Crypto Trading is Tricky: Learn the Exit Strategies Here!
Updated On February 24, 2022 | by Joseph Williams
Among the millions of crypto traders today, only a few of these people have achieved their financial targets. What’s the reason? It’s not a business for those who have a lower risk appetite and settle for mediocrity. Instead, this is only fitted for the players who exactly know how to navigate their way to the top.
The secret lies in the investment strategies which could make or break the entire case. This is an ongoing process of dealing with risks and uncertainties and might prove a quite tricky one. Because the truth is, the volatility and unpredictability of cryptocurrency are embedded into its nature forever.
Whether you like it or not, joining crypto marketing is a roller-coaster ride. You’ll have mixed emotions as you observe how the asset prices change from time to time. Sometimes your mental and emotional impulses can even drive you nuts and lead to miscalculated decisions. But this is all a worthwhile experience because you’re getting wiser each time you lose some money.
However, losing capital and profits doesn’t have to be a trend. You can change the course of your investment by improving your crypto strategies along the process. And one of those is having an exit plan during your crypto trading endeavors. Know when is the right time to stop from the following guides.
Exiting a Crypto Trade
Part of managing your funds is knowing when to enter and exit a trade. Sometimes the entry is much easier than the exit. Because by the time an investor accumulates or loses some money, there’s already a motivation that’s holding them back. Either they want to recover substantial losses or generate more profits. So, essentially, there are only two ways to get out of the trade: taking a loss or making gains. These are also referred to as stop-loss orders and take-profit orders, which are discussed below.
When the crypto market becomes unfavorable to conduct crypto trades or your asset may decrease value over time, you may decide to make a stop-loss order. This is done by placing the order with the broker to sell your asset automatically at a certain point. Once this point is reached, the stop-loss will immediately be converted into a market order to sell. This strategy is proven to reduce losses if the market is moving against your interests.
Conversely, when the market is good, and there’s a high chance of making more profits, you can take the opposite approach. It’s making a take-profit order that has a similar process but converts the order into selling points once the profit cap is reached. The execution of this strategy is essentially dependent upon the ongoing market trends and the performance of your investment.
Developing a Trading Exit Strategy
Crypto traders who understand that the market is not always favorable to achieve their financial goals would set an exit strategy. This can serve as a reference on what actions to take depending on the prevailing circumstances. There are essentially three steps to developing this strategy.
Decide on How Long to Stay in the Trade
Time horizon is very important to know when the profit or loss is enough. But this would primarily depend on the type of trader: whether long-term or short-term. Those who want to trade for a longer period should consider such things as setting profit targets that are reasonable for the given period. Short-term traders, on the other hand, may take a different approach that is suited to their timeline.
Trading platforms with a wealth of good trading tools like the Bitcoin Era would ensure that you’re not going beyond your limits. That’s being wise, and it helps a lot!
Determine How Much Risk to Handle
Risk should not be ignored just because the gains are promising. This is part of crypto trading and must be calculated at the beginning. When determining this aspect, you have to focus on how much money you can afford to lose. It would specify the length of your trade and the type of stop-loss that you need. Generally, investors who prefer lower risks would set tighter stops, while those who handle greater risk may have different standards.
Know When to Get Out of the Trade
It is critical to be certain about your exit point. As the cliche goes, there’s an end to everything. This means that conducting trades may not be a forever business for many people. There are times when the profits are enough, and going further may reverse the winning position. Also, when the losses are already substantial, the thought of recovery might be more dangerous to take. Being prudent all throughout the process would always keep you in a secure position.
Crypto trading is highly risky. You have to recognize this fact before joining the market. But since the possible gains are also encouraging, it might prove worth taking risks. When you’re already part of this global network, make sure that you have a definite trading strategy.