As with stocks, currency and commodity trading activities, success is dependent on your marketing strategies. But at the end of it all, it comes down to two things: market/trade entry and exit.
The times you and periods you do this can be the difference between significant losses and huge profits. This is why every crypto trader must master the art of entry and exit. Do it right, and you will be “rolling in it”.
Do it wrong, and you could lose your shirt. A good entry strategy focuses in price points and market sentiments, while a good exit strategy focuses on either minimizing losses or maximizing profits.
Of particular importance in every trade is the exit point. This is probably more important than your entry point. Of course, both complement each other, but your exit strategy must be designed for excellent results. Whether it’s taking minimal losses or maximum profits, your strategies must work.
If you’re thinking of taking losses, Stop Loss is an incredibly effective tool for your trades, while the Take Profit tool will help you exit the market profitably when the prices reach a predetermined point.
How To Setup Stop Loss & Take Profit In Your Crypto Trades
If you don’t know what stop loss is, it is an order that you put in place to sell your assets at a certain minimally acceptable price. So, as soon as that price is reached, the order is transformed into a market order that then sells your assets at the agreed price.
These are usually put in place to prevent losses from the positions you took when you bought an asset and hodled it for an increase in price. Smart traders typically set their stop loss orders at a price that’s slightly more than they bought the asset.
So, if for instance, they entered the market for BTC at $6,500, their stop loss can be set at $6,800. This way, if the price of bitcoin starts free-falling, they would still be in profit, break even or take very small losses.
There are different variations of stop loss orders, and choosing one is often dependent on your preferences. For instance, your stop loss can run infinitely until you cancel it. It can also be setup as a day order, so it expires after 24 hours.
You can also opt for a trailing stop order that closely trails market prices, but never quite drops in price. Successfully setting a good stop loss or take profit requires technical analysis –yeah, I saw that eye roll.
Most people don’t like reading up on technical analysis, but you need to understand that it’s a critical skill necessary for being successful in crypto trading. If you need help with this, you might want to try tradingview.com.
This tool helps you plot all kinds of trading indicator charts and execute those charts. It also comes fully equipped with oscillators like Adaptive Ergodic and Heikenn-Ashi oscillators among others.
Using a combination of indicators and oscillators, it will be very easy to set up entry and exit points as well as stop loss and take profit orders.
If you prefer something more, try using candlestick charts like hammers, shooting stars, piercing patterns, bullish engulfing patterns, haramis and morning star indicators among many others. These can help you determine good entry and exit points too.
This last tip while not directly related to stop loss and take profit orders is critical for saving yourself when you’re trading. Instead of trading on just one platform, have an account on multiple platforms, and spread your capital across them.
With this in place, it will be easy to save yourself if the asset price freefalls. You can easily log into those other platforms and execute sell orders immediately, thus minimizing your losses.
This is a smart approach because different exchanges tend to have slightly different asset prices when the market is unstable. This small difference can mean a lot in savings if you are trading huge volumes.
Things To Consider When Creating An Entry & Exit Strategy
Successful traders typically develop an entry and exit strategy and play out all scenarios before deciding on the best one for their trades. The following are some of the key things they take into consideration when they are setting those up:
Duration Of Trade
How long do you want to stay in the trade? Do you want to go long or short? These are things you should consider. If you’ll be trading on a daily basis, you’ll need to determine this early on.
If you’ll be taking a position and holding for a week, a month or three months, this will influence your trading frequency. Whatever the case, picking a duration for a trader is often preferable to simply buying and hodling indefinitely.
You should also consider implementing a profit locking strategy in the event of a price freefall. Traders focused on short term trades typically don’t need huge capital as they can easily plow back their profits into other trades.
But, those who are in it for the long haul, might want to ensure capital preservation by periodically taking profits from their asset’s price growth. Exiting for long term traders should be based on fundamental indicators and factors.
Short term trading strategies must include short term profit goals. They should take advantage of common execution levels like Fibonacci/Gann levels, pivot point levels, as well as other short term execution points.
While you’re doing this, you want to implement good stop loss orders to prevent significant losses from your trades. Best bet for trades though, is to always utilize a mix of short and long term strategies for profit maximization.
Crypto trading itself is a highly risky venture given the highly volatile nature of the market. The good news is this volatility can be profitable for you if you play it right. But you need to determine just how much risk you can tolerate from the get-go.
Some traders are high risk takers, others are very risk averse. This will play a role in just how profitable your trades will be. Determine early just how far you’re willing to go: all in or spread risk? The call is yours.
The one constant though is high risk takers typically tend to bank harder and make a lot more money than their risk averse counterparts. But, these strategies come with their attendant downsides.
High risk takers can lose everything in the event of the market going bonkers, while the risk averse plod along, taking minimal losses, owing to their cautious strategies. The best spot however is somewhere in between high risk and low risk. This offers significant returns in the medium and long term.
Whatever the case, you need to determine how much risk you’re willing to assume when entering and exiting the trade. This will determine your profit margins. Set up your stop loss orders so that they kick in early enough to prevent taking a hit if there’s significant market volatility.
Best Exit Point
This is even more important than the other two as it determines your profit margins, and risk exposure. Determine this early on in your trading cycle. Never get attached to your portfolio, it’s the quickest way to lose money.
While you can set decent take profit orders, pay attention to possible profits along the way. Take your profits when they are available, not necessarily when they are hit your target. Pay attention to your fundamentals always.
It doesn’t matter if your assets are performing well, if your fundamentals have shifted, then you need to take your profit and exit the trade. Don’t waste any time on sentimental attachments to your portfolio. Execute those trades, make your money, exit the market when necessary, and smile to the bank.