San Stop Loss, the protector that will save your investments. Why is it so recommended to set it?

By Pablo Fernández

In this Post our intention is not to go into much technical depth of the types of Stop Loss that can be set, or how to set them. There are plenty of forums and content with that kind of easily accessible information.

Our intention is to share our strategic vision on the use of Stop Loss, and why we think it is an essential tool when investing not only in Cryptocurrencies, but in any type of financial asset.

What is it?

Fundamentally the Stop Loss it is tool to avoid losing your entire investment portfolio if a continuous series of erroneous trades occur.

As you already know, it consists of establishing an order at a price below the entry price of your trade, which once reached, causes the system to automatically execute an order of sale (or purchase depending on the type of trade) and that comes to mean that you give up the investment you had made, that you assume the loss, and somehow, and this is the most complicated part, that you assume your mistake.

At Cardaniers we firmly believe in technical analysis as a fundamental criterion for investment in Cryptocurrencies.

We also believe that the Swing Trading, that is, in investments whose resolution period can last days or weeks, since it is also the most appropriate rate for this market.

And this is so, because the Day Trading (operations that are resolved on the same day), requires a level of dedication, technical knowledge, and available portfolio size, much higher than what most people can have.

And on the other hand the Long-term investment As such, that is to say, operations designed to remain for many months or even years, require a level of deepening in the fundamentals of each value, and a psychological profile, which most people do not have either.

Ok so let's say Stop Loss is a tool to protect our portfolio against ourselves.

Yes, you heard right, against ourselves.

What can I do with him?

By setting a stop loss immediately after executing a reversal, or a trade, we do the following:

We protect ourselves against errors in the investment criteria, whatever it may be

Because no technical analysis system is error free. No decision algorithm is perfect, none. There are a multitude of uncontrollable variables, a multitude of risks, some of them systemic, and a multitude of new circumstances that are constantly occurring and that have not been taken into account by any analysis system, precisely because they are new, and can only be taken into account for the future.

If there are any of those variables that you did not take into account, and we have not established a maximum loss margin, we would lose the total value of the investment. But what is even more serious, if during a long enough season, this situation occurs repeatedly, which is also something perfectly feasible, we would not lose the value of a specific investment, but the entire portfolio.

And this is the risk that under no circumstances can be assumed.

We guard against our changing judgment

These changes occur as our value evolves, and so do we protect ourselves against self-deception that many times cover up these changes in criteria.

Because one of the greatest difficulties we have as human beings is accept the mistake.

we need to be right in order to survive. Not only when investing, but in anything. In a conversation, in a discussion, in our personal relationships, in our professional performance. We believe that being right makes us who we are, and allows us to sustain our self-concept and assert ourselves.

And it is too frequent that non-professional investors, when they see that a value they had bet on falls (or goes in the opposite direction to the bet) begin a process of self-conviction, which usually carries with it a certain level of doubt, and with it a certain level of suffering.

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This process is aimed at imagining as real the multiple reasons that we are capable of creating, for which our value will straighten its trajectory, no matter how many signs there are that it will not be so.

Sometimes, the subjective and “magical” conviction that the value will simply go up is enough.

The reason for this type of process is often emotional type. It seems to us that the suffering of accepting our error (or that of the system in which we trust) is greater than that of abandoning ourselves to magical ideas without contrast or foundation.

We protect ourselves against the Pernicious Mathematics of Recovery

That is, we believe that if we wait, our value will recover. But it's possible no one ever told you how much a stock has to grow to recover from a major loss.

Look at the following chart:

It is important that you are aware that if you have lost a certain percentage, in order for your value to recover the starting price, you have to do a percentage path much more important than that of the loss that occurred, that is to say, that under equal conditions it would require much more time and much more favorable circumstances to return you to the initial situation.

Some technicians advise not to assume a loss greater than 20%, but this is again a subjective figure, each expert can give you a different figure, but it is important that you be aware that Mathematically, the effort a security makes to recover is greater than the effort it makes to fall.


Always, we repeat, always, a certain percentage our investments will go wrong. And some are dead wrong, it's part of the act of investing.

What we try is that investments that go well, are greater in number and percentage than those that go wrong (This is also why in our investments the Stop Loss percentage is always significantly lower than the Target Profit percentage).

It is solely and exclusively about this.

But for this we have to assume that we are going to make a mistake.

It is that blunt and indisputable.

We are going to be wrong many times.

And this idea is something that the sooner we are able to incorporate and above all to accept, the sooner it will allow us to naturally fix and manage our failed investments, and before it will make it easier for us to make our portfolio grow.

We hope we have been of help to you, and if you want to comment on anything, you know where we are.

In addition, we have prepared a simple tutorial for beginners so you know how to use Cardaniers Alert Pro in a very intuitive way:

<< Click HERE to learn HOW TO OPERATE FROM BINANCE with Cardaniers Alert Pro >>

The Cardaniers team

Cardaniers is a financial information channel, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risk, including the risk of permanent and total loss. Past performance is not indicative of future results. Proven strategies are not recommendations. Consult your financial advisor before making any financial decisions. Investing in crypto assets is not regulated, may not be suitable for retail investors and may result in the loss of the entire amount invested. Past performance is not a reliable indicator of future performance.

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