The crypto market is extremely volatile, which means price swings are normal, and if you get spooked easily, you will lose money. Panic selling is a common mistake beginners make, where they first get into a market without much research and then, when faced with a sudden drop, sell to ‘cut their losses’.
The problem with this approach is that once you sell, you’ve actually lost money (you don’t lose until you sell), and while in some cases, cutting your losses does make sense, most coins will bounce back in days, if not hours, and then the same people, seeing a surge, buy back at higher prices, only to repeat the cycle. Buying high and selling low is a one-way ticket to going broke.
You found a good entry, and the price has gone up, what now? Do you book your profits and exit? Do you keep holding? If so, why? Most beginners don’t have any exit plans and just wing it as they go along, and in most cases, end up either losing their profits, or actually going into loss and have to hold the coins until they can break-even.
As I said earlier, if you are buying to hold long-term, you are not trading, but if you are trading, you should have an exit plan, where you book your profits and move on.
Granted, at times you may see the price going higher after you take profits, but as a trader, you need to expect that. One very effective strategy however, is to sell in stages instead of selling all your coins in one go. This way, you give up a percentage of immediate profits to have a chance at riding the surge higher.
This year alone, Bitcoin has gone from $1,000 to $20,000, which is an obviously impressive gain. Ethereum and Litecoin have also recorded similarly massive returns, but not every coin can, or will, follow the same path.
Some coins, either due to their large supply, or a host of other factors, are relegated to certain price ranges (for example Ripple), and investing in coins, hoping for 2,000% or 4,000% gains is not a sound plan.
As a trader, you need to understand the specifics of each coin that you trade, and that includes its price history and reasonable future projections, so you can plan your trades accordingly.
No coin will go up forever, even Bitcoin has very good days, and then some really rough ones. The crypto space is ever-changing and evolving, with new opportunities coming up every day. If you believe in a coin, holding it for long-term returns is a good approach, but if you are looking to make money by trading, you cannot have emotional attachments with any coin.
When Bitcoin is dropping from $20,000 to $12,000, it is hardly smart to keep holding on to it. Similarly, if a coin is surging ahead of an important announcement, you can easily double or even triple your investment with it, instead of holding Bitcoin at $20,000, expecting a $500 gain.