Profit taking strategy crypto
Sometimes, especially if it's a coin you believe in, you could consider HODLing. Moreover, we recommend focusing on optimal gains. After all, it's impossible to time the market perfectly, and we don't need to hit a home run each time to grow our portfolio. Another benefit of focusing on optimal gains is that you can compound those gains by shifting those profits into other coins that are just starting a price run.
The compounding gains can lead to large overall earnings in your portfolio if you follow this disciplined approach. Lastly, it is reasonable to sell when you have other investment opportunities that you've DYOR on and would like to put your money in. Now that you have a basic understanding of when you should take out your crypto profits, let's move on to how you can optimize your crypto gains.
Below, we discuss four strategies you can consider following. Since the crypto market is volatile, it's advisable to place your sell order fractionally based on the market climate. Selling all your holdings in one go unless it has hit your target price and you are fine with selling all of it could lead to missing out on future potential gains.
Moreover, you might still want to keep a portion of your holdings to HODL. Keep your profits in fiat reserve-backed stablecoins Not sure what to do after you take out your crypto profits? Or has the crypto reached your target price, and you're looking to invest in something else? Consider keeping them in a fiat reserve-backed stablecoin.
This way, you can use them to gain interest by providing liquidity to DeFi projects. Besides, you can easily purchase other coins with stablecoins as you do not have to wait for days to transfer fiat. Sell and buy the dip You may also consider strategic trading methods to realize and optimize profits for crypto that you see long-term value in. For example, when a particular crypto is undergoing an upward swing, you could consider selling a portion of it and using the profits to buy more when the price has dropped.
Stake and earn interest You can also increase your profits by staking them on Binance Earn or opting for other investment products on Binance, such as staking. To learn more about recurring investments in crypto, read our article here. Investing In New Coins A strategy that some seasoned traders use is investing in new coins or innovative ICOs initial coin offerings to achieve a higher reward ratio.
When they profit from the initial investment in the principal coins, they then use a portion of the profit to purchase highly innovative yet riskier coins. This strategy might be suitable for those looking to build their portfolios with principal coins but want to invest a small portion of their portfolio in new and innovative coins that they believe have great potential.
Want to save yourself the extra work of making new coin purchases manually each time? In lieu of a crystal ball, here are five questions investors can ask themselves to figure out what to do next after seeing enormous profits in a single holding. Why did I buy it in the first place? This is a question you should ask yourself before buying anything as an investor because it helps define your risk profile and time horizon. Some investors prefer to buy and hold come hell or high water.
Others prefer to be more tactical in terms of taking profits or selling their losers. Many crypto advocates have decided to buy and hold for more or less forever. Tesla has a similarly strong shareholder base. Do I have a better use for this money? Is it possible Cramer will be missing out on further crypto profits in the future? Some people have a higher risk threshold when it comes to taking on debt. Are there better investment opportunities available? One of the simplest ways to keep yourself honest as an investor is to consider how you would invest your capital if all of your money was sitting in cash today and you had to start all over.
Would you still invest in the same asset classes, funds, or companies you own now? What would you do differently? What would remain unchanged? What does my investment plan say? A portfolio of stocks, mutual funds, ETFs, or any other investment is simply what you bought. Portfolio management is what comes next, and that requires an investment plan to guide your actions.
Portfolio management requires discipline and the foresight to plan your decisions well in advance, regardless of which way the markets go.
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In order for you to change your result, you first need to change the way you manage your portfolio. When you mix your own ideas and emotions with other inputs your judgment gets clouded. This is a poor way of managing your cryptocurrencies and you are bound to make mistakes. Are you looking to become a skilled crypto trader?
Check out our detailed crypto trading guides in our educational center. You will learn new strategies and how to read charts in real-time. In order to sell your crypto gains, you need to have balls. Think about it, if you sold your cryptocurrencies when everyone was making windfall profits you would go against the crowd and you would keep your gains while everyone else sold in panic in the next crash.
