Is it a good time to sell cryptocurrencies? Should you sell right now or should you hold on while they bounce back?
The cryptocurrencies are crashing very fast, but it is also happening with stocks. It’s always happening when the markets are crashing. Today’s average investor, looking at large losing positions, keeps asking: “Should I sell it, or will it bounce back?”
First, let’s have a look at a Bitcoin chart below. You can see that Bitcoin was going up and then went down. If yesterday we were below 6000, today we’re bouncing little bit back trading right around 8000. Most people, who have a huge position in Bitcoin, are sitting on a large loss now. They are getting depressed, as Bitcoin is going down. There is much fuss around its rate in the cryptoworld. Some users keep saying that it is going to bounce back. But we have already heard this when Bitcoin passed to $13,000, then to $10,000, then to $8,000, and we also heard it again when it finally became $6,000.
Now let’s talk about when is the right time to get out of the market.
One extremely successful billionaire with hedge fund of $20 billion and his own net, worth several billion dollars, Paul Tudor Jones, once said:
If you have a losing position that is making you uncomfortable, the solution is very simple. Get out because you can always get back in. There’s nothing better than a fresh start
When exiting a position, it’s either too early, or too late. It’s never the right time to exit a position. Either you leave some money on the table, or you’re exiting too early. It’s never the right time. You must just get used to it. I have this stock and it’s down, should I sell it? Again, a fresh start sometimes is best, if you’re right now in a position that you don’t want to be in. Just start over and build your account up, because we never know if it will bounce back.
When you’re selling today, either you got lucky and tomorrow it is crashing, or you’re reselling today and it continues to go up. There’s no right time for this. When you make this mistake… What can you learn from this? One quote from Henry Ford says:
Failure is the opportunity to begin again more intelligently
Now let’s talk about how to limit your losses. Here it’s important to keep in mind: “Never ever risk more than 2% of your account on any given trade”. If the trade goes against you by 2%, get out! There’s no need to hang on to a losing trade. Unfortunately, that’s what most people do, and this is what puts them into trouble.
Trade what you see, not what you think! Because when you thought that Bitcoin would bounce back, and it actually went down from $13,000 to $8,000, you were wrong. This is what many investors have experienced in their trading career. Whenever they thought something’s going to happen, they were wrong. That’s why these days there is a very clear rule-when you’re in a losing position and it’s getting 2% against you, go out of this. This way you’ll never hang on to a losing trade again.
If you are in a position that you’re uncomfortable with, get out! Start over fresh! Then apply some basic principles.
Trade what you see, not what you think.
Always limit your losses. Never risk more than 2% of your account on any given trade.
Take profits while they are there. One rule of thumb – for $1 that you risk, you can make $2, or for every $100 that you risk, try to make $200. For every $1,000 that you risk, try to make $2,000. Not $3000! Not $4,000! Not $10,000! For every dollar you risk, you try to make two, and then you take the money off the table.
The reason why so many people are now stuck in Bitcoin positions is because they try to 10x, 50х, 100x their position. Sometimes it might work, but based on my experience, in most cases it doesn’t. When you take profits as soon as they are