Crypto Margin Trading Without a Stop Loss

We rate this tip S tier, and it is the plainest warning on this viki: George Vanous traded crypto on margin without stop losses, and his notes price the habit. "I lost $90,000 because I chose not to sell while it was dropping and it kept dropping", he wrote on Nov 25, 2020. On May 12, 2021: "Down $300K+ in 1 hour." On May 13 the position was, at its lowest, $1 million negative. The regulators' own pages explain why it can go that fast. The US Securities and Exchange Commission says a margin investor can lose more money than they invested and that the firm may sell the holdings without contacting them first. Everything below is one person's dated losses and the rules he wrote afterwards. It is not advice to trade, and it says nothing about what to buy or sell.

We think the United Kingdom keeps its door shut on this: the Financial Conduct Authority, which has barred the sale of crypto derivatives to retail customers since Jan 6, 2021, said when it reopened crypto exchange traded notes that the derivatives ban will remain in place, and we expect that page to say the same when we next read it. Confidence: Likely. Check by: Mar 2027.

The words, as regulators define them

• Margin: borrowing from the broker or exchange to buy, with the investment itself as collateral. The SEC's worked example: buy a $50 stock with $25 of your own money and $25 borrowed, and a fall to $25 is a 100% loss, where a buyer who paid in full has lost 50%.
• Leverage: the multiplier that borrowing puts on every price move. The Commodity Futures Trading Commission's advisory on virtual currency says leverage amplifies the risk, and that traders whose market moves against them must add funds or close out and may lose more than they first put in.
• Liquidation: what crypto exchanges call the forced sale. When the collateral no longer covers the loan, the lender sells. The SEC's margin page describes the same thing for stockbrokers: the firm can sell without a margin call and chooses what to sell. The price at which that happens is the liquidation price in George's notes.
• Market order: buy or sell now. Investor.gov's Types of Orders page says it guarantees that the order executes and does not guarantee the price.
• Limit order: buy or sell only at a stated price or better. It may never fill.
• Stop order (stop loss): an order that waits at a stop price and becomes a market order when the price gets there. On the same Investor.gov page, a sell stop is the usual tool for limiting a loss on something you own.

What his notes record, in order

The figures are his, written on the day, and some are paper losses at a moment in time, so they do not add up to one total. His notes do not say how much leverage he used, and we have left out every account balance.

Nov and Dec 2020: the rules arrive one loss at a time

Beside the $90,000 entry sits the rule it produced: "Have strict stop-losses, decide what your maximum loss is before you take a position." The note does not name the coin. For scale, the Coinbase Bitcoin price that the St. Louis Fed republishes went from $19,185.07 on Nov 24, 2020 to $17,173.00 on Nov 26, a 10.5% fall in two days.

A month later the lesson came back in another form. On Dec 28, 2020: "I went to bed, bought all-in Bitcoin, and woke up to a big drop just 30 minutes ago!" The rule he wrote under it is in capitals in the original and says to set sell limits before going to sleep, even though that limits the upside. An undated line from the same weeks reads "Do not trade when tired", and explains: "You will make mistakes and feel emotion if it goes against your plan".

May 2021: the week that set the price

The same Fed series for Coinbase Ethereum frames the week. Ether stood at $4,172.50 on May 11, 2021, $3,800.24 on May 12 and $3,708.95 on May 13: down 11% in two days. By May 19 it was $2,498.21, 40% under the May 11 figure, and on May 23 it was $2,115.75, 49% under.

His entries track it day by day. May 12 opens with a belief and its correction: "ETH always goes up. Wrong!" May 13: "I could have closed my position at almost break-even yet I wanted it to go above, instead it dropped so far down", and he calls it "A $1 million mistake (how far negative it got at the lowest point)". On May 14 he sold 650 ETH, not to take a profit but to push the liquidation price down, in his words "to lessen the risk of losing everything", and wrote the rule again in capitals: "HAVE STRICT STOP LOSSES FOR ALL MARGIN ORDERS. I lost $300,000 in the best case".

Here is the arithmetic the definitions above imply, ours and not his: an 11% fall takes 22% of the trader's own money at two times leverage and 33% at three times. A 40% fall takes 80% at two times, and at three times the position is gone before the fall is finished. That is why a two day dip that an unleveraged holder sits through becomes a decision about survival for a borrower.

