- “Taking Profits” is an Exit Strategy.
- “Taking Profits” doesn’t always require an investor to sell their investments.
Taking Profits can be referred to as an ‘Exit Strategy’, wherein an individual attempts to sell crypto or security after holding it for a certain period to lock in gains. To put it in layman’s terms, it’s an act of holding a security for a defined period until it reaches a higher than its predetermined price and then selling it to gain profits.
The crypto market, as compared to the stock market, is tremendously volatile, that’s why it is crucial to know the market inside out and be alert about the movements in the market along with being up to speed with the concerned news at all times to minimize the risks and gain profits.
Moreover, an investor must follow the “Price Taking” strategy because it helps shield their investments from market volatility by regularly taking profits.
When is the correct time to Take a Profit?
It’s not so easy to determine the “Best time” to “Take Profit”. It depends on various factors, such as current market conditions, investors’ targets, etc. Listed below are some ways which indicate when to sell to earn profits:
- When the market is in a volatile phase – if the market is in a volatile phase it’s wise to lock in the gains and safeguard your investments in case the market crashes.
- If the market has crossed the purchasing threshold – overbuying of shares presents a perfect opportunity to gain profits because, in that case, it’s likely that the price will come down to a realistic figure. The Relative Strength Index (RSI) is a valuable indicator in the crypto market as it measures the speed at which a cryptocurrency is moving.
“Taking Profits” doesn’t always require the selling of already-owned crypto, there are ways by which an investor can “Take Profits” without selling their holdings. Some of these are listed below:
- Staking – staking is a situation, where an investor can lock his/her assets for a defined period to support and promote the operation of a blockchain. In turn, the investor gets paid more cryptos. Staking keeps tabs on the legitimacy of the transactions and data to be added to the blockchain.
- Lending to peers – Lending to peers involves providing your crypto as a loan to others, allowing you to earn interest. It is done through DeFi exchanges and DeFi exchanges claim to provide a guaranteed interest between 10% to 20%.
Your Approach towards Taking Profits:
The crypto market is a highly volatile market to make investments in, profiting in the crypto market is not easy for everyone. That’s why there are strategies that an investor can follow to minimize risk and increase the chances of gaining profits. Here are a few examples:
- Not selling the whole position but a portion of it – It is one of the most effective methods to make profits without cashing out your position entirely. Selling a portion of your position enables you to minimize the risk as you’ve already gained some profit. Moreover, it allows you to remain partially invested in the market as it may go higher.
- You can also earn profits by achieving your predetermined goal irrespective of the time it takes as it is crucial to set targets for yourself before entering the market.
Dr. Naveen Singh is an entrepreneur with achievements in sports, academics, healthcare, innovation, blockchain technology, telecommunications, and philanthropy. He is the Co-Founder and Chief Executive Officer (CEO) of Inery, the first layer-1 blockchain programmed for database management. With Inery, he aligns with his vision of a new paradigm for data to empower web3 and complete decentralization.