💰 Profit Taking Is The Most Difficult Thing To Do In The World Of Crypto - Here’s A Method That Might Work For You Too

in cryptocurrency •  9 months ago

When should I sell? Is this the top? What if I take some profits now and I get out too soon? Difficult questions...

I get it, crypto life is hard. No wait, crypto life is awesome! Everything is booming, nothing comes down, it is one big party. The only thing we don’t know is how long this party will last before we see a major correction. Or maybe we won’t even see a correction, but we’ll end up in a bear market for a while. Or not even that. Who knows?

Anyway, personally I feel most comfortable when I take some profits along the way. It gives me peace of mind. With taking profits I mean really take it out of the crypto world. That’s right, to fiat money (I know this is an ugly word for some of you here :-P).

I have struggled with taking profits for a while and I notice 90% of the people in the space do. I always thought it was a better decision to leave my profits in crypto and thereby have a higher ROI on my money than with fiat. Which is easy to think given that the market keeps on growing and is currently not far from its ATH.

But you know what they say: “Fix the roof when the sun is shining”. That is the reason why I tried a few different things and I now finally have found a method for profit taking that works for me.

If you are struggling with profit taking, it might be something for you as well. Preferences are personal of course.

Portfolio Profit Taking vs. Coin Profit Taking


timetotakeprofit.jpg
When is the right time to take some profit? Image source

The first mindset shift was to start determining when to take profit based on my portfolio as a whole instead of the price of a single coin. Don’t get me wrong, I continuously look for opportunities to get more ROI on my investments.

Not having a crystal ball, that means I will never be able to determine the best price to get out of a coin or token upfront. That’s a fine art and I will always make suboptimal decisions. Accepting that, I now decide on when to take profit based on two very simple rules.

The first thing I did, was to take out my initial investment. I did this when I was up around 300% and basically did it in one go. By doing this I made sure I would at least never lose money in this crazy crypto world. I could have done it sooner, but this felt like a good moment to me.

The 50/10 Rule

The second thing I did (and still do), is follow another very simple rule: if my portfolio goes up 50%, I take out 10% and turn it into fiat. If my portfolio goes up another 50%, I take out another 10%. And so on, and so on. To me, this is the right balance between locking in a part of my profits, while still being able to profit from a growing cryptocurrency market.

For clarity reasons, let’s illustrate it with an example:

  • Peter starts with an initial investment of $2,000.
  • On day 120 Peter’s portfolio is worth $8,000 and Peter takes out his initial investment of $2,000. Peter’s portfolio is now worth $6,000.
  • On day 180 Peter’s portfolio is worth $9,000 and he takes out 10% ($900). His remaining portfolio is now worth $8,100.
  • On day 220 Peter’s portfolio is worth $12,150 and he takes out 10% ($1,215). His remaining portfolio is now worth $10,935.
  • On day 300 Peter’s portfolio is worth $16,403 and he takes out 10% ($1,640). Etc., etc.

You get the picture. What this method does is that is forces you to look at your portfolio as a whole. Since you ‘have to’ take out 10%, you will look at all your positions and decide which positions are best to sell.

Yes, if the market continues to rise, you have missed out on some extra profits. On the other hand, you ensured yourself of some profits in case of a black swan event and might have gotten a bit more peace of mind as well. Next to that, what about the awesome opportunity you will be able to take advantage of when the market crashes with 70%? You actually have fiat money to buy in again, as opposed to those that never took some profits off the table.

I see profit taking as a way of building an opportunity treasure chest for when a great opportunity comes by and nobody has the means to take it, except you ;-)


Cheers and good luck with your investments!


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Disclaimer: I am not a financial advisor, trader or developer. I am just a blockchain & cryptocurrencies enthusiast. Make sure you do your own research, draw your own conclusions and do not invest any money that you cannot afford to lose.

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Fiat still rules the world, allows you to buy things and survive, until that changes it is no shame to cash out. Heck, some people are lucky enough to live off cryptotrading, but they still gotta eat.

