When to Take Profits on Crypto Trading

It is beneficial to take profits when trading bitcoin and other cryptocurrencies, but how? This guide explains when to take profits on crypto trading.

If you’ve been involved in the crypto world for any length of time, you likely have questions about when to take profit. After all, this proves one of the key factors for distinguishing profitable crypto traders from unprofitable traders.

Of course, you must consider a variety of factors before deciding how to take profits in crypto. For example, you’ll need to consider why you’re entering each trade and where you expect it to take you.

You’ll also want to think about your plan should the market go south and you need a quick escape route. Is trading crypto profitable? Yes, if you learn the fine art of discernment and have the right crypto investment resources at your fingertips.

Here’s what you need to know about when to take profits on crypto.

How to Take Profits in Crypto

When it comes to taking profits in crypto, there’s a lot you need to bear in mind. After all, the volatility of digital currencies represents a double-edged sword.

It’s common to see multiple four to five percent moves within the span of just 60 minutes. Occasional spikes of forty or even fifty percent aren’t unheard of.

The advantages of crypto markets prove obvious. For example, they remain more accessible. But here’s where the double-edged sword metaphor comes into play.

You see, inexperienced traders gain easy access to crypto exchanges, and there they may get presented with life-changing financial opportunities in the form of volatility.

At the same time, this volatility represents a trap to these newcomers, especially if they allow their emotions to get in the way of logic.

Crypto vs. Stocks: Different Markets, Different Strategies

Many crypto newbies make the mistake of assuming that cryptocurrencies and stocks represent similar investments. But these markets are ultimately quite different and require unique strategies.

Remember that if you want to make a take-profit strategy work on the crypto market, you must approach it in a highly objective manner, free of emotions. Don’t get into the habit of waiting for more gains after hitting your profit targets, for example.

Because of the crypto market’s volatility, HODLing could cost you dearly. Don’t fall into the trap of sitting through massive gains without taking any profit.

Prices can turn on a dime, and sitting on assets can lead to rapidly dwindling portfolios. Instead, make an investment plan and stick to it no matter what.

Know What a Take Profit Strategy Looks Like

It will also behoove you to come to some decisions ahead of time about what you want your take profit strategy to look like.

For example, some traders prefer to exit their entire position simultaneously. Yet, other individuals prefer to baby step out of the market with exit orders across a range of prices. You need to make a decision ahead of time about your approach and then stick with it.

Remember that if you choose to leave incrementally, you must set stop-loss order. Why? This step will ensure you don’t lose all of your gains.

How does a stop-loss order work? Consider the following example.

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Let’s say you have a one Bitcoin long position at $3,300 and an exit of fifty percent of the position at $4,000 for $350 of profit. What to do? Options include setting a stop-loss order at break-even $3,300 to stop losing money.

But if you see Bitcoin starting to nosedive, you can close the original order completely. In other words, setting a stop-loss order at break-even lets you avoid losing money on an already profitable trade.

When to Take Profit Cryptocurrency

What’s the bottom line when it comes to taking profit on cryptocurrency? That depends on your level of comfort with risk and ultimate goals. Nevertheless, there are a few strategies worth considering.

They include:

  • Keeping your eyes open for divergence
  • Paying attention to Fibonacci levels
  • Watching for pivot points

When it comes to becoming a crypto trader, honing the three strategies above will help you become a veritable boss.

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Keeping Your Eyes Open for Divergence

What is divergence? The disagreement between the indicator and price. It can have significant implications when it comes to trade management.

The amount of agreement or disagreement proves relative. As a result, don’t be surprised if you recognize several different patterns that evolve in the relationship between price and the indicator.

To make momentum analysis valid, price swings must be of sufficient strength. For this reason, momentum is useful in active trends. But it’s not helpful with range conditions where price swings prove variable and limited.

When does divergence in an uptrend occur? When the price skyrockets, but the indicator does not. Divergence happens when the price decreases, yet the indicator doesn’t reflect the downtrend.

There’s a higher probability of a price retracement when divergence is recognized. Ultimately, divergence can assist the trader in recognizing and reacting appropriately to a change in price action.

It indicates change and means the trader must decide whether it’s tightening the stop-loss or taking a profit. Your ability to recognize divergence will contribute to increased profitability.

How? By alerting the trader to protect profits.

Paying Attention to Fibonacci Levels

The crypto market, by its very nature, also tends to push prices to Fibonacci levels. If you pay close attention to these levels, especially concerning retracements, you’ll gain the hometown advantage when it comes to cryptos.

Remember that crypto markets are, to some extent, influenced by algorithms and automated trading bots. This market environment tends to push prices to Fibonacci levels.

In most cases, there will be some reaction as a result of different Fibonacci levels. This can provide a temporary liquidity pool for you to close a position and take profit.

In addition to Fibonacci levels, it’s also common to see price reactions at pivot points.

Watching for Pivot Points

You can calculate pivot points to determine changes in market sentiment from bullish to bearish.

In particular, day traders use pivot points to determine levels of profit-taking and entry points and stops. When it’s all said and done, think of pivot points as intraday technical indicators.

Use them to identify reversals and trends primarily in commodities, equities, and forex markets.

Trading in Cryptos

As you can see, the right strategies can help you succeed in making money on digital currencies. But before you can ask how to take profits in crypto, you must realize that investing and trading in cryptos is a world away from stocks.

You can’t rely on the same approach, and you’ve got to get used to recognizing the “tells” of cryptocurrency, so you know when to get in and when to bale. Once you become more familiar with how these assets work, however, get ready to experience significant returns.

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