Let’s keep technical or fundamental analysis out of the way for this. Keeping it real simple here. Again this is based on my own learnings and experiences. No defined science to it. Meant to act as a guide only.
Let’s go back in time. January 1st, 2017. After a night of partying and a discussion, which somehow went on to cryptocurrencies, you’re friend’s convinced you to buy some Ethereum. First thing you do is you open an account and buy 10 Ethereum.
Price of Ethereum on the 1st Jan 2017 is $8. So your 10 Ethereum cost you $80.
By the end of March, the price of one Ethereum has risen to $50, making your total investment worth $500.
What do you do? Hold or Sell?
1. First thing you want to do is free up your capital or invested amount
What I mean here is take out what you’d invested off the table. So if you invested $80, you want to take that out. This would translate to selling approximately 1.5 Ethereum in this case (roughly $75, more or less your capital). Having seen a run of five times, it makes sense to maybe take off at least two times. You need to enjoy what you’re making right? I think this is purely an individual call to make and depends on your financial situation and risk appetite.
Remember nothing keeps going up forever. There are cycles. There are ups and downs. As they say, a bird in the hand is worth two in the bush (it’s just a phrase. I love animals a lot. No harm intended. So PETA, back off).
Once you’ve freed your capital, it becomes a lot easier to HOLD. You need not have sleepless nights over your money.
2. Don’t listen to influencers screaming “HODL”, “Do not sell before 100X”. Taking profits never hurts.
You’re going to see a lot of this in bullish markets, like the one we currently are amidst. Let’s go back to the example of Ethereum from above. Say you hold onto your 10 Ethereum without booking any profits. You’re following an influencer, let’s call him “SHITTO-MAN”, who’s convinced you not to sell a single Ethereum cause it’s going to $10000.
What do you think happened to Ethereum in the following two years? The chart shows that
You can argue, but it’s currently at $1800 an Ethereum. Yes it is. But each one’s circumstances are different. You need to decide for yourself. Can you hold on indefinitely? No influencer or crypto expert, the best of them, knows your specific circumstance. The $80 investment in Jan 2017 was worth $4000 in June 2017. That’s a lot of money. Would be for me at least.
NO ONE HAS EVER BEEN HURT TAKING PROFITS OFF THE TABLE. You decide this for yourself. I know its easier said than done. But think what are your immediate goals. Maybe it’s a car, or a house. A vacation. Take it. Book profits. Go and buy yourself you’ve wanted the money for. So what if you book profits early?
3. I thought of using a recent example here for one of my own trades
So I was looking to take a punt (loosely translates to making a risky bet on something in the hope of making some money). It was a small amount. Let’s work with a $100. Note: This is not something I’m advocating and using here just to stress my earlier points made.
So here’s the tweet I noticed when I looked trying to find something to bet on,
To me this seemed attractive. A sub-$1M market cap (meaning the total value of the company is below $1 million). Again I was trading here, OKAY with the thought of loosing that $100. So be clear on that.
I got into a crypto called Curate (XCUR) when the price was $0.47. So for my $100, I got an approximate 212 units of XCUR (ignoring fees here. Just wanting to make the point).
Here’s a chart of what happened next with XCUR
By the second day, 7th Feb, XCUR was at $1.5. That’s nearly 3 times my money. Specifically, my $100 was worth $318. What did I do? Firstly I thanked the person I saw tweeting about this,
And then I sold some of my XCUR. I sold half that I held. That’s approximately $160 (way more than my capital). I now held a balance of 106 XCUR.
By now XCUR FOMO (FOMO is a term which translates as FEAR OF MISSING OUT) was sky high. What this means is it catches the eye of people. Everyone wants to get on it and are willing to rush into buying at whatever price. Twitter is bursting with calls of “100X on XCUR”, “Don’t sell below $10”, “I’ll only sell my XCUR at $100”.
These are just a couple. Trust me, if you go back to those dates, you’ll find scores of these. No offense meant to these guys.
It’s difficult. But you got to stay disciplined. Else you’ll get burnt (not literally obviously. But you’ll blow a hole through your pocket.
Anyways, XCUR continued its move. I got real edgy at $2.50 and ended up selling the balance of my XCUR at a price of $2.67 (that’s an additional $283 to make my overall $100 invested worth $443 in just over a day). Did I sell at the top? NO. XCUR moved to a high of $3.71. (It does feel bad when you sell and the price runs). I eventually just removed it from my screen and felt a lot better.
But for me, getting a 4X in a day was more than enough. I moved that money to another investment.
For the record, XCUR is currently trading at $1.67
This post was not meant to make any judgement on the project or the people influencing. I used it specifically for a trade. I’m not following XCUR any more or have no plans to.
So to sum up, the points I’ve made here
- Protect your capital
- Do not get carried away
- Make decisions for yourself. No one knows what you need or want better than you
- Stay grounded. Or at least try to. It’s NOT easy
- Take profits. No one’s lost money taking profits.