As the name suggests, the exit strategy means a good plan to leave. In the case of cryptocurrencies, an exit strategy works for leaving the crypto market after selling the cryptocurrency’s assets and taking the maximum profit. The strategy is to minimize the losses. This is the Go URL for creating a trading account.
Why is an exit strategy necessary?
Everybody knows that when you are trading something, hoarding the asset for too long may result in losses. Because the values of these assets will fluctuate, and when you decide to sell your asset, the price may fall and result in a huge loss. The same happens with cryptocurrency also. The value of the cryptocurrency is also fluctuating all the time.
For instance, in the month of December, the price of Bitcoin suddenly increased, and you thought that this trend would also continue in the next month. But unfortunately, it got a downfall, and your investment became less than what it was before, and your investment ended up in loss. That is why a good crypto exit strategy is important to guide you when to leave the market with profit.
In this article, we will provide you with 10 tips for creating a good crypto exit strategy:
Tips for a crypto exit strategy:
1. Do technical analysis:
The analysis is not a new topic for a crypto trader. You may have all the skills to study and analyze the market effectively. While you are planning for a crypto exit strategy, make sure that you are keenly observing the market and keep on recording the market’s behavior. This data will help you predict the future of the market and show how to exit the market.
If you are not good at analyzing the market, let some others analyze it for you. This is not recommended normally, but if you really want a good strategy and you don’t know the way, taking others’ help will not cause any harm.
2. Apply DCA-Dollar cost averaging technique:
This strategy is particularly designed for safe investment. In the dollar cost averaging method, the investor divides his total amount and periodically buys the targeted asset. The purchase is done between a regular interval.
When you are applying this strategy, you have to sell the asset at a regular interval at a particular price point. So you will get profit periodically, stopping you from being greedy and hoarding the asset for too long. Hence you don’t have to worry about the inflation that will affect the investors. This method appears simple but will assure you a great profit.
3. Have a price target
This is the most commonly used exit strategy. Here you target a price for your investment and sell your asset when the prices reach that range. These price targets can be set according to the market analysis results, or some people set them emotionally according to their perspective. For example, you have thoroughly studied the market, and you are confident that the prices will reach 100K per Bitcoin. Then you set your price range between 90K-95K and sell your Bitcoin at that price range.
4. Use stop-loss strategy:
A stop-loss strategy, as the name suggests, is designed to protect the investor from losses. According to this strategy, a stop price is below the invested amount. These prices will not sink with the volatility of the market. This strategy will help you to make a decision without any emotional interference and help you get profit.
5. Analyze the market timing:
You have to set a target for the reward amount and the loss amount. You have to set a goal about what should be the minimum profit amount and minimum loss amount. It is like setting a range for the selling amount. Then analyze the market for the timing at which the price range increases to your targeted amount and sell th
e assets at that point.
6. Show some altruism:
Never be greedy in the crypto market. Do not hold the assets for too long that you have to see a major downfall. Sell your assets when you get the perfect price.
7. Follow Bitcoin cycle:
Bitcoin is the leader of all cryptocurrencies. What I mean by stating this line is that no cryptocurrency will oppose the trend followed by Bitcoin. If the value of Bitcoin is increasing, the same is going to happen with the other coins also. Hence if you are trading other coins than Bitcoin, keep an eye on the trends of Bitcoin. You will know what will happen with your cryptocurrency and, according to that, plan your exit strategy.
8. Observe the signs:
The market trend indirectly gives you signs for selling your assets. It would be best if you decided whether selling is good or not at that time. See whether there are more buyers in the market for your coin or not.
9. Think about re-investing:
People commit the biggest mistake of only investing in a single project. Investing in multiple projects gives better results. When you are leaving the market, consider investing these profits into a new project. This exit strategy makes you gain more amount than you expected without holding on to the single investment. You are taking profits on time and are less exposed to losses.
10. Follow initial investment return policy:
If you miss out on everything that has been mentioned above, you plan a strategy that gives you a profit that is equal to your invested amount. This saves you from losses that will happen if you keep the assets for too long. Also, you will not lose more money than you have invested.
An exit strategy is as important as the investment plan. You should know how to get the profit in hand and how to use it. Barley drawing the amount and not using it properly for creating more investment is truly sounded stupid. When you create a perfect exit strategy, you will have the profit in your hand, and it will attract more money if used correctly.