The cryptocurrency world is not always as easy as it looks from the outside. It can also be full of ups and downs with lots of questions in the mind of any crypto trader. One of such questions is when and how to pull profits from your crypto investments. Knowing when to take out profits is one important factor that helps distinguish between a profitable trader from unprofitable one.

However, you can’t just pull out profits from your investments any time you feel like doing so. There are some factors you need to carefully consider before pulling profits from crypto. For instance, you need to consider when you entered the trade and what your plans are for entering into such a trade.

At the same time, you will want to think about the crypto exit strategy you will be using in case the market goes south. So let’s go deeper into the topic now and see how you can pull profits from crypto.

The Volatility of Cryptocurrency is a Double-Edged Sword

In case no one tells you about this before you venture into cryptocurrency trading. Crypto is an asset subjected to too many changes. It is highly volatile. The price of a crypto token can increase by 5% within only one hour. At the same time, it can surge deep even in the next hour. It can be very unpredictable.

However, many inexperienced traders today when faced with a lifetime opportunity that comes in form of volatility, it can be very difficult to make a smart decision. But many of them oftentimes fall victim to the volatile nature of cryptocurrency by allowing their emotions to dictate their trades. So, always learn to tame your emotions.

Learn How to Control Your Emotions

This is very important to any investment, but most especially in crypto trading. Even if you have the most interesting take-profit strategies in place, they won’t work if you are not the type that can excellently control your emotion.

Once your profit target has been hit, don’t be tempted to want to hang around for more gains. This scenario was common with the 2017 Bull Run where many traders sat through massive gains without pulling profits. So learn how to keep your emotions in check so you can do the right thing at the right time.

Understand What a Take Profit Strategy Looks Like

To be a successful crypto trader, you need to properly figure out what your take-profit strategy will be. For some traders, it is exiting their entire position simultaneously. And some would prefer to baby step out of the market taking things gradually. And this is a decision you would have to make ahead of time.

The point is that if you choose to exit incrementally, you will have to set a stop-loss order so you won’t be losing all your gains. This is an example: let’s assume you have a one Bitcoin long position at $2,700 and an exit of 50% of the position at $3,500 to make a gain of $800. So in this case, you will be setting a stop-loss order at break-even $2,700 so you won’t continue to lose money.

Setting a stop-loss order is a great way to prevent yourself from losing money on an already profitable trade.

When Should You Consider Pulling Profits From Crypto?

Remember, you are not letting your emotions rule your actions right now. So you need d to carefully analyze it if it’s even the right time to pull profits from your investment. Below are some strategies to help you figure out if it’s the right time to close a position and call it a day.

#1: Watch out for divergence

Yes, one of the excellent tools to find profitable entry and exit prices is a divergence between relative strength index (RSI) and price action. Divergence is the disagreement between price and the indicator, and this can have significant implications when it comes to trade management.

The amount of disagreement in trade is however relative, causing different patterns in the relationship between the indicator and the price. To make momentum analysis valid, there must be sufficient strength in price swings. That means momentum is more useful in active trends than it is with range conditions where price swings are very limited and variable.

In an uptrend, divergence happens when the price increases but there is no increase in the indicator. And in a downtrend, it happens when there is a decrease in price, yet the indicator doesn’t reflect that. When divergence happens, it can go a long way to help you recognize and react appropriately to a change in price action. At that time, it is a sign that you need to decide whether you should tighten the stop-loss or just pull profits.

That means that your ability to recognize divergence in your trade will help you make the most out of your trades. It will always notify you that it’s time to pull profits.

#2: Pay attention to Fibonacci levels

The cryptocurrency markets are, to some extent, influenced by algorithms and automated trading bots. This market environment tends to push prices to Fibonacci levels. Paying close attention to these levels can help you gain a hometown advantage in the crypto market. This is even especially true during retracements.

Oftentimes, you should expect to have some sort of reaction based on different Fibonacci levels. And this can provide you with a temporary liquidity pool when looking to close a position and pull profits.

#3: Keep a close eye on pivot points

This is another important indicator to have a clue into when it’s right to pull profits from your crypto investment. Pivots will help you recognize changes in market sentiment from bullish to bearish. Pivot points are especially useful for day traders as it helps them to recognize levels of entry points, profit-pulling, and stops. So you can always see them as technical indicators you can trust for a profitable trade.

You can use pivot points to identify reversals and trends primarily in equities, commodities, and forex markets.

Final Note

Like other forms of trading and investments, crypto trading also requires that you have a good strategy to help you make the most profit. However, crypto trading is very different from stocks. So you can’t rely on the same approach for the two.

However, in crypto trading, there are lots of “tells” to help you recognize when it’s the best time to get in and out. Once you are able to identify these “tells” and indicators, you may not be having many troubles trading cryptocurrency. Nevertheless, this is not what will happen overnight; it will require a series of experiments.