The opposite is true for when to sell. A parabolic move to the upside is most often followed by a crash that erases most of the increase. Even though that is the best option in most circumstances there is another way. Selling your crypto in parts during a market increase is a good way to take profits and keep what you have made.
This will ensure that you lock in at least some gains while still having a foot in the market. Sell different coins at different levels This is somewhat of an advanced strategy but sometimes it is required of you as an investor to liquidate some coins in your portfolio that is outperforming others. Many altcoin projects have different roadmaps and some of them get hyped at different moments.
This can create confusion with investors since most digital asset enthusiasts are used to seeing all coins rise at the same time. How to take profits and reinvest The idea of reinvesting your gains is a very good idea if you know how to do it. There are a couple of things you should know before you reinvest to make sure you reallocate your portfolio in the best way.
Simply buying other coins randomly will not cut it, your need a system that holds up and has a proven track record of success. Below are some tips that will put you ahead of the curve. Take part of your profits and invest them in a more stable cryptocurrency in the top 20 that you know has the potential to follow the market for a long time. Then take the other part of your capital and reinvest in some of the other projects that you are currently invested in to increase the positions.
Finally, if you have some capital left you can always reinvest in some coins that you consider more speculative. This investment is valid since you are using the money you earned in a previous investment and most of the capital is already put to work in other places. Rebalance your portfolio Rebalancing your portfolio is a great way to take profits on crypto and invest in lower-priced coins.
There are several crypto exchanges that offer automatic portfolio allocation such as Coinrule or Shrimpy. These platforms have built-in programs where you can tell the algorithm to sell coins that have increased and buy other coins that are still priced much lower. Buy the dips This is an old one but it still holds true. Using your gains to buy the dips is a great way to redistribute your capital. This might take some patience and time but it is definitely worth saving some of the capital from your previous positive investments for when the market pulls back.
This is an investment strategy that has been used for decades in traditional finance. How to take profits in crypto without selling There is a way of taking profits in crypto without actually selling your coins and leaving the blockchain. This is usually a cheaper alternative to converting your cryptocurrencies to cash and will help you out if you are an active investor.
Convert to a stablecoin Stablecoins are very useful when it comes to profit-taking. A stablecoin is a cryptocurrency that has its price pegged to a fiat currency such as the Dollar or the Euro. The stablecoin will represent the same value as you would have if you withdraw your coins to fiat money, but instead, you can keep them on the blockchain and avoid high withdrawal fees. Stake your coins A great way to utilize your stablecoins is to stake them and earn a reward at the same time as you are looking for new investment.
Many platforms such as Celsius Network offer high rewards for stablecoins and you can withdraw them at any time you want. Whenever a new opportunity arises, just withdraw your staked coins and invest them again with an even bigger size. Should you HODL all the time? There is one option to selling your digital asset every time the market peaks and that is to keep HODLing your coins without touching them. The good thing about this strategy is that you will be sure to follow the market up if you are invested in some of the major cryptocurrencies.
The HODL strategy is good if you can keep adding more funds when the market dips. This way your portfolio will keep growing year in and year out. Unlike forex FX or stocks, double-digit gains or losses are a common occurrence. In fact, it's common to see your account jump up or down by two percent just minutes after hitting the buy or sell button.
Taking profits in crypto by following a proven crypto profit-taking strategy will let you take advantage of these opportunities, and outpace a HODLer in no time at all. Fortunately, developing a strong crypto profit-taking strategy isn't very difficult once you understand support and resistance, Fibonacci levels, pivot points, and other key fundamentals of technical analysis.
Without proper understanding of these trading basics, however, the odds of becoming a successful trader and being able to take profits are greatly reduced. While knowing precisely when to enter and exit a trade largely comes down to understanding price charts and technical analysis, there are a few general signals to watch for.
Signs of Bearish Chart Patterns One of the best times for taking profits in crypto is when you spot the formation of a bearish chart pattern. Death crosses , head and shoulders , shooting stars and other bearish patterns often signal trend reversals, and should be incorporated into any crypto profit-taking strategy.
