In addition to our blog post, we have also highlighted a video on our home page published by content creator, Virtual Bacon. In this video, he explains a variety of strategies that are recommended by our team ranging from $1,000, $10,000 and $100,000 portfolios. Incase you missed it, the link is below:
https://www.youtube.com/watch?v=U9oj5ULbDS8
The demise of every trader typically falls into two categories; Greed and Failure to Secure Profits. I remember my first bull run where everything in my portfolio was skyrocketing and it seemed like there was no stopping it any time soon. At peak alt coin season, I would wake up to different positions in my portfolio being up as much as 20-30% on a daily basis, and some going as high as 500% over time. I thought the profits would never stop, and bought into influencers ideas on social media calling for double digit prices. The important lesson I learned here, quoting the infamous words of Isaac Newton “what goes up, must come down.” No matter how directionally bullish the charts are, how positive news circulating in the media is, it's inevitable that traders will take profit and you don’t want to be the one left twiddling your thumbs, holding your bag, and tricked into becoming exit liquidity for the professional traders.
All of this to say, learn from my mistakes and don’t be that guy who thinks their favorite crypto project is going to the moon, because I hate to break it to you - it's not.
There are several strategies traders can use when selling their crypto. In this blog post we’re going to explore three popular strategies each with varied levels of risk. Not every approach is right for everyone, that said… do what’s best for you in support of your own financial journey and always remember "GREEN IS GREEN, NO ONE EVER WENT BROKE TAKING A PROFIT."
Profit Taking Strategy #1: Trailing Stop-Loss
The first, a popular profit-taking strategy, which can also apply to option trading is the Trailing Stop-Loss strategy where a pre-determined percentage level (say 10%) is set for a specific target. Once your target is identified, as the asset price climbs, your trailing stop moves up accordingly maintaining the preset range. If the price stops rising, your stop-loss level remains at its previous position. Trailing stops are designed to lock in profits and/or limit losses as trades move favorably in your direction.
An example of a trailing stop-loss, if the initial share price of ABC stock is $100. When the share price rises to $150, your trailing stop-loss adjusts accordingly to $135 (10% below new market price). This way, if the share price drops to $135, your stop-loss order will be triggered, selling the shares and locking in profit.
Profit Taking Strategy #2: 40-30-30
Now let’s take a look at another popular strategy, called the 40-30-30 approach. This strategy is all identifying a price you believe the asset will reach (Elliot Wave TA is recommended), determining the amount of profit based on your position, and dividing this number into three smaller bite sized chunks. The idea here is to identify three price targets for your position that you plan to take profit at. As the share price rises/falls to each of your identified targets, you will gradually sell off more of your position until you have nothing left. When it reaches your first price target, you sell 40% of the position, then another 30% when it reaches the next target, and the final 30% as it reaches the last target.
With this method in mind, it is important to pay close attention to price movements and overall market sentiment. If you don’t have the enough time to devote to this strategy, we simply advise that you do not attempt this approach as it requires more effort and discipline on behalf of the investor. Why? You will need to have conviction in your identified price targets based on technical analysis, you will need to adapt to market sentiment, and finally you will need patience and discipline to execute on your sell targets. Elliot Waves are not a crystal ball, but simply provide an edge for traders narrowing down an infinite number of possibilities into 2 or 3 probable scenarios for what the market is likely to do. At the end of the day, nothing is concrete and it's up to the trader to adapt and pivot accordingly.
As Bruce Lee once said, "Be like water making its way through cracks. Do not be assertive, but adjust to the object, and you shall find a way around or through it. If nothing within you stays rigid, outward things will disclose themselves.
Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle and it becomes the bottle. You put it in a teapot, it becomes the teapot. Now, water can flow or it can crash. Be water, my friend." Do not force your trades, be patient and above all preserve your capital when the charts are choppy and indecisive.
As an example, let’s say your goal is to 2x your initial investment of $50 as the share price of a stock reaches $100. Timing the exact top to ensure that you reach your goal AND secure profit can be difficult. In order to ensure that you are taking profits as the price rises (compared to taking profits as it falls), naturally one will leave a small percentage of profit on the table. In doing so, this strategy however ensures a higher percentage of profitability and provides the trader with structure and peace of mind. Back to our example, let’s say that you’ve identified three price targets that you aim to sell portions of your position at: these being 75, 90, and 105. As the share price reaches $75, your goal is to sell 40% of your position, at $90 you will sell 30% and at $105 you sell the remaining 30%. This strategy ensures that you are taking profits as the share price gradually increases, and avoids the situation where it is falling and you are stuck panic selling. While you may not have reached the full 2x goal, you came damn close and came out of this trade a winner.
Profit Taking Strategy #3: Going Full Degen
Bag1
Keep an eye on the rotation of money in crypto... If you don't already know, there's a predictable rotation of money during bull runs and if you can time your positions accordingly, you can ride each wave from Bitcoin > Ethereum > Large cap projects > Small cap projects & Memecoins.
Bag2
This strategy starts off with 40-30-30 approach, however this time after your first 40% and 30% we're going to flip these profits into risk adverse projects which have yet to break out. This approach is dependent on a variety of factors with the most important being timing. Typically, things break out in sub groups/categories and if the timing is right you can bounce around and turn 2x into a 4x into a 8x and so on. Flip the initial 40% profits into risk adverse projects, and flip the 30% profits into projects with higher risk like small cap projects or memecoins. The final 30% will consist of the remaining assets in your portfolio hitting the third identified price target.
If this is your style, godspeed to you.