Imagine you buy Bitcoin at $50,000 and are willing to risk a 10% loss, so you set a stop-loss at $45,000. In the event that Bitcoin slides to $45,000, your position will exit automatically, and you’ll be spared additional losses if price continues to fall. This also saves you the trouble of keeping watch and inputting a manual order.
A word of caution though, setting stop-losses can be tricky because markets fluctuate, even when trending in a solid direction. Setting a very tight stop-loss, say 0.1%, is a minimal risk but is almost certain to trigger. So while your assets will have been ‘protected’ you may also miss out on profits. Some breathing room is required.