The Complete Profit Taker’s Guide to Crypto Bull Runs
What goes up must come down. Use our 10 best Profit-Taking Strategies to secure your gains before the drop.
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Bernard Baruch once said — “Nobody ever lost money taking a profit.” It seems that we are in a crypto bull run! Some cryptocurrencies saw a huge surge in price over the last few months, including many cryptocurrencies that are up over 100% over the last year:
- Bitcoin (154% 1-year)
- Solana (445% 1-year)
- Cardano (101% 1-year)
- Avalanche (147% 3-months)
- Chainlink (140% 1-year)
- ImmutableX (294% 1-year)
- Thorchain (353% 1-year)
And the list goes on and on and on! I’m sure many of you also see your crypto portfolio growing amazingly.
Congratulations! Being patient during the bear market, buying the dip, dollar cost averaging, and enduring all the volatility is now paying off.
🤔 However…
There’s a big however, yes! So far, these gains are only paper gains. The green numbers you see on the screen will only turn into actual profit when you click the sell button.
Although I believe the bull market is not over yet, there are many uncertainties in the market. It might be time to materialize these profits into reality.
To be a great investor, you must know when to exit your investments. So, to ensure your paper gains don’t evaporate, I will give you 10 profit-taking strategies today to lock your returns on investment during this crypto bull run.
If you’re into crypto investing, you may also be interested in this article:
Here are the 10 best profit-taking strategies:
1️⃣ House money strategy
In moments when the market is super-hyped, and you have a comfortable profit margin in your investment, sell your initial investment and let the profits ride the market.
For example, if you bought $1,000 worth of Solana 1 year ago, the investment is now worth $5,450 (😮). You can now sell $1,000 worth of SOL, which will secure your initial investment. The rest, “the house money”, can remain invested with the potential for further growth.
This strategy effectively reduces your risk, as you’re playing with the market’s money rather than your own. By using the house money strategy, you can lock in gains and continue to capitalize on the market’s momentum without the emotional burden of potential losses impacting your initial capital.
2️⃣ Take-profit order
A take-profit order is a limit order that you can place in your crypto exchange. The take-profit order will automatically sell your crypto (or part of it) at a pre-determined price.
By defining your risk/reward ratio, you can establish a take-profit order for your trade.
Say you bought AVAX at $10, you could immediately place a take-profit order at $20. This way, once the price hits $20, it will automatically sell your position, and you will cash 100% profit, even if you are sleeping.
A take-profit order will remove human emotions out of the equation, ensuring that you stick to your investment plan, cash out, and avoid the common pitfall of holding onto an asset for too long in the hopes of even higher returns, which can lead to significant losses if the market turns.
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3️⃣ Trailing take-profit order
Similar to a take-profit order, a trailing take-profit will also sell your position automatically. The key difference is that this order will “trail” if the price moves favorably. Confused? Let me explain.
You can set a trailing take-profit order at 10% of the current price. If the price of your crypto moves up, the trailing take-profit order will also move up. Once it moves up, it cannot move back down.
This is a great way to lock in profits as the prices reach new highs.
4️⃣ Partial profit-taking at different levels
In the same way, you can buy in by dollar cost averaging (DCA) during the bear market; you can also sell and take profit during the bull market by setting multiple take-profit levels.
This strategy, known as partial profit-taking, allows you to capture gains at various price points as the asset’s value rises.
For instance, if you’ve purchased a cryptocurrency, you could set take-profit orders at 50%, 75%, and 100% above your purchase price. As each level is hit, a portion of your holdings is sold, securing profits while still maintaining a position to benefit from any further price increases.
This method helps in balancing the risk and can provide liquidity, as well as ensuring that you are not completely exiting your position too early during a potential uptrend. You can take profit at different levels to harvest gains on the way up.
5️⃣ Take profit when everyone is talking about it
It might be a good idea to take profit and sell a good portion of your crypto when you notice everyone is talking about it.
In the last crypto bull cycle Bitcoin reached $69,000, and I noticed that when the price was over $60,000, random people started to talk about it. From taxi drivers to random friends that I hadn’t talked with for years texting me asking how to buy Bitcoin, it became clear that the market was reaching a fever pitch, often indicative of a speculative bubble.
This is a sign that the market is overly hyped, FOMO is king and it’s a good time to ring the cash register and take a profit!
6️⃣ Take profit looking at overbought oscillators
Some technical analysis indicators can give you very good clues on whether a crypto is overbought or oversold and when the market might be turning to a downward trend.
Let’s take a look again at the peak of the previous bull market when Bitcoin hit $69,000. When BTC was over the $60,000.00 mark, a number of indicators were screaming overbought: MACD, RSI and Stochastic.
When technical indicators like RSI, MACD, and stochastic oscillators are in the overbought area, it is likely that the market will drop. This might be a good opportunity to sell your crypto partially or entirely and pocket some gains.
7️⃣ Take profit at key levels
Taking profit (partially or entirely) at certain key levels and resistance levels can also be a good idea. Some key resistance levels will see strong volatility and potential price rejections, as many traders have set their sell orders around these points.
By anticipating these movements, you can capitalize on the price fluctuations.
For example, if a cryptocurrency has struggled to break past a certain price point multiple times (in the BTC case, that was $69,000), it may be good to set a take-profit order just below this resistance level.
This strategy assures that you lock in profits before a potential pullback happens. Other traders could be taking profits or shorting the asset at these critical key price levels.
8️⃣ Big candle profit-taking
A huge green candle can also be a good sign to take profit. Huge green candles like the ones below don’t happen very often and they are not likely to continue.
The chart below shows that AVAX price rose by 278% in less than 3 months. This is a super rapid price surge and not sustainable in the long term:
When such a significant price spike occurs, it often reflects a climax of buying pressure, which could be followed by a sharp correction as traders start to cash out their positions.
Taking profit and crystalizing gains after a big green candle can be a strategic move!
9️⃣ Portfolio rebalancing
The goal of portfolio rebalancing is to adjust the weight of the assets in the portfolio. This way, if a certain crypto goes up a lot, you will sell part of it to make its weight come down to the desired level.
Imagine 3 months ago, you bought $2,000 worth of AVAX and this investment represents 10% of your portfolio. In the meantime, because AVAX price went up a lot, your AVAX investment is now worth $5,000 and represents 25% of your portfolio. Rebalancing your portfolio would require selling AVAX so that its weight returns to the initial 10%.
This is a good way of taking a profit, and not only that, portfolio rebalancing will increase the performance of your investments!
I have written about portfolio rebalancing in detail in this article.
🔟 Take profit when you need
Last but not least: take profit when you need!
We all have different goals in life. You may be saving and investing to help your family, to retire earlier, to buy a car, to buy a house, or to buy an engagement ring. Ultimately, we all have different needs, different investment time horizons, and different risk profiles.
So maybe one of the best profit-taking strategies is to… take money off the table when you need it, and whenever your profits give you life-changing money!
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