Hodling is not always the Best Option in Crypto – Risk&Profit taking
Another approach to investing in Crypto
This is a short recap of what I talk about in the video. This risk/profit taking strategy is not new and it is definitely not something I thought of myself.
We currently are experience a huge correction on the whole crypto space. So hopefully this strategy will help you improve your investing.
This is mostly for people that like investing in crypto but are not too familiar with technical analysis. So if you like investing but do not care much about which cycle the market is in, then this is for you.
Below is a table with a column showing the percentage a coin has fallen and it’s respective value on the right.
As you can see up until the 20% threshold, the percentage the coin has to rise to get the initial value is quite similar. However, at 50% correction the coin needs to rise a whopping 100% just to make back the initial investment.
Risk/Profit taking Strategy
On a psychological level it is difficult to sell when a coin has had a lot of growth. I know this from experience! It is equally difficult to sell when you are at a loss because you feel like the coin might go back up. However to remain profitable in such a volatile market it is critical.
As an example: You have found this new amazing project.
You did your own research and watched a few gurus on youtube hype the project.
You are ready to buy and want to get your ticket to the moon.
Unless you have a basic understanding of technical analysis it is not easy to find a good entry.
Let’s say you buy in at a price point that seems alright to you. Now it is important to decide how much risk you are willing to take.
Entry: 2657 sats
Stop: 2040 sats (about 20% lower than entry)
This stop can be set as an alarm on trading view to notify when the price has dipped below a certain point.
Please read: Beginners guide to Tradingview
Luckily in this scenario, Cardano shot up high. We are only using a 3:1 profit/risk ratio. It is up to you to decide how high you want to let a coin rise. Just remember what goes up eventually comes down again.
What happens when things go south?
In the image below, I chose my entry at around 5587 sats. For a while cardano went sideways but started dipping after a few days.
That is when you need to sell. Turn off your emotions and just sell.
What if it goes back up again?
Here is the kicker. When buying or selling you can apply the same strategy. When you sell you can also select a risk/profit ratio but the other way around.
You buy back in if the coin goes 10% above the price at which you sold.
Ideally you can set your stop limit buy slightly above the next resistance. But more about that in the next post.
When to use this strategy?
This should be used for new projects that are at 3x or 10x of the ico price. It should especially be used for projects you have fomod into.
That’s it. Have a great day. : )