I would like to read your ways of cashing out since the wirex debacle!

Thanks, @cryptotem! As a relative crypto noob, I've been thinking a lot about the optimal profit-booking approach that jives with my personality, portfolio & overall goals. Buying & entry points seem like the easy part. 'Exit strategies' are a lot tougher for me.

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Totally agree with that. The one I describe turns out to be best suited for my personality and overall goals. Hope you'll get some inspiration from it :-)

Thanks for sharing your plan. It seems necessary to have one otherwise get caught up in greedy thoughts. My most frequent one is "If I spend in fiat now, I'll lose out on 10x in crypto gains." Not necessarily true! The broad profit-taking from overall portfolio value rather than single coins also seems much more manageable. Good post!

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That thought I recognise very well!

Good advice @cryptotem, thanks for putting it in perspective based on your experience and knowing also that state of mind or psychology is just as important as knowledge when it comes to the cryptocurrency market

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Thanks @julescape :-) A bit of knowledge about cognitive biases and psychology of the masses indeed help in the crypto space!

It's a difficult one for sure, but you've definitely got to have some kind of plan. I don't take anything just yet, but I like that you've got yourself a nice system on the go. I think there will come a time when my balance is high enough for me to be content to skim some of the top and reinvest the rest. Great read!

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Thanks @philnewton! Yep, something along the lines of "If you fail to plan, you plan to fail". I believe strongly in setting rules and making some kind of plan, because self-discipline and willpower and not infinite.

Indeed great methods to get your investments back and some profit. I know a lot of people in this crypto world don't like the word FIAT, but some people struggle with money and there's no other choice but to sell your cryptos to get some cash. I think the 50/10 rule is perfect and I'm going to keep it in mind from now on :)

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Cool! Let me know in a while whether it is something that could work for you :-)

This is a cool idea, it's really easy to just want to move those earnings to a new coin because it worked before. I think at the very least getting your investment back is a fine idea!

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Another option could be rebalancing. If one coin spikes whilst some are still yet to climb, you'd be overweight in that coin on your portfolio and a rebalancing would mean taking a few profits from that coin and buying more of those which are still consolidating. The general idea is capping each coin to certain percentages of your overall portfolio. Similar in some ways to what you're saying regarding taking partial profits, but for instance, if you have a 25% cap, then when a coin gets above 25%, you sell a portion until it's back to 25%. It's not for everyone, but like you say, it should suit your personal style as well. Anyway, another option to consider :)

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Definitely true and I think that is something you should always do. My strategy on that part is this: https://steemit.com/cryptocurrency/@cryptotem/the-70-30-cryptocurrency-investing-portfolio-approach-updated-v1-2

The above article is about really taking profits out of the space, something to combine with rebalancing :-)

Good way of thinking! Cashing out is the most difficult decision I find, and the good ol' 'I should have done....' which is applicable in any crypto action, is always lurking around the corner there

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Very true :-)

My husband is into crypto and here I am still no head no tail of it. I really should learn more after reading your post. Thanks for sharing.

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Always good to know and understand the basics!

You might want to look up some introduction videos by Andreas Antonopoulos or Ivan on Tech about Bitcoin and blockchain. Those are a good place to start.

thanks for posting your tips as this is super helpful. im new to crypto but havent turned any of my profits yet. i like your strategy. do you use an app such as blockfolio ttrack which coins are profiting?

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I am glad it is helpful, that is the goal :-)

Indeed, I use Blockfolio to keep track of everything, but next to that I use Google Spreadsheets with more details like consensus models etc.

the sentence "Fix the roof when the sun is shining" is a great meaning for a something new like you wrote in your post. don't forget to see my blog too @cryptotem

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Thanks, I will take a look!

It is really very interesting. Thank you very much.
I need to be stronger to solve the issue. I'll try it. Think.

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Thanks @apnigrich and good luck!

It very amazing thanks for sharing

the right decision is the right investment

Great information. Congratulations!

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The world of the bit coin is particular about me.
It is studied very much.

I thank for your post!