Trading cryptocurrencies involves some kind of risk, making it important for traders to use different kind of tools to control risks while securing profits. People invest in cryptocurrencies for several reasons, and want to earn profits from their investments. Since crypto trading market is highly-volatile, determining how to buy and sell cryptos for a profit could be challenging for the traders. Before investing in cryptocurrencies, it’s better for a trader to review how to take profits out from this.
Take profit strategy helps traders to learn when to sell the crypto to maximize gains. Selling your crypto assets to lock in profits seems really easy to understand theoretically but tougher to practice in reality. Learning when to take profits out is important! Why? Let’s understand this with an example:
Suppose you buy a coin, and it goes up and up, hitting your target price. You are happy now, but not decided to sell it- while thinking, why you should stop at this profit when it looks like it will go further higher in a day or two.
But you wake up in the morning, suddenly checking the charts, and feel like you have been dumped. Why? Because the trend had reversed while you were sleeping, turning your gains into -4% losses.
Here is when considering take profit order can help you out!
Take Profit order
Take profit order is one of the most popular and important risk management tools used by professional traders on regular basis. This is actually an automatic exit strategy based on the trader’s profits and loss calculation. Placing a take profit order requires some analysis and market research about the market moments.
In crypto trading, Take profit order mentions the specific price at which a trader should close an open position for a profit. Most of the crypto traders utilize this order strategy combined with stop loss orders so as to manage their open positions.
In this order type, usually the trader chooses a take profit value as the appropriate amount in case the trade moves in his favor. And, if that particular profit level is reached or once the take profit order is triggered, the trade will be closed automatically.
Take profit order is a kind of pending order that locks in the trader’s profit automatically and lets traders earn immediate profits.This strategy works well for traders with short-term strategy who wants to enjoy the benefits of a sudden rise in the price of assets.
Example:
Suppose a trader buys a BTC at $10,000, and puts take profit value as +10% which means, then he has created an order to sell BTC at a price of $11,000.
For some time, the BTC has traded within the range of $10,000, and then it continued to grow. Upon reaching the value of $11,000 or above, your pending order with take profit +10% will be fulfilled, and the system will close the trade as a sell order.
In this case, the total profit value comes out as $1000.
How can I place take profit order?
The traders can place these orders via automatic crypto trading platforms like TrailingCrypto. Such platforms automate the profit targets and stop losses of the trader. Making use of crypto trading bots from these platforms is an additional benefit. These bots help traders to manage their positions in the best possible ways. The traders can even customize their trading strategy via these platforms.
Take profit order is designed to manage the risks whenever the system will stop the bot and sell the order as per the preset conditions. Once the bot reaches the specified percentage set by you within the take profit parameters, it will stop trading by selling the asset at the best price.
To activate the take profit order, traders are required to set the TP percentage. Considering the risk/reward ratio is also important. To execute this order, traders need an open position.
Example:
Suppose, you have an active bot set on the crypto trading platform which is trading on BTC/USDT, and you set the Take profit percentage at 10%. As soon as the current price of the BTC(In USDT) becomes +10%, the bot will close all the orders automatically, and sell the remaining BTC.
Why should one choose take profit order as their trading strategy?
While no one can predict precisely which trades will work well in crypto market,considering take profit order as your trading strategy can let you earn profits via making use of trading bots at the best trading platforms. The key advantage of take profit orders is that the trader is not required to execute any kind of trades here manually. This order type is executed at the best available price in the market as per your preset conditions. This order type minimizes risks and maximizes your chances of earning profits.
While setting this order type, it’s important for the trader to consider risk to reward ratio which will show how much profit the trader expects on any exchange. The best trading platforms like TrailingCrypto allows traders to test and automate their trading strategies. These platforms have their own trading bots that watches the market 24x7 and place trades automatically on behalf of the trader.
However, Take Profit orders are a short-term strategy that ensures the traders can reach some profit level quickly. These orders aren’t suitable for traders with long-term strategy who’d like to endure more ups and downs in the market in order to make more profits.