The crypto market ebbs and flows with volatility, creating endless opportunities for buying, selling, and taking profits when the time is right. While there's no magic formula for timing the market and knowing when to take crypto profits and get out or stay put, there are several tips and strategies you can employ to maximize your gains when taking profits in crypto.
We have got you covered if you are thinking of taking your crypto profits but are unsure how or when to do it because you lack the proper crypto profit-taking strategy.
What Does Take Profit Mean?
Taking profits is the deliberate act of selling crypto or another security to lock in gains after appreciation. Unlike HODLing, it often involves regular trading and market participation. HODLing, short for "holding on for dear life," is a hands-off form of investing.
We share three significant strategies that you can use to take profits in the crypto space.
1. Reverse Dollar Cost Average
One of the most recommended and proven methods for building a portfolio is the ''dollar cost average''. Spreading your purchase into smaller pieces over a more extended period to create a strong average.
Did you consider the opposite also to be true?
While timing bottoms or tops are near impossible, most people can at least tell whether we are in a bull or a bear market. We can see when assets are dramatically rising or dropping after all. Consider selling 5% of your portfolio every month on the same day.
You will often sell too soon and sell too late, but you will have the perfect average profit during an entire run. Best of all, you do not need to be able to time the market or stress about anything.
Relax and let the strategy do its work.
2. Fundamental Triggers
If there is anything close to a blueprint for timing the markets, it is this right here. This is a favorite and the one to use most of all. Do you know what is also great? It is still not the most difficult one. It just takes time and research.
Price heavily reacts to fundamental updates. If there's a big update happening soon, like the release of smart contracts or a product development update, you can be sure the price will rise in anticipation of that. The opposite is also true.
After the update's release, the price will respond negatively and drop since most of the anticipation and hype will disappear. It is precisely for this reason you will want to take profits off the table exactly a few days before the actual release.
It is still acceptable if you sell on the same day, though. Just do not wait too long. Want another cool trick? Buy solid projects 2-3 months before a significant update. Combined with this profit-taking strategy, it will do wonders.
3. Technical Triggers
This one is for the more experienced traders out there. A particular psychological element exists in price struggling to break previous historical price levels. Quite often, price responds to buyers' and sellers' activity from the past.
However, the benefit of this last strategy is that it is a lot less time-consuming than the second one. It does take lots of practice and experience in the markets, though. Take your time to learn this one first.
Final Thoughts
Regardless of the crypto profit-taking strategy used, taking profits in crypto largely depends on one's risk appetite and investment timeline.
Additionally, the right trading strategies can help you make money with digital currencies time and again. However, before you even begin thinking about taking profits in crypto, you must get used to recognizing specific cryptocurrency signals or "tells" to know when to buy and when to bail.
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