When To Take Profit? - Cryptocurrency Explained For Beginners
When you decided to join the bandwagon and invest in cryptocurrency, it does not end after buying your crypto coins. Purchasing is just the beginning of the journey. You need to do and learn many things, including when to take profit cryptocurrency.
It is vital for traders to know when to take profit to distinguish which cryptocurrency is profitable and which ones are not. To know when to take the profit, ask yourself these questions: 1. Why did you enter this trade? 2. Where do you expect will this trading venture take you, and 3. Do you have a plan if the market turns against you, and what are those? By answering these questions, you will be able to learn how to make profits in crypto and make a plan for your next move.
How To Know When To Take Profit Cryptocurrency
Build a Strategy
It is essential to build your own unique trading strategy to become successful in this venture. In most cases, people usually just hold on to their coins when there is a big bull trend happening. Then, the top and the dip comes, and they are still holding on to them. The coins will hit a full correction, and they wonder why they didn't sell. This is a common mistake, especially for new traders.
When trading, always take profits on the way up. This ensures that you make profits as well as allow you to have some liquidity in case a correction or dip happens. Always seize the opportunity as you may never catch the next top, and no use in trying anyway.
Look for Divergence
One way to know when to take profit cryptocurrency is understanding the divergence between price action and relative strength index as this is vital to find profitable entry and exit prices. Divergence may mean nothing to those who are not familiar with it. Still, professional traders are always on the lookout for it as it can give them key trading signals to support marketing analysis. There are two indicators to use to look for divergence against the price. These are the Relative Strength Index (RSI) and On-Balance-Volume (OBV). Also, look out for the types of divergence: two bullish divergences and two bearing divergence.
- Bullish Divergence - can be found when the price prints a lower low, but a corresponding indicator prints a higher low. Hidden bullish divergence is vice versa.
- Bearish Divergence - can be seen when the price prints a higher high, but the corresponding indicator has a lower high. On the other hand, hidden bearish divergence is when the price shows a lower high, but the related indicator is higher.
Check Fibonacci Levels
Another way to learn when to take profit cryptocurrency is to check Fibonacci levels. The market environment in cryptocurrency tends to push prices to Fibonacci levels. You can take advantage if you pay attention to Fibonacci levels, especially if there are retracements. Usually, there will be a reaction of various Fibonacci levels that can provide a temporary liquidity pool for traders to close a position and take profit.
How To Maximize Profits When Selling Cryptocurrency
Find the Next Bitcoin Peak
Nobody can really tell what the future holds for cryptocurrency because of the market's volatility and some unforeseen black-swan events. However, looking at some historical data can give you information and insight into the potential movements and learn when is a good time to sell.
Based on some data, there is usually an initial bull run followed by a price top that ends with over 50% drop. After this, there is an accumulation period followed by a new bull run.
When Should You Sell
When you start selling your crypto coins early, you will get your ROI faster, but you'll have more profit per transaction if you wait and sell later. These two concepts should be considered, and as a trader, you need to play around with these two in setting your crypto coins' selling price levels.
Assuming that a coin's price will reach $200,000, then the potential selling price will be around $100,000 to $200,000. If you are more on the cautious side and want to start selling soon, you can begin selling for approximately $50,000. To get more profits, it is essential to know your portfolio's percentage to sell and what to keep.
How Much Should You Sell
To know how much you should sell, you need to ask a crucial question: how many crypto coins am I willing to part with? If your main goal is money, you will want to sell almost 100% of your crypto stack. But, if you believe in the future of cryptocurrency, you may want to keep at least 50% of what you have.
What You Should Do With The Profits
To execute a trade properly, know where you want to invest the profits after taking it before liquidating them. Or you can make your own game plan. Doing so can help you devise a strategy and lessen your stress level when dealing with it since you have thought about it prior to making decisions. Making decisions is vital in the cryptocurrency trade. This is why it is essential to plan and be decisive.
It is vital to keep a logical mind and keep emotions at bay when dealing with cryptocurrency investments. Learn how to buy and sell cryptocurrency for profit, stick to your plan, and know when to take profit cryptocurrency whenever there is an opportunity.
Note that you will never make money if you do not make a profit when crypto trading. You need to arm yourself with the right knowledge and information in this trade to make wise decisions and make great deals. Every trader has their own goals and targets before they enter cryptocurrency trading, which is why comparing and mirroring yourself with another trader is a recipe for disaster. Learning from other traders' experiences can be helpful, but have your own style and strategy. There is no need to follow what everyone else is doing. Learn for yourself. Find out more about cryptocurrency trading here!
UPDATED March 5, 2021
By: Hunter Shultz
With the increasing number of people and establishments taking part in digital money exchange, this phenomenon has undeniably created a need for banks to offer traditional banking services but deal explicitly in cryptocurrency.
UPDATED February 2, 2021
By: Paulette Dane
Foreign exchange is among the largest markets out there. With a daily volume of almost 6 trillion dollars, moving money worldwide definitely promises great returns on your investments.
UPDATED February 1, 2021
By: Hunter Shultz
Cryptocurrency trading can be a lucrative career if you know how to do things right. Applying the proper strategies in trading cryptocurrency can earn you profits even as a beginner.