Cryptos are one of the most volatile assets in the world. There’s no limit to what percentage a currency can rise on a particular day. Because there’s no regulatory body present to set a limit. This is why crypto coins can rise more than 1000% and fall to a complete 100% in a single day. If a person has invested money in a certain currency, and the currency by any chance falls to a complete 100% there’s no place that the trader can go crying at. The most recent example is the Squid Game’s cryptocurrency which went to zero within minutes.
So, it is sometimes better to sell and book your gains. But in the case of crypto even booking gains can be your biggest regret. Because if you plan to sell your currency at a 100 or 500% gain, and that currency rises another 1000 or 10,000%, you may regret it for the rest of your life. So, it isn’t easy to decide when to sell a cryptocurrency. There’s no fixed indicator or a set of rules you can follow to help you decide the right time to exit a trade. But you can still take a few precautions to save yourself from extremely disastrous circumstances.
5 signs when you should sell a particular cryptocurrency
1. Extreme Volatility
Crypto in itself is a very volatile asset. Therefore, the point is to exit during extreme volatility, not high volatility. It means when you see a movement of 20-40% in a single day. If it’s moving in the positive direction only then you can hold it for some time. But if the movement is on both ends, and you are not in for the long trend but for a swing trade, then you should immediately exit the token.
In crypto, you can lose a lot within a very short span of time. And maybe after you exit, the coin recovers back, but you need to think how much you have saved had the coin gone the other direction. And in the maximum cases, the coin goes in the other direction of the majority. So, you need to think about the risk-reward. How much risk are you willing to take, and you need to be strict with your stop losses.
2. Target Achieved
Although setting a target is difficult with cryptocurrency, because it can go far beyond any number you decide as your target.
Still, you should set a target and with the market developments, you can keep upping or stretching your target. Not for no reason, you should only change your targets based on the market developments, not because of the price movements. Because large movements will only happen based on new developments in the specific token or in the industry. So, if there isn’t any new news or events happening and you have still achieved your target, you should satisfactorily book your profits and exit the trade.
3. Following the Frenzy
In crypto, we have a term called “meme” coin. It is nothing but a joke, where people are crazily putting their money to see what happens. There is no assurance, no fundamental research, no technical data, for such coins. It is just a frenzy that has gone viral, and people with too much surplus amounts, putting their money to have fun. But people who put their major investment fund in these coins lose the worst when the joke ends. So, firstly you should never put your money in such memes, and if you do, try to exit as soon as possible.
But it’s not just the meme coins where frenzy follows. There’s a coin mentioned in the first paragraph “Squid Coin“. You can read all about it here, to see what happened to the investors who followed the frenzy for too long.
4. No new development
Although the overall crypto market has gained a whopping $2.7 Trillion Dollar market value. But more than 65% of that number is contributed by the Top 3 Cryptos only. So, we can conclude that crypto, in the overall is still at an early stage of its development. And we have lakhs of coins and tokens revolving around the market. But only a few will be chosen by the investors, only some can come into the highlight.
So, if your coin/token is showing no development in its technology, then you are simply wasting your time and money. Because sooner or later it will slip out because the development in other tokens won’t stop. And investors will realize that some other coin may be a better investment option.
5. Crash in Price
It has been mentioned more than once that cryptocurrencies are a very volatile asset class. But you should be able to make the difference between very, and extreme, rise or falls in tokens. So, if your token is falling hard due to some news, or industrial impact. You should exit if you are in for the short term, or just for a swing trade. Because cryptos’ history has proven more than twice how worse it could get when the market crashes. And a rational trader would never want to be stuck in that scenario. So, it’s better to take the exit before you lose it all.
These were the 5 signs when you should sell a particular cryptocurrency, and a trader/investor should always keep these points in mind. It will definitely decrease your chances of being stuck in a situation where you have to regret why didn’t you sell your crypto earlier itself.