If you’ve been participating in the crypto realm for any duration of time, you’ve probably wondered when it’s time to cash out. And besides, this is one of the most important aspects in determining whether or not a crypto trader is profitable. It frequently needs careful planning and discipline. It’s a good thing you have the problem because it signifies you’ve made money. It can, however, be challenging, especially if you don’t have a clear plan for what you want to do with the money you’ve earned. Knowing when to take profits is an important aspect of being smart and avoiding losses.
What does a take-profit approach entail?
It’s a good idea to make some judgments in advance about how you want your take profit strategy to look. Some traders, for example, like to close out their entire position at once. Others, on the other hand, choose to take small steps out of the market by placing exit orders at a variety of prices. You must make a decision regarding your strategy ahead of time and then stick to it.
If you’re going to exit in stages, keep in mind that you’ll need to put a stop-loss order. A stop order is an order to buy or sell crypto at market price after it has traded at or through a predetermined price (the stop price). When the stock reaches the stop price, the order is converted to a market order and filled at the next available market price. It helps you not to lose all of your gains.
How do you maximize your profit?
It is impossible to win every time, but you can give yourself the greatest shot imaginable. Reading the white paper of each cryptocurrency, you’re interested in and all the material available on the web, as well as on social media, will help you learn more about it. You can begin by taking a part of your winnings in the 30% range. Instead of waiting for a 50%-100% increase, focus on a smaller increase to avoid being caught in a disheartening 20%- 40% correction that can occur in the rapidly changing crypto market.
After you’ve taken out your earnings or hit your desired price, consider putting them in stablecoins. This way, you can use them to gain interest in providing liquidity in DeFi projects. Plus, you may save your earnings in the crypto market by assigning them to stablecoins, which are unaffected by market fluctuations. Furthermore, because you do not have to wait days to transfer cash, you may easily buy other coins with stablecoins.
Strategies to use to know when to take profit
Holding and DCA investment strategy
This is especially helpful for long-term investing. Dollar-cost averaging (DCA) is an investment method in which the total amount to be invested is divided up into periodic purchases of a target cryptocurrency in order to reduce the impact of volatility on the overall purchase. The acquisitions are made at regular intervals and regardless of the asset’s price. If you want to sell your cryptocurrency to lock in a profit, conduct your research to determine the coin’s long-term value. You may try holding on occasion then take profit, especially if it’s a coin you believe in.
Taking profit after the market correction
This is done by buying the dip. Purchasing an asset when its price has plummeted is known as “buying the dips.” When the market corrects, and prices rise again, the idea is to sell it later and profit. There are three scenarios when you can buy the dip.
Buy the dips when there is an uptrend. When the price of an asset rises in a typically upward direction, it is said to be on an uptrend. Its peaks and troughs are frequently higher than the previous ones. What this means is that if the price decreases, there’s a good probability it’ll rise again, and that’s when you will take a profit.
You can also buy the dips to enter a crypto network. When the price of a cryptocurrency drops, it’s a fantastic moment to invest in a crypto network and begin earning additional coins. Staking is another name for this. Purchasing the dips in a staking network allows you to begin earning at a cheaper cost. After the crypto earns value, it is time to take a profit.
Additionally, you can buy dips of well-known cryptocurrencies and take a profit once it rises. Bitcoin is a wonderful example. It’s one of the most volatile assets in history, having weathered some of the worst financial meltdowns.
Using technical analysis to take profit
You can use different technical analysis tools to guess when to take profit. Many charting applications, for example, TradingView, have indicators that can also be used.
Be alert for any signs of divergence
Divergence occurs when a cryptocurrency’s price moves in the opposite direction of a technical indicator or against other data. Divergence signals that the present price trend is weakening, and in some circumstances, the price will change direction. It’s time to take profit once you’ve identified the signal.
Use Fibonacci retracements
The Fibonacci sequence is a trading concept that works across all timeframes and markets. The levels that are most typically used are 138.2 and 161.8, but you can customize your own. The majority of traders employ it in the following manner: A 50, 61.8, or 78.6 retracement will often go to the 161 Fibonacci extension after breaking through the 0%-level. A 38.2 retracement will often come to a halt at the 138.2 Fibonacci extension.
There is no secret formula for timing the market, but there are tactics you may employ to optimize your profits before withdrawing your cryptocurrency profit. Holding and a DCA investment strategy is both solid bets for long-term investments. You can also apply technical analysis like the use of Fibonacci retracement tools and take a profit after buying a dip following the market correction.