People are always advised to take profits when trading cryptocurrencies to avoid cases of lose of assets and unforeseen circumstances due to the volatility of the crypto market. Cryptocurrencies are very volatile assets whose price can either rise or fall at anytime. Sometime, the markets even gets unpredictable for professional traders. Taking profits when trading cryptocurrencies is a must if you are not strong enough to HODL. I would be sharing my story on why I always take profits when trading cryptocurrencies and how I do that.
REASONS WHY I ALWAYS TAKE PROFITS WHEN TRADING CRYPTOCURRENCIES
Investing in cryptocurrencies is risky as is already known and that is why everyone is advised to do a proper research before investing in any project. Sometimes, the market volatility and other factors cause the price of cryptocurrencies to go down, thereby forcing traders to panic sell. When cases like this occur, a good number of people sell at prices lower than what they bought leading to lose of capital. To avoid losses like this, traders are advised to always take profits when trading cryptocurrencies. Some of the reasons why I always take profits are;
- MARKET VOLATILITY: The volatility of the crypto market is the major reason why anyone would want to take profits. The prices of cryptocurrencies fluctuates all the time. Sometimes, they go so low that investors barely escape with 10% of their initial capital and sometimes, they go really high that investors make more than 10,000% profit on their investments. The market volatility is caused by different factors such as big industry news, launch of new product, announcement of partnership and so on. During bull runs, the prices of crypocurrencies are high and during bear runs, the prices go low. Traders are advised to take as much profit as possible during bull runs to avoid being cut up in the bear which sometimes lasts for years.
- WHALE EFFECT: In the crypto space, investors who own a relatively large amount of a particular cryptocurrency are known as whales. Most times, these investors have the potential to control the market and when they dump, it hurts the token price badly. Traders should beware of whales and should always make sure to take profit so as to avoid being cut up with excess price dump when whales sell. To prevent the effect of whales, many projects have begun to implement anti-whale features in their smart contract and this has really helped to prevent too much fluctuation.
- TAKE PROFIT TO RE-INVEST: Another reason why you may want to take profit is to re-invest in more promising projects. Investing in projects early brings in more profits than investing when the project is already popular. When investing in projects, it is always good to do a proper research so as not to fall into the hands of scammers. Taking profits from your already profitable investments to invest in well researched low cap gems is one of the reasons traders are advised to always take profits when trading cryptocurrencies. It is easier to make profits from a low cap gem than making profits from an already established cryptocurrency.
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WHEN TO TAKE PROFIT DURING CRYPTO TRADING
When trading crypto, it is important to know when to take profit so as to mitigate your possible losses since it is a very risky investment. When trading, make sure to follow the steps below in order to trade safely and reduce risks of losing your capital.
- SET A TARGET: When trading cryptocurrenies, it is important to set a target on when you want to take profit. When this target is met, it is advised that you sell and take some profit. You may see a particular coin at it’s all time high and tomorrow it falls 90% below it’s all time high. Do not try to exceed your target when it is met. It is better to make little profits than losing your trading capital. After taking profit, if you must get back in the trade, I would advise that you study the market condition properly. The best way to set a limit is by using limit orders in centralized exchanges. With this, you can easily set a buy and sell order limit.
- PAY ATTENTION FOR BULLISH OR BEARISH NEWS: Since the crypto market is mostly controlled by sentiments, it is important to pay attention to certain industry news. When negative announcements are made about the industry, it most likely affects the prices negatively and when positive announcements are made, it affects the prices positively. Paying attention to these kind of news will help traders know when to take profit.
Investing in cryptocurrencies is risky and everyone is advised to take profit whenever possible to help reduce the risk of possible lose of capital. Setting a target is the best way to know when to take profits and it is important not to be greedy when trading cryptocurrencies to avoid being caught up in a trap. Taking profits when you aren’t hodling is the key to not losing your money in the crypto space.