The whole point of being around the crypto market as an investor is to invest at the right time for higher profit margins. But only the knowledge of one booming cryptocurrency to invest in is not enough to generate phenomenal profits.
It is important to statically predict the short and long positions depending on the circumstances. Otherwise, you might end up stuck in various positions selected randomly and might lose all your capital.
This article deals with the best Crypto Exit Strategy that covers how to generate higher profit margins on your invested amount irrespective of the case or whether you are in a position short or long at the right time.
Crypto Exit Strategy
The major thing to note while learning Crypto strategies for selecting the suitable one for your portfolio is trying to research well and stick to one after that because the portfolio you hold without an existing exit strategy is your personalised perspective of selecting a cryptocurrency and your exit strategy must match with that perspective and not the other way around to create a flow of profit margins as per your personalised strategy.
There are various crypto exit strategies but it is advised to use only one during the initial stages. After reaching certain applied knowledge then enhance your criteria to include other strategies.
Price-based Exit strategy
It is the most commonly applied strategy where investors release the position based on profit gains when the cryptocurrency price touches certain profit or percentage marks.
In theory, this crypto exit strategy is done to earn higher profits with trading as well as making a small amount on hold in case the prices enhance exceptionally high, which is quite obvious with cryptocurrency or having some inside information. But in practice, it is hard to conclude the right time to clear the position.
The more practical approach that most investors don’t know about is Support and Resistance levels.
Support levels look for the series of low prices bounce indicating that currently it is in a downward trend and maintain that furthermore. Whereas resistance is just the opposite of support indicating that supply is preventing the cryptocurrency prices to touch higher levels.
Note- As soon as the price struggles to break resistance one needs to book the available profits as it is indicating that it is now conditioning towards trend reversals or preparing to go sideways.
Gradual exit Strategy
It is also a percentage sell-based strategy as mentioned in the above section that selling cryptocurrency as a whole is not advisable as they are highly priced and volatile.
In this exit, the strategy approach considers distributing the portfolio cryptocurrencies individually in several percentages and then accumulating these divided distributions as per bearable loss and expected profit sets.
After that try to release the loss-making crypto currency percentages comparatively fast than profit percentages to release the funds to reinvest in the profitable crypto percentages
One more thing to consider here is that within the profit distribution sets holds some percentage based on appropriate calculated statistics and risk appetite on the hold side as it acts as potential future profit if there comes an exponential growth in the prices that is quite a common occurrence in cryptocurrencies.
Return-based Exit Strategy
It is also a quite common exit strategy in which investor targets predefined assumed profits return seeks related to a particularly invested capital. Once the investment can extract investor assumed returns from the market the investor is willing to release the position as the required profit gained is fulfilled.
However, the major issue one faces during this crypto exit strategy too is a lack of understanding of the signals conveying the cryptocurrency during the position hold.
To overcome this, the recommended practice is to use Support and Resistance levels and MSI indicators for more surety.
Opportunity-driven Position Exit Strategy
One of the monitoring-based exit strategies that use the properties of non-price change assertions on the portfolio by laying off the non-performing currencies and reinvesting that amount in the higher return promising or currently performing crypto assets.
The way it enhances the profit margins is to give up on the non-performing cryptocurrencies because it consumes the value and time and generates gains by reinvesting more percentage in already tested performing cryptocurrencies in your portfolio.
With its implementation along the Gradual exit Strategy, the profit margins can be exceptional.
Cycle Exit Strategy
Time is one of the most important factors when it comes to deals of any kind. In the investment of cryptocurrency, some investors consider it of utmost priority and that is the reason they invest by understanding the cycle growth calculated of a particular cryptocurrency.
The more general example of this strategy is the 4-year change cycle while the intermediate approach is understanding long-term trends and their impact on short time frames.
Now Let’s take a thorough dive into the need for an exit strategy that not only explains the requirements of the strategy but also builds a foundation on which it becomes easy for one to understand exit strategies too.
The need for Crypto Exit Strategy
The main reason that requires an exit strategy from an investment is directly proportional to the volatility of the investing asset. This means if an investing asset is highly volatile in terms of price change then the requirement of exit strategy related to the invested amount is also high and vice versa.
And in the case of crypto, it is the most volatile investment asset ever structured because it includes the extent of freedom of trade that is not possible in any other investment.
Various other reasons are quite enough to make you understand the implementation of the right-suited crypto exit strategy in your current portfolio.
Profit releasing based on fragment distribution
Profit releasing is a concept where an investor releases the positions based on statistically predicted profit values. Applying a Limit or stop to the orders based on the short or long position of the trade is one of the obvious methods that is used to release the profits.
But in the case of cryptocurrency the prices of top-level currencies such as Ethereum, bitcoin, etc where the price of the prior is above 1000 dollars and that of the latter is above 20000 dollars, the investors use a fragment-based distribution model on top of profit releasing where one crypto currency’s amount distributed in various percentages and sold depending on the current market values.
Minimise the position losses
Every trade in the cryptocurrency involves the bearable risk appetite one can handle if the prices go otherwise from the expected values. A crypto exit strategy helps determine the values of these risk appetites and maintains the balance in the portfolio with lower and calculated risk levels.
This not only saves larger losses but is also helpful to not affect your future investments based on previous unwanted events of loss that might trigger the negative emotions which can be huge and one might end up with the loss of all capital in case of missing exit strategy.
Tackling Non-price change
The chances of non-price change in crypto prices are general as this investing type is relatively based on the very innovative yet new concept of decentralised distribution of the money flow to global levels without the one regulating authority intervention. Hence there are cases when the outlook of the investments you are doing in the present or have done in the past needs to change.
Example: Once bitcoin was established, it became valuable as the banks considered it an acceptable form of exchange resulting in investors releasing the other crypto assets and starting investing in bitcoin even though the price is still at the same levels as before.
Profit Maximising on the position
The exit strategy not only helps to minimise the loss margins as we discussed above but provides the edge of enhancing profit margins exponentially by figuring out the right time to exit from a current profiting asset when it is within the favourable scope and to reinvest the gained profit margins to other growing cryptocurrencies that are relevant to your investment strategy to gain more profits on the same investment.
Unbounded Targeted Profits
In the case of cryptocurrency investment, there is no concept of a minimum investment period, unlike share or commodity markets.
Hence with an appropriate crypto exit strategy in place, one can achieve targeted profit margins without any hassle of technicalities of placing or releasing criteria that change based on trading aspects.
By now one understands the basics of working of crypto as an investment asset with its involving factors that make it a potential profit-generating stream.
Now is the time to go through different exit strategies and select one that suits the current positioning of cryptocurrencies in your portfolio.
Although Crypto exit strategies vary based on the particular mindset behind the creation of a portfolio based on suitable logistics, strategies, statistics, and knowledge of the added currency along with bearing risk and capital ratios that vary from person to person, there is various Crypto exit strategy that has some common ground, enough to make one understand the complete picture of their functioning to identify their matching trading/investment patterns with them.
This article is designed to fulfil the motive of making investors understand the appropriate evaluation of the Crypto exit strategy to maintain constant profit margins by having a deep understanding of their portfolio.