Stop orders are used to enter a position when the price breaks above or below a certain level (the Stop price).
For eaxmple, if the price is currently 100 and you want to go long (buy) as soon as the brice gets to 110, you can place a Stop buy order with a stop price of 110
Similarly, if you placed a Stop sell order with a stop price of 90, you would go short once the price drops to 90. These are typically used to enter "breakout" trades when the price breaks through a key support or resistance level
To the set criteria based on how much an asset rises or lowers in price it is a good idea to have a plan in mind on when you would like to buy or sell an asset.
Currently a Stop Order, will not be visible in the book and will trigger a Market Order once the price hits the specified criteria.
Example: If I bought LTC at 82 EUR and would like to sell it in case the price falls below the 80 EUR mark, I would set a Stop Order at the 80 EUR price.
This offers an offhands approach to setting a Stop Loss, because it is always good to have a figure in mind on when you would like to exit if the prie starts dropping
Take profit can be set up by simply using a Limit Order at the price you wish to sell your asset to gain a profit.
Example: I bought ETH at 195 EUR and would like to sell it once the price reaches 240 EUR. I would set a Limit Order to sell my ETH at the 240 EUR mark.
The order will be visible in the books from the start and other traders will see that you are selling ETH at the 240 EUR mark.
Stop Loss- Set at a price at which the order automatically closes, when the price of the investment reaches a specified lower price.
Take Profit- Set at a price at which the order automatically closes, when the price of the investment reaches a specified upper price.
NB: Keep in mind this is true for exchange orders, but not margin orders.
In Margin trading a new limit or stop order will always open a new position, even if you have an existing open position for the same pair. (It's possible to be both long and short in the same pair at the same time in margin trading.)
In margin trading the take profit and stop loss are specified in the opening order or subsequently added to the open position.