Everyone talks about when to BUY bitcoins, but when do you SELL?
I noticed the reddit market community talks a great deal about when to buy. Whether your reason is based on fundamental or technical analysis, bitcoins like stocks and currencies don't go up forever. You need an exit strategy. In this post, I will go over the basics so you can have a better understanding of risk management.
Exit strategy 1: Have your exits determined before the trade.
This one is easily understood. You simply set the price target and stop loss when you enter the trade. You can’t be greedy; your profit target is calculated ahead of time based on your analysis such as a measured move target or prior support/resistance. Being disciplined is the key. Put away your pride and egos. Exit the trade when you are wrong. This will be the least costly trade compared to if you were to hold the bags. What is worst than being wrong is staying wrong.
Exit strategy 2: Dynamic exits
This does not mean your exit strategy is based on “how you feel”. To put it simply, this is an exit strategy that is dynamically adjusted based on market conditions. A simple example is a moving average stop in which you exit the trade if the price drops below the 20 day simple moving average. More complicated stops such as ATR based stops, highlow exits, and indicator based stops are popular.
If you guys like this post, I’ll do a post on the trade-offs between different types of stops. Feel free to leave a comment. Follow me on twitter @ibankbitcoins . I am also looking for active bloggers on my site if you are interested.