Skip to main content

Why Are Stop-Loss Orders Less Effective in Low-Liquidity Cryptocurrency Markets?

In low-liquidity markets, there are fewer buyers and sellers, leading to a thin order book. When a stop-loss order triggers, the resulting market order may consume all available bids or offers at the stop price.

This forces the order to execute against prices much further away, leading to extreme slippage and larger-than-expected losses.

What Is the Difference between a ‘Stop-Loss’ Order and a ‘Limit’ Order during a Flash Crash?
How Does a “Stop Limit” Order Combine a TIF Concept with Price Control?
Why Are ‘Stop-Loss’ Market Orders Particularly Susceptible to High Negative Slippage?
Explain the Role of “Stop-Loss Hunting” in Exacerbating a Flash Crash