Inside this field, many people carry out buying operations based on various judgments, such as brainless buying based on their own feelings, following others to follow orders, buying based on market news, buying based on K lines, buying based on some chain indicators, and so on.
It can be said that buying is actually very easy, but the most difficult, often how to sell! That is to say, can you sell to the most appropriate position, for example, many people in the last round of the bull market when BTC sold in the 67,000 U.S. dollars in an excellent position, and some people, although it has been several times the profit but still do not sell, and believe that BTC will certainly be up to 100,000 U.S. dollars, and so with the back of the decline and into the bear market, but also can only continue to get the choice to get it now.
This process involves a certain amount of psychology in addition to the fundamentals, i.e. psychology plays a more important role in any trading market, just as important as technical and fundamental analysis. today, we will address this issue and discuss with you how you can better do in the trading market to take profits and close.
The concept of profit taking sounds like it’s very easy, it seems that any trade that makes money is considered a profit taking understanding, but do you really think it’s that simple?
Literally, it seems perfectly understandable that profit taking is indeed a strategy of closing out a position to secure the profit you have made, which sounds and feels very simple - sell the coin you bought and that’s it, however, the biggest problem is that many people fall into the trap of greed, and they often act like they want the price to increase even more in the case of “profit taking”.
Psychology therefore plays an important role in the process of profit taking and two main emotions that influence this process are: greed and fear of loss.
Greed drives individuals to dream of greater profits.
Fear of loss, on the other hand, is manifested by the fear of losing the profits they have earned, and the fear of loss leads them to close their positions prematurely.
So, in order to optimize profit taking, we have to find a balance between greed and fear. so, is there any specific way to balance these two common emotions above?
Before you answer this question, you need to think hard about the following things for yourself:
- Why did you buy this coin?
- What are your expectations for the price of the currency?
- At what point do you plan to stop buying?
- When do you plan to take profits?
If you can’t accurately answer these questions above for yourself, then it’s not recommended that you take any trading action.
For myself, I generally do some thorough research on a specific project before making a trade, such as when we bought some ARBs in tranches a while back, which was based on an understanding of the Arbitrum ecosystem and research, which included fundamental, technical, and psychological analysis of the project.
Fundamental analysis and technical analysis, words outside the words of the previous article has given you a few more detailed combing and introduction. next, we mainly to discuss the psychological analysis.
In the process of trade execution, we should have a psychological price, this is very important, we can simply take an example, for example, in the last round of the bull market, after BTC broke through $ 65,000, many people expected that BTC will hit $ 70,000. However, the highest price at that time did not reach this level, and here $ 70,000 represents a psychological target price for these people.
As shown in the chart above, in any given trading cycle, because of the volatility of the coin itself, we may have a psychological price of our own, and that price can sometimes represent the milestone price (i.e., the highest point price of the phase) of the coin itself.
If the currency is about to reach your final psychological target price, it is important to note that your psychological target price should not be the only basis for closing your position, but rather, you should be as far ahead of others as possible and take profits as early as possible. e.g. if your psychological target price is $1, instead of waiting for the price to reach $1 to consider taking profits, you should consider closing your position between $0.94 and $0.97, which could be a good opportunity for you.
Of course, the above strategy based on psychological target price also depends on market conditions and specific tokens, so we will first apply this strategy to those promising torrents in the bull market, especially those with a high market capitalization, and as for those volatile MEME Coins, this strategy may not always work, and it will be a race to the bottom to buy early and run fast.
So, here are some of our experiences and suggestions on what to do for a specific implementation strategy for your reference:
First position: At 3 times profit, we close 33% of the position to recover the invested capital.
Second position: When we realize 4 times the profit from the entry point, we close 20% of the current position again.
Third position: When we realize 5 times the profit of the entry point, we continue to close 30% of the current position.
After the above three positions, we still have almost 40% of our initial open position and 2x the profit we took back, and with this backing, we can use some of the money to continue investing in new currencies that we are interested in.
As for the initial open position, because it is already profitable, the next operation becomes simpler, as long as a small number of closed positions in a phased manner in batches, but here our operating advice is that you can always keep 5-10% of the initial position not to sell, in order to prevent the back of the growth of the speed of growth, and back, even if the market enters a downtrend later on, but because you have already made a profit, so to keep 5-10% of the position is not a big problem.
Overall, this strategy will keep our positions healthy at all times and will allow us to have enough liquidity (cash) to invest in other coins to generate more revenue, but considering that different coins (projects) may face different situations, we will implement different trading strategies for different coins during the execution process, but at the same time will keep the similar concepts as above.
But the reality is that many people enter this field is to hold 10 times, or even 100 times the psychological goal to do investment trading, this thing I can not say good, I can not say bad, but for me, when 3 times the profit, will strictly according to the above strategy to operate, and later do not have to worry about the position, because I have already invested the principal withdrawn. of course, the initial goal of the end of the initial goal of the strategy is to 3 times, but it may need to be different from asset, for example, if you have a very large amount of money, then there may be a 20% return on the right, and if you have only a few hundred dollars to invest, so want to fight ten times a hundred times the we also very understandable.
Of course, the above strategy is more suitable for operation during the bull market, because many people before the message will say, hope that the next round of bull market can give them some signals, so that they can sell in the best position (top escape). in fact, the best position to sell in the bull market this question I can’t answer, because if it is really in the bull market, even if you have been staring at such as AHR999 such as the top of the escape indicator may not be able to do well, because of the mass psychology of the major impact on profit taking, when most investors began to close the position, it may trigger a chain reaction, or even change the trend of the overall market. so, today’s article is also kind of to give these partners an answer of our own, right?
As for trading strategies during a bear market, I still have the same idea that I have mentioned many times in previous articles: during a bear market, the best strategy is accumulation (fixed investment).
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Special thanks for this article: wacy_time1, 0xTHades
Disclaimer: The above content is only for the majority of enthusiasts to learn and exchange, does not constitute any investment advice, the crypto market is extremely high risk areas, please rationally view and improve risk awareness.