{"id":10913,"date":"2022-04-04T06:56:10","date_gmt":"2022-04-04T06:56:10","guid":{"rendered":"https:\/\/digitalsurge.com.au\/education\/?page_id=10913"},"modified":"2022-05-13T02:41:26","modified_gmt":"2022-05-13T02:41:26","slug":"understanding-crypto-exit-strategies","status":"publish","type":"page","link":"http:\/\/3.26.50.104\/education\/understanding-crypto-exit-strategies\/","title":{"rendered":"Understanding Crypto Exit Strategies"},"content":{"rendered":"\t\t
\n\t\t\t\t\t\t\t
\n\t\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\u2190 Back<\/a>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t
\n\t\t\t

Understanding Crypto Exit Strategies<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t
Definition<\/h6>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t

An exit strategy is a plan to either minimise your losses or ensure you take some profits off the table as your investments go up or down in value.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t
\n\t\t\t

Understanding Crypto Exit Strategies<\/h4>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t

\u2018When should I cash out?\u2019 is probably the most frequently asked question during any bull market. And for good reason.<\/p>

It\u2019s exhilarating to watch your portfolio increase during a bull run, but many crypto traders realise too late that they don\u2019t actually have a plan in place for when things are going really well\u2026 or really badly.<\/p>

In the past, this has led to countless traders seeing their portfolio go all the way up and then back down again without taking any actual profits off the table.<\/p>

There are two ways<\/strong> a cryptocurrency exit strategy can help you:<\/p>

  1. Taking profits when things go well<\/strong><\/li>
  2. Reducing losses when things go badly<\/strong><\/li><\/ol>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t
    Know your goal for each asset <\/h5>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t

    While your exit strategy will depend on your investment goals and risk tolerance, generally it is recommended to have a rough goal of how much you want to make from any given crypto investment. This will depend on whether you think the coin has long-term potential, or if it is one you picked up to make a quick profit off some upcoming news & short-term price swings.

    <\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

    \n\t\t\t\t
    \n\t\t\t
    Take profits incrementally<\/h5>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t

    After your asset hits a certain price point or percentage increase, you will want to start taking small chunks of profit<\/strong> to ensure you are realising some of your gains into fiat currency or a more stable asset. Crypto markets are highly volatile, and it is easy to get carried away by a pump and think that your asset\u2019s price will increase forever. Remember: Profits aren\u2019t real until you actually cash them out.\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

    \n\t\t\t\t
    \n\t\t\t
    What are the most popular exit strategies? <\/h5>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t

    Step-by-step \u2013 <\/strong>taking small chunks of profit incrementally, as shown in the example above. (Note: many investors choose to keep at least a portion of their investment for the very long-term.\u00a0<\/p>

    Initial investment return \u2013 <\/strong>taking out your initial investment at a given point when you are in profit, ensuring that you can never lose more money than you initially invested. Never a bad idea.\u00a0<\/p>

    EXAMPLE<\/strong><\/p>

    While we are not financial advisors and are of the belief that a good exit strategy should be tailored to suit the investor, here\u2019s a super simple example<\/strong> to give you an idea of how a step-by-step exit strategy<\/strong> might look.<\/p>

    Rule: Take 5% of the profits for every 25% increase in price<\/strong><\/p>

    Mike buys $1000 of Bitcoin. After a few weeks he has seen Bitcoin\u2019s gradually rise by 25%. His $1000 holding is now worth $1250. Although he thinks Bitcoin is likely to keep rising, he wants to realise some of his profits, so he cashes out on 5% of his total investment.

    5% of $1250 is calculated by: $1250 X 0.05 = $62.50

    Mike sells $62.50 of his total Bitcoin holding back into fiat currency. Then he waits till his holding of $1187.50 goes up by another 25% (approx. $1484) before repeating the process. Mike can use profit\/trigger orders to automate his exit strategy. <\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

    \n\t\t\t\t
    \n\t\t\t
    Reducing losses<\/h5>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t

    Having an exit strategy for when things go badly is just as important as knowing when to take profits. It takes a certain level of emotional detachment from investments to accept that not all of your investments are worth holding on to.\u00a0 If all the signs are telling you that a position is going to keep dropping, it may be wise to sell before your losses become bigger than they need to be.<\/p>

    However, keep in mind, volatility is completely normal in the crypto markets, and you should be okay with seeing your portfolio fluctuate in value. As Bitcoin has shown throughout \u00a0its history, even major crashes are often just dips before an even bigger rise. If you have faith in the fundamentals of a coin then it might be worth holding onto to it \u2013 after all, you only really lose when you sell!<\/p>

    That being said, if some catastrophic news comes out about one of your investments you will need to re-assess whether or not it\u2019s an investment worth holding onto.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t
    Key Takeaways\n\n\n<\/h5>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t