How to take profit, a deep dive into my trading strategies.
I made many mistakes in 2017 and most of the time, my lesson wasn’t fundamental research on, it was one thing emotion.
What keeps us from taking profit? And what makes us jump on a coin that went 200–500x or even more? Emotions
Fundamental research is the basis of my strategy, my code and my way of investing.
But this piece is about how to act & react to the market, so I won’t cover fundamental research inhere.
The casino effect
Many probably know this one, a player enters a casino and starts winning, he wins once, twice and let’s say 5 times in a row.
Now, what’s happening after this is with every win, the chance to lose is rising exponentially.
In the end, the bank always wins, and why? The longer you play the higher is the chance you will lose.
It’s very similar to holding a crypto asset.
Let’s say you discover a great hidden gem with a market cap of 500k$ you do your research find its solid and invest. To make a 10x with your investment it needs a market cap of 5 million $ this would put it at rank 1200* on Coingekko.
So it’s safe to say there are plenty of projects with this validation and the chances are pretty good.
But to make a further 10x it would be at 50m $.
It would rank it around 500
This means its one of the 500 “best” performing projects at this moment.
But fine say it does another 10x it would be a 500m$ cap this would put it at rank 150
Congratulations, you now hold a top 150 project.
You see where this is going?
Now here lies the clue, it’s best to look at this scenario independent to any project cause you will see a project that made a 10–100x will have a hardcore fan base, and they won’t listen to any other reality than MOON SOON.
But if you think this through its similar to playing longer in the casino, every 10x you keep holding the higher is the chance to lose and the smaller is the chance to win.
Seeing a top 20 project shilled hurts me, it’s just the reincarnation of 2017 and I wonder why we didn’t learn anything.
A 10x would bring a top 20 project to rank 4 between ripple and BNB.
Now whatever you say as said before if you held this long, you will make all wild presumptions why this could happen.
And I don’t say it can’t.
BUT realize the % to gain is becoming tiny and the % to lose is becoming wider and wider.
This is a simple fact.
Lessons from 2017
What I learned from 2017 are two things, nothing is stronger than the market and nothing is more powerful than emotions.
Most of the time new people see gains and invest after a project made insane % gains. It’s just how humans work, so this is the time when you should be very careful and take a solid step back.
Take your profit or its gone.
You can have 100m$ but if you don’t take profit it won’t be real, and it can turn to dust.
Do you think that’s an unrealistic example? Look at $PAY (TenX)
It peaked at nearly 600m$ and now is insolvent and struggles to maintain at 13m$cap and will probably perish.
It’s just one of those examples. A top 20 pick Isn’t safer than any other.
I never agreed with this narrative.
Trust in your research, not your emotions.
There are times to take profit and there are times to stay calm, you will see the hardest times are before you are in any profit.
Now we got the basics right, lets have fun
Admit you are not perfect
You won’t buy the perfect bottom, and you won’t sell the perfect top.
Drop it, stop worrying about it, it’s a huge waste of time and brainpower.
Especially beginners ask me daily, will this drop more?
If you found a solid project that’s down 20–30% with a low market cap, you don’t ask you start to accumulate.
That’s why I always preach accumulate slow
But what does it mean?
It means splitting up your buys into small bits and buying over a period.
$DAG peaked at around 285sats which is 216% above my highest purchase of 90sats and whooping 307% above my lowest buy of 70 sats in October 2019.
Do you understand now why I don't bother with a few sats more or less if I accumulate?
In the long run its totally irrelevant, the only thing that matters is that i have established my positions and didn’t panic sell.
$DAG currently testing its ATL at 40sats, shows again Take your profit or its gone.
- Update 2
DAG now at 186 sats so a 4.65x from its ATL, selling on the way up and buying on the way down would have been the right play again.
You can have 100m$ but if you don’t take profit it won’t be real, and it can turn to dust.