The rules he was given on a call

On May 19, 2021, the day Ether fell to $2,498.21, George's notes record a two-hour call and the rules he was given on it. Quoted as he wrote them down:

• "for leverage trading, max 1-2% stop loss of account"
• "risk management is the most important, have a stop loss always"
• "never go to sleep without a stop loss"
• "don't martingale on your losses (don't double-down on your losses)"
• "does not recommend day trading"

Seven months later, on Dec 6, 2021, he added two of his own: "Pick a strategy and stick with it", because "If you keep changing your strategy (as I did) then you will always lose", and "Never use emotion to buy or sell".

None of these is a regulator's rule. We found no SEC, CFTC, FINRA or FCA page that sets 1 to 2% of an account as a limit. They are what one trader told another after a bad week, and they are printed here as part of his record.

Two order-entry mistakes, and what a market order costs

The small entries are the ones a reader can check against the definitions.

Price in the amount box. At 4:55 am on Dec 6, 2020 his notes say "BIG MISTAKE mixed up price and ETH values". The order went through at $599.39 for 600 ETH while the market stood near $605, and he counted the cost as 600 times 5, $3,000. At 2:05 am the next night: "repeated BIG MISTAKE again", 599 ETH at $595.44 against a market near $599, about $2,400. Both times he added "pay attention". Both happened in the small hours, which is his "Do not trade when tired" rule in practice. He notes that the price happened to fall afterwards on both nights, so the slips cost him nothing in the end. That was luck.

Market against limit. On Nov 5, 2020 he sold with a market order and, in his words, "lost $16 of $16,100 because sold at 403.59 USD / ETH and 404 USD / ETH was possible if did Limit". Four cents in a hundred dollars is what Investor.gov's definition predicts for a calm market: execution is certain, the price is not. In a frightened market the gap is not four cents. On Dec 25, 2020: "Do not panic sell at market", and beside it, "Lost $19K". His rule for the other direction, written after a midnight purchase on Dec 30, 2020: "Never buy at market on impulse, there will always be another deal".

What a stop loss does not do

His capital letters make a stop loss sound like a seat belt. The regulators are more careful. The SEC's investor bulletin on order types says that once the stop price is reached the order becomes a market order, that the execution price can deviate significantly from the stop price, and that a short-lived swing can trigger it. FINRA's Order Types page adds that a triggered stop is filled as soon as possible at the current market price, which may not be the stop price.

So a stop loss sets when the selling starts, not the price it gets. On a day like May 19, 2021 that difference is large. It still answers the question his Nov 25, 2020 entry says he failed to answer in time: the decision to sell is made before the fall, by someone who is awake.

The United Kingdom's regulator went further than a warning. The FCA banned the sale of crypto derivatives to retail consumers from Jan 6, 2021, four months before the week in George's notes, judging the products unsuitable for retail customers, with volatile prices among its reasons, and estimating the ban would save them about £53 million. A different way to lose money on crypto without any leverage at all is on Cloud Mining Contract Losses, where the damage came from a contract's fee clause.

What we checked on Nov 10, 2026

The definitions come from the SEC's margin page and Investor.gov, the CFTC's customer advisory, FINRA and the FCA, all read that day. The prices are the St. Louis Fed's daily Coinbase series (each value as of 5 PM Pacific time), so they will not match the minute of any entry in his notes, which were kept in Dubai time. The dollar losses are his own figures: we have no statement or exchange record to check them against. We could not tell from the notes which coin the Nov 25, 2020 loss was in, what leverage any position carried, or which exchange's order form produced the swapped boxes, and order forms have changed since 2020. The adviser on the May 19 call is not named here.

Sources

• Margin: Borrowing Money to Pay for Stocks, US Securities and Exchange Commission, read Nov 10, 2026
• Types of Orders, Investor.gov (US Securities and Exchange Commission), read Nov 10, 2026
• Understanding Order Types: Investor Bulletin, Investor.gov, updated Aug 18, 2026
• Order Types, FINRA, read Nov 10, 2026
• Customer Advisory: Understand the Risks of Virtual Currency Trading, Commodity Futures Trading Commission, read Nov 10, 2026
• FCA bans the sale of crypto-derivatives to retail consumers, Financial Conduct Authority, Oct 6, 2020
• FCA opens retail access to crypto ETNs, Financial Conduct Authority, updated Feb 6, 2026
• Coinbase Bitcoin (CBBTCUSD), Federal Reserve Bank of St. Louis, read Nov 10, 2026
• Coinbase Ethereum (CBETHUSD), Federal Reserve Bank of St. Louis, read Nov 10, 2026
• George Vanous's notes, Nov 5, 2020 to Dec 6, 2021