Lack of Upcoming Catalysts Another good example of when to take crypto profits is when the price of Bitcoin or another crypto you're vested in stagnates and loses upward momentum. This usually leads to price consolidation, which should serve as a possible exit signal in your crypto profit-taking strategy.
However, you should wait for confirmation from another indicator prior to placing a sell order. Change in Fundamentals Another good time for taking profits in crypto is when a change in fundamentals begins to occur. Knowing when these changes are taking place involves fundamental analysis. Unlike technical analysis, which relies on crypto price charts, patterns and indicators, fundamental analysis involves looking at the number of people buying and using a crypto, a change in the team behind it, and other available information to know when to enter a trade and when to take crypto profits.
Uncertain Macroeconomic Conditions Similar to a change in fundamentals, your crypto profit-taking strategy should also account for changing or uncertain macroeconomic conditions. Events such as wars, pandemics and recessions can have a significant effect on the stock, commodities, FX and crypto markets.
Any of these can cause major market disruptions, and can give clear signals for when to take crypto profits rather than watch them disappear. How to Take Profits in Crypto Deciding when to take crypto profits based on fundamentals or macroeconomic conditions is one thing, but determining exactly how to take crypto profits is quite another.
Do you set a random take-profit after a certain percentage gain, or should your crypto profit-taking strategy involve taking profits in crypto at certain areas of resistance — or by utilizing pivot points and Fibonacci levels? Smart traders use all of the above. Setting Profit Targets At some point, every trade has an exit. Entering a trade is easy, but where and how you exit determines how much you profit — or lose. When taking profits in crypto, trades can be closed according to a crypto profit-taking strategy involving the use of trailing stop-loss orders and profit targets when specific conditions are met.
Depending on your crypto profit-taking strategy, the profit target can be a specific price target or a percentage-based target. Regardless, when the price of the crypto reaches a predetermined level, the trade can be closed either manually or automatically by entering a specific target profit during trade execution. If the price of Bitcoin reaches this target level, the trade is closed.
In a nutshell, that's how to take crypto profits with price targets. To do so, you need to enter a stop-loss, which should ideally represent less of a price change than your profit target. This way, the reward will outweigh the risk. Risk vs. Reward Although you can never know percent whether a trade will be a winner or a loser, you'll be more likely to turn a profit when your reward is greater than your risk.
Taking profits in crypto by utilizing profit targets as part of your crypto profit-taking strategy also makes it possible to tell whether or not a trade will be worth taking. If the risk is greater than, equal to, or even not considerably less than the profit potential, then the trade isn't worth taking — and you should wait or move on to the next opportunity.
In this way, determining a profit target can actually help you filter out poor trades. Using Technical Analysis for Exit Points Many traders use technical analysis to identify entry and exit points in order to maximize profit and minimize risk. While there are hundreds of technical indicators, chart patterns and tools you can use to analyze crypto charts and zero in on key entry and exit points, there are a few strategies in particular worth considering. Using the Tools The first, support and resistance , should be a part of any crypto profit-taking strategy.
When looking at the price chart of any crypto in almost any time frame, you'll notice certain areas where upward momentum seems to halt. These are known as resistance areas. Conversely, you'll also see certain areas where downward momentum is stopped or reversed. These are known as areas of support. Both areas are key. Whether you have an open buy order or sell order, keep your eye on these key areas and consider exiting the trade and taking profits in crypto whenever the price nears.
While the price will break through either support or resistance if the momentum or trend is strong enough, more often than not crypto prices will react and bounce off of these areas in the opposite direction. Fibonacci levels are equally important when learning how to take crypto profits. Well, the crypto market naturally tends to push prices toward the various Fibonacci levels.
By paying attention to these levels — especially retracements — and checking them as a part of your crypto profit-taking strategy, you'll gain the upper hand when it comes to taking profits in crypto.
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