This reduces the risk as good as possible with buying continues instead of hoping for the one perfect entry.
This strategy kept me fluid in a very tough market and I can only recommend it.
So how does it work with selling?
There are two types of selling a bag.
- You want to take profits from your gains
- you want to sell to buy back later cheaper. (swing trade)
The Biggest question of all when to take profit?
I wish there were a simple answer but it is a very complicated question because it takes many factors into account.
Most important the market.
The first rekt people in 2017 were the ones that sold too soon, there was a massive amount of fomo(fear of missing out) back then.
I did so on various coins and did a 5–10x AFTER fomoing back in.
Nothing is stronger than the market, never forget that.
You can hold the worst coin in the right moment and win or the best coin in the worst moment and you won’t succeed.
Similarities in different charts
You can see there are two periods where you can miss out.
The one is in the first stage, where the project is in the “hidden gem” stage.
Second is after the main pump where the project price is experiencing a slow but steady decline with no recovery in sight.
The window to take profit is in both cases extremely slim.
Its usually defined by 2–3 very sharp upwards movements.
I find these charts very interesting since they are both nearly identical.
With the main difference of 2 years difference IOTA in 2017 LTO in 2019.
This shows also that history will always repeat itself, what we can see here are market movements driven by emotions and various other circumstances that can always repeat itself.
Looking at both $LTO and $IOTA both had a near 90 degree angles upwards, both never reached their former ATH and had a slow price decline.
There are no 90 degrees in nature, such growth is simply out of this world and a no brainer.
Now let’s look at the big Daddy
Little more organic growth but surprisingly similar, the perfect time to exit is equally slim and seems near impossible to time perfect.
But looking at bitcoin in late 2019 it doesn’t seem to match the pattern, it seems it started a new cycle.
Now everyone has heard about the Wall street cheat sheet.
But what many don’t know about it that this cycle has no beginning and no end.
It is a never-ending circle, it ends and starts with disbelief.
If we repeat the same pattern we would receive something like this:
This would mean now is the time when investors usually sell to soon and get shaken out and the next ATH is probably 6–12 months away.
- Update 18.12.2020
The above chart was made in October 2019, now compared with an updated overlay from December 2020 you can see it nearly played out as I guessed.
Now the Question is when is the time to take profit, and when does the “slow death phase” begin.
- Update 18.5.2021 Why I think we are in disbelief stage
Since writing this article BTC went from 10k to 63k and now down to 45k$
Now many will say this is similar to the drop from 20k to 17k in 2017 which started a slow bleed of death all the way to 3k.
But this time is different, on so many levels.
2017 had No usecase
There is a common misconception by most traders, yes there are cycles, but no one is paying attention to what is starting or ending a cycle.
in 2017 we had btc and eth and some altcoins not really doing anything
We had no defi, almost no working and used eth dapps
No institutional interest, no Funds buying BTC
No working dex we had a few cex many of them exit scammed us
We had ICOs that collected 20–100m just to go silent for 2 years without delivering anything.
2018 and 2019 wasn’t a natural market correction retail bled dry over these shady tactics
2017 had no defi
Now we have billions locked in defi , institutions buying billions of btc and eth
And now we see institutions having their eyes on defi and altcoins, defi isnt an idea anymore, its reality. it works, it generates billions in farming revenue, and billions are locked up in liquidity pools
2017 had no scalabilty
My theory is that the market is like a new born river, still very tiny trying to make its way to the oceans, many obstacles in the way. what keeps the bullrun going? is flow and speed. in the 2017 bullrun peak BTC and ETH where both clogged to death, tx stuck for days where common, this is what truly ended the run.
Now we have multiple scaling solutions in near future, and #BSC run Pancake growing exponentially as we speak!
2017 was euphoria
many say the current market sentiment changes from euphoria to bear in seconds, i strongly disagree. We have never seen euphoria since 2017, true euphoria will change your mindset, beginners will take loans to buy more coins, every dip will be seen as a buying opportunity.
