"Cutting losses is easy, but cutting profits is hard." This is a saying commonly exchanged in the financial market, and the truth is, it's accurate. Taking profits is a challenging task, even for experienced investors, as it involves not only factors like projects, capital flows, and individual positions but, most importantly, it is related to the general psychology of investors. Below are some safe profit-taking strategies that I have employed.
👉For BTC:
Signs that BTC is reaching its peak and distributing when:
- After a period of price increase, there is a sudden spike in volume compared to the previous volume, indicating strong selling pressure. However, market makers (MM) don't typically sell-off in one go to crash the chart; they need liquidity to sell off their holdings. Therefore, when this sign appears, continue observing whether BTC is forming new highs or not. Pay attention to observing on a larger time frame, such as weekly (W).
- BTC consolidates sideways with decreasing volume, and as it approaches the highs, there are candles with significant volume indicating price decreases compared to previous candles.
- During this time, there is a lot of positive news about BTC and the fear of missing out (FOMO) also reaches its peak, with optimism indices remaining at their highest levels.
- The average duration of this distribution phase is around 2-3 months, so we have enough time to handle our positions and find the right profit-taking points.
(Note: These are just some basic signs.)
👉For Altcoins
- During the period when BTC consolidates sideways around its peak, altcoins usually perform the strongest, also known as alt-season.
- Observe the altcoins you're holding to see if they are experiencing significant or minimal increases, compare their current market capitalization with others in the same category, and assess if the target levels set initially are still reasonable for profit-taking plans. If the project analysis indicates potential growth, consider only partially taking profits, otherwise, if the target has been reached, consider closing positions. Since numerous altcoins may rise along with BTC (though not many), rising during BTC's sideways peak, and sometimes even at the end of the distribution phase, it's crucial to thoroughly research each project, as some may not rise or may only rise slightly with BTC before crashing.
- For coins showing signs of a 50% decline from their all-time high (ATH), pay close attention as this is a strong profit-taking signal and could be an early indicator from Market Makers (MM). Stay calm when you notice this profit-taking signal because they cannot crash the chart in one go; they need enough liquidity to sell off their holdings, so there will likely be a rebound. This rebound could break the ATH or simply return to the previous peak and then consolidate sideways. If there are strong profit-taking signs from MM, you can sell a portion according to their actions and continue monitoring price movements. If you see multiple signs indicating profit distribution and feel the price has reached two peaks, consider selling the remaining positions during the rebound.
- In an uptrend, the phenomenon of "chasing heat" always occurs when the coin you hold doesn't rise while others do. There are usually two reasons for this:
+ Your position isn't favorable, you didn't buy at crucial support levels but instead bought at higher prices. Therefore, even a slight correction in BTC can put your position at a loss.
+ You bought at a favorable position but want to optimize your gains, so you keep switching coins. After buying a few coins and seeing no further rise, you sell them all and move to other coins for new opportunities. However, the coin you sold starts rising again while the new one you bought declines. The point you bought might even be the peak.
The solution here is when you have a favorable position at support levels and have thoroughly researched and selected projects, simply sitting tight during an uptrend can result in substantial profits. Along the price journey, you can completely average up in profit. Jumping in and out frequently during an uptrend only leads to account ruin.
- An average investor typically invests in around 5-10 coins. However, it's advisable to have a watchlist of 15-20 coins. I understand that most people like to optimize gains. Some investors double their investments and then move to other coins to double again. For these investors, this strategy significantly increases their account size. However, before doing this, make sure to closely follow the other 15-20 projects; buy the ones that haven't risen or haven't risen much yet. Otherwise, be careful not to buy at the peak. Advice for those who aren't skilled in frequent trading: when you have a favorable position, sitting tight during an uptrend already leads to significant profits. By the end of the period, those who optimize frequently may not have earned as much as you.
- Always prioritize safety by partially taking profits. However, use this strategy flexibly in each situation because in an uptrend, taking profits prematurely means losing 50% of potential gains.
- For low-cap or trendy-following coins or those related to viral keywords or issues, prioritize partially taking profits and avoid closing all positions, always keep 10 or 20% of the coin quantity in case it suddenly rises significantly, you still have some to sell.
- A common issue among investors is that when buying, they do it gradually, averaging their costs. But when selling, they do it all at once. Why not split the selling? Even Market Makers do this, they buy and sell in parts. They themselves don't know where the peak is; they also have to calculate the FOMO of investors, the liquidity outside to gradually take profits, rather than holding a lump to sell off. It's challenging for us to hold a lump and sell at the peak. Instead, split the selling into parts, 50%, 70%, 80%, and 90% depending on the capital and position of each person, be wise in taking profits so that when the price shows signs around the peak, you still have some to sell.
- Rest assured that both BTC and the market provide us with ample time, about 2-3 months, to handle our positions and take profits, so don't rush and act hastily, which could lead to mistakes.
In summary:
Before taking profits, answer the following questions:
- What stage is BTC currently in: accumulation – accumulation, price increase, peak – distribution? If everything shows no signs of reaching the peak, there's no reason to close positions prematurely, right?
- Are the projects you're holding showing signs of selling off or accumulating more?
The most important thing is: TAKING PROFITS MEANS CASHING OUT, YOU HAVE TO SPEND THAT MONEY TO BE THE WINNER. If you take profits and then return to the market to continue trading, you are undoubtedly the loser, and there's no reason to justify that.
Closing thoughts:
Not every uptrend is easy money. Because there are many factors influencing our decisions along the way. Essentially, it's still a psychological battle. This market is still a money game.
Everyone will close positions prematurely sometimes but remember: you have to close positions logically and with calculations.
Wishing everyone during this uptrend season abundant gains in their accounts.
