One of the biggest problems that you can have as a new crypto investor, is figuring out when to sell your crypto. The only thing that truly separates the winners from the losers in crypto is those who click on the sell button and those who do not. Failure to take profits is an absolutely critical error that many crypto investors make. The assumption in a bull market is that coins will go up forever and they do not. And when a bear market comes, many investors who watched their investments soar will then watch them come back down to earth and perhaps even sell at a loss when the fear sets in.
This is NOT how winning is done!
If you want to get rich from crypto then take profits!
Write this down somewhere: Take your profits or the market will take them for you!
Strategies For Taking Profits
There are a thousand different ways to think about taking profits, but there is only one way to actually do it. And that is by clicking the sell button. Seemingly so easy, and yet a bridge that so many fail to cross. So let’s look at some of the strategies for taking profits.
Laddering
This is probably the best method for making gains. The basic concept is that as your coin rises you reduce your position size.
For example:
- You buy 100 Litecoin at $10.
- Litecoin goes up to $20 and you sell half of your position to take out your initial capital. Your bag is now free.
- Then Litecoin goes up to $30. You sell half of what you have left. You just made profits. Congratulations.
- Litecoin goes to $40 and you sell half again. More profits, yay!
- Then it goes to $50 and you sell everything that is left.
Now you might be thinking, but hey, I will just wait and sell everything at $50, I will make more that way. Yes, that is true, but the example I gave was a best case scenario. Reality is often very different, which is why we manage risk.
There are as many ways to ladder out as there are numbers.
Take 1% out every 10% the coin goes up.
Take 5% out every 5% the coin goes up.
Etc., etc., etc…
You will need to decide what works for you when you enter your position.
There are of course plenty of other ideas like selling when a coin gets to a certain market cap. Selling when a coin does 100X. Selling when the coin goes from $10 to $100. But these all-or-nothing concepts can fall short if your target is missed.
Learn TA
This may not be for everyone, but even some basic knowledge around technical analysis can really help your selling game as well as your buying game. Learning how to identify overbought market conditions with RSI and watching breaks in uptrends can help you find good times to exit positions.
Bonus Tips
- Moonbags: You never need to sell 100% of your coins. You can always keep some around just in case this coin does a million X. But in most cases you will just watch that “moon bag” hit the ground and go back to the bottom. But hey, if it was only 5 or 10% of your initial position and you made truck loads of money on the way up then you probably don’t care too much, do you?
- Happiness: The ever-present dilemma for sellers is what if it goes higher after I sell? I will miss out on profits. Almost no one perfectly sells the top and the sooner you realize that the better you will be. If you made money on a coin then be happy! And always remember, “No one ever went broke taking profits”.
What Should You Sell Into?
So you sold, now what? Well, there are a few different things you can.
- New Opportunities: You can always just plow profits into some new hot coin. But, it is unwise to do that with all of your profits. The market has a sneaky way of taking your profits from you very quickly. So if you are plowing profits into a new coin keep it as a small percentage of your total profits.
- Bitcoin: Many people in crypto use Bitcoin as their savings account. Money from successful trades and investments will often go into Bitcoin. At least a little bit of it anyway.
- GET OUT OF CRYPTO!!!: There is a time and place when crypto is great for making money. But, I always like to move money out of the crypto market and diversify. Yes, crypto is the future, but it is super volatile, and not all coins are the future. In fact, many will only be around for one cycle.
- Gold and Silver: I love metals. They are rather boring investments, but they are also nice ways to diversify your portfolio. I hold both gold and silver coins and bars. You can either choose to have them stored in a safe for you or custody them at home if you can.
- Stocks: This are a super popular option for staying invested in markets, but getting out of crypto. Beware though that the two markets tend to be highly correlated, especially tech stocks and other high-growth stocks. Thus more defensive dividend stocks like energy providers, mining companies, banks, and household goods producers might be a good way to protect your gains and gain more.
- Property: In case you didn’t know real estate is still a damn popular option for investors. This is one of the most proven and stable asset classes in the world. The entry costs are high, but once you are it can provide a lifetime of income.
- Cash: Yes, sometimes it is ok just to chill in cash. This can be in stablecoins on your crypto wallet. This can be in cash in your bank account. In both circumstances, you can consider putting that cash to work to earn more for you. In crypto that is using defi to earn a yield on your stablecoins, but keep in mind it is dangerous and smart contract hacks are prevalent. On the flip side you can get into a high-interest savings account or term deposit with your bank. Safer, but lower gains.
Not all Coins Need to be Sold.
This may seem counterintuitive to much of what I have said here, but it is true. Here are some examples of coins you may not want to sell or may want to hold on a much longer time frame.
- Bitcoin: A unique coin in the crypto market. It has the most adoption, the most interest, and has captured the cultural zeitgeist. In many ways, it is gold 2.0, and almost everyone involved in crypto has some BTC for a long-term bag. Thus Bitcoin can be used as a wealth preservation asset.
- Staking Coins: If you are a long-term believer in a coin and want to stake it for the long term and don’t mind riding out the volatility then coins like Ethereum or Cardano can make nice long term holds. But, this can also be risky because some coins are simply not going to make it long term. And you must always factor in risk-reward opportunities. For example, if you bought some Cardano at 10 cents and the current price is 2 dollars then you will make A LOT more by selling now than you will from staking.
- Real Revenue Coins: Theseare coins that pay you real money and are becoming increasingly popular in the crypto market. Coins like GMX, JOE, and SNX all pay holders a share of the fees generated from revenue produced by the protocol. Often these rewards are paid in stablecoins or a “hard” asset like Ethereum.
And a final note! No matter what you do ALWAYS make sure to set aside money for taxes. Many investors do not take this seriously and are hit with massive tax bills that they cannot cover without having to sell things they don’t want to.
Plan for taxes.
Read our Crypto Tax Guide for some ideas on how to keep safe.