Now we see 80% of the people in disbelief combined with a strong dose of bear market PTSD (what if this is 2018 all over again??)
This is NOT euphoria, thats why I remain with my conclusion we are in late disbelief stage
This will be a total new ball game and it will change the lives of everyone inhere whos paying attention
Sell in steps
So this is the perfect example of selling on the way up.
Similar to accumulating slowly you sell slow, meaning on every leg up you sell 10–20% of your bag.
2017 was the biggest bull run so far, almost no one would have thought altcoins could reach those highs.
But even so, you could say that after doing a 2–5x on your investment it’s surely time to think about taking profit.
Especially in a bear market.
How did I survive the bear market?
I made many mistakes in 2018, I held the way too long, and I expected a bounce that never came.
Not going to lie, it nearly crushed me.
But then I remembered, why I entered crypto in the first place, how it felt like to be part of this epic place.
So I mastered my fear and looked at the situation.
The one beautiful thing about the bear market is that everything is on sale.
The bear is not picky about whom he eats, every damn project was or still is -80 –90%
This gave me the excellent opportunity to shuffle my bags, get rid of bad ones and buy the best.
I also kept buying the blood, day after day.
about moon bags
Now I keep it more fluid I separate my bags into moon bags for the future, and play bags to keep me in the game.
This means I have my list of picks, I try to accumulate a moon bag of each, and the rest is my play bag.
How big is my moon bag? Well as big as you can afford.
*But you could do it like this:
Buy 1 Bitcoin of coin X
Split 0.5 BTC into your moon bag, you store it off-exchange and keep it for a longterm, if the FA doesn’t change, or the project doesn’t underperform there is no reason to worry about this bag.
Split 0.5 BTC into your playbag of coin X.
After 20% gains, you sell the 0.6 BTC and buy a solid project that’s down 15–20%
You can repeat this endlessly.
Analyzing the top 100 holding positions through block explorers is an excellent way to research. It’s not an exact science since many holders are on exchanges, and the biggest holders often are exchanges.
It’s a very good way to see how early you are on a pick to calculate how much $ investment brings you into the top 100 holdings.
You can learn from this, is it possible to become a top 100 holder with your funds? How many coins are needed? How even are the top 100 holders distributed?
*How to check the amount required for x coin
- On etherscan.io, neotracker.io, etc search for the coin, click on holders/addresses
- Check what amount is on rank 100
- Copy that amount
- open coingecko, search for the coin
- insert the amount > see how much USD is required
Whats the benefit of analyzing the top 100 holders?
1.Getting a clear view about the distribution and centralization of the coin.
2. Finding out if its still possible to achieve a top 100 position, this shows how early you are on this.
Let’s summarize this
- Knowledge and Fundamentals are key, but it’s your emotions that will likely stand in your way.
- Separate between a longterm moon bag and a short term play bag.
- Holding a crypto asset through substantial gains is similar to playing longer in the casino, every 10x you keep holding the higher is the chance to lose and the smaller is the chance to win.
- Holding a top 20 Assets doesn’t make it a safe investment, don’t delude yourself into false safety. In the last stage of 2018 many sold all and went into the safe havens of the top 20, it didn’t help them.
- Trust in your research, not your emotions.
- There are times to take profit and there are times to stay calm, The time frame to take profit is usually the shortest, the time frame where you get shaken out the longest. Hang in there!
- Market cycles repeat itself, know in which stage you are.
- Average your way in and out of trades, buy in small steps.
- Every situation no matter how bad has its advantage, finds it and plays it out.
- Analyze the top 100 positions for your positions.
- Don’t blindly compare to 2017, look at the key differences
I hope this was helpful, longterm I think investment in a solid project will be life-changing, but we live in the now, and those tools helped me to cope with some of the challenges of the crypto market.
*Since i received many Questions about those 2 paragraphs i made some further explanations.
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