The incredible rise of cryptos such as Bitcoin in 2017 highlighted the amazing earning potential of investing in cryptocurrency. However, the fall in value we saw following these peaks also demonstrated the financial losses that can be incurred.
If this taught us anything, it’s that crypto can be volatile. For a crypto investor, this makes it even more crucial to learn when to sell and how to set your targets effectively. Here are some of the thing’s traders should keep in mind when looking to sell their crypto:
The dotcom boom and bust
Deciding on the right time to sell your investments is something that crypto, stock market and property investors all dwell on. When it comes to crypto, a good parallel is the dotcom boom in the 1990s. During this time the value of internet companies soared, with many investors making a lot of money in the process. However, as we’ve seen many times throughout history, the bubble eventually burst, leaving many investors with nothing to show for their initial investment.
However, there were those who sold at the right time and made significant gains. Even if they sold before the market peaked, they still came out on top. This highlights the importance of knowing your own expectations when it comes to trading. Of course, we always want to make as much money as possible, however a good question to ask is, “what are you willing to lose?” The team at Cryptosouk encourage all traders to put a framework in place that is guided by how well you can absorb a loss. This will enable you to set expectations about the level of risk you can handle.
How to know when to sell?
You need to be clear up front what you are aiming to achieve. Know your goals and expectations and decide how much time you will commit to watching the markets every day. Given its volatility, crypto fluctuates by the hour, sometimes even by more finite time series. As a result, many day traders spend most of their day watching the market and pouncing on potential opportunities. The key is to understand exactly how crypto exchanges work and the potential for certain coins to go up and down.
It’s also a good idea to research some of the theories to help guide your selling decisions. The “regret theory” for example looks to help you identify which of several decisions will leave you with the least amount of regret. For example; let’s say you purchased your favourite crypto for a price of USD $4,500. If you sold too early and the crypto keep rising to say USD $15,000, you would have missed out on making huge profit. However even if you did instead sell at USD $6,500 you would have still made USD $2,000 profit, not bad!
This example shows that if you don’t plan on holding crypto long-term, there are two paths you could go down:
- Sell and take any profit gained at the time of sale
- Hold on a while longer and hope the price eventually increases and then sell
Following your decision, either of the following could happen:
- You hold the coin, the price falls, and you lose money
- You sell the coin, make some profit, however the price continues to rise, meaning you missed out on potentially more profit
You need to ask yourself which one leaves you with more regret. Everyone is different and therefore will take a different course of action. What’s important is that you set your targets and expectations up front, so you make informed decisions and minimise your level of regret.
Set your targets wisely
When you want to sell your coins, you need to decide the value that you as the coin owner place on that coin. There are several tools you can use to do this and execute your sales. The “stop loss” tool is one that the team at Cryptosouk recommend. Setting a stop loss is an important part of crypto trading as it allows you to protect your profit margin and limit your losses. You also have the option to set a “limit sell order”, allowing you to close your trade when a specific set price is hit.
Some traders choose to invest a small percentage of their portfolio and seek out short-term wins. These traders usually have big portfolios so that even a 1% trade value gives them the potential to make good money in return. Experienced traders often prefer this method as it reduces risk and increases your chances of more long-term profit.
The more conservative traders play the long game. They hold their crypto for extensive periods and hope the price increases. Given how volatile crypto can be, holding long term can limit your exposure to short-term fluctuations.
There is no way of knowing the perfect time to trade your crypto. The team at Cryptosouk encourage you to set your targets, expectations and goals; and don’t deviate from them. This reduces the chances of you making an irrational and emotional decision. Do your research, understand your “regret” level and trade accordingly. If you need guidance or help, the team at Cryptosouk are always there to help. Whether you’re a novice or experienced trader, the Cryptosouk platform is designed for all levels of expertise. Sign up now and trade with no trade-offs.
The information contained within this website and resource section is not intended to be a substitute for financial advice or promotional offer on the investment or purchase of Cryptocurrencies, digital tokens or related assets. Although care has been taken in preparing the information provided to you on this site and in the resource section, we are not held responsible for any errors or omissions and accept no liability whatsoever for any damage or loss you may incur through the result of your own actions and decisions when deciding to purchase or invest in Cryptocurrencies or related digital assets. You should never engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. We recommend you always seek financial/or legal advice counsel relating to your investment and purchase circumstances. This material has been prepared for informational use only.