What Is A Good Take Profit Percentage In Crypto
Most traders starting in the crypto markets tend to focus solely on buying and identifying the best entry points but neglect what happens after they have bought. But experienced traders with a couple of years of trading under their belt will tell you that selling is equally if not more important than buying.
While there is no magic formula for selling, there are several strategies that you can use to maximize your gains while taking profits in the crypto markets. If you are unsure about how to take your crypto profits, we have got you covered. This article will share with you the strategies that you can use to maximize your gains in the crypto markets.
Taking Crypto Profits Vs Holding Crypto
While the term HODL is synonymous with crypto, holding crypto regardless of market conditions might not be the best option. This is because losses work geometrically against you.
As the losses get larger, the gains that you need just to break even get exponentially larger. So if you sit through a 50% decline, you will need the price of the crypto to go up by 100% just to break even! While there are some crypto that experienced 50% or more declines that managed to recover and make new highs after that, there are many more that did not recover from such declines. For every BTC and ETH, you have LUNA, SQUID, SAFE, SpaceBIT and more.
Furthermore, taking profits can help you avoid the regret of not selling at the right time. It can be tempting to hold onto a winning investment, but there is always the risk that prices will fall, and you will miss out on gains. By taking profits, you can avoid the emotional rollercoaster of watching crypto prices rise and fall and instead lock in your profits.
Advantages And Disadvantages Of Taking Profits In Crypto
We have highlighted some of the advantages of taking profits in crypto above. While there are upsides to taking profits, there are also downsides.
The advantages of taking profits in crypto are as follows:
- Allow you to keep and lock in your profits
- Minimize drawdowns in your portfolio
- Redistribute proceeds to other assets and rebalance your portfolio
That said, taking profits in crypto also comes with its disadvantages.
Disadvantages of taking profits in crypto:
- Have to spend time closely monitoring your portfolio
- Potentially miss out on larger gains
Set A Trading Goal
Now that you have weighed the pros and cons of taking profits, let’s move on to how you can optimize your crypto profits.
The first thing you need to do before you even put on a position in the crypto markets is to have a trading goal. Setting a trading goal helps you determine your purpose for taking on that position and outlines specific targets you aim to achieve. Some factors which can influence your trading include financial goals, risk tolerance, and trading time horizon. By having a well-defined trading goal, you can better identify what a good take-profit percentage would be for a particular trade.
For example, if you have a short-term trading goal, you might set a lower take-profit percentage to achieve a quick return, while a long-term investor may set a higher percentage, as he or she plans to hold the asset for an extended period.
Why Did I Buy This Crypto
Before you enter a position in a crypto, you need to know the reason why you are going long or going short. It can be a fundamental or technical reason or even both, but you need to have clear reasons why you entered your position in that crypto.
Risk Appetite
Risk appetite refers to the amount of risk you are willing to take on to achieve your profit target. It varies from trader to trader as risk appetite depends on personal factors such as age, financial situation, trading experience and more.
A trader with a high-risk appetite might set a higher take-profit percentage as they are more willing to tolerate the volatility of the market to achieve potentially higher returns. On the other hand, a trader with a low-risk appetite is more likely to set a lower take-profit percentage to minimize volatility in his or her portfolio.
Are There Better Opportunities
As traders, we only have a limited amount of capital that we can deploy in the crypto markets at any given time. If all of your capital is already tied up and you are unable to deploy it, you might miss out on other potentially better opportunities.
Holding onto your existing crypto positions can limit your potential gains and leave you with missed opportunities. If there are better opportunities, selling and taking profit in your existing crypto positions can be a wise move. By doing so, you can free up capital to invest in other potentially more profitable opportunities.
Understand This About Trading
Trading is not about picking tops and bottoms. Even the best traders in the world are not able to consistently pick them. Many have suffered significant losses trying to pick the exact tops and bottoms. The faster that you understand that you will never be able to consistently sell at the top, the better off your trading will be.
But the good news is that you do not have to pick tops and bottoms to be successful in the crypto markets. The goal is to keep your losses smaller than your gains and do that consistently.
Determining a good take-profit percentage in crypto trading requires consideration of various factors such as the reason you bought the crypto, your trading goals, and risk appetite. While there is no one-size-fits-all answer to this question, you can use the strategies and tips outlined in this article as a guide.
Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service.
Trading digital assets and digital asset derivatives comes with significant risk of loss due to its high price volatility, and is not suitable for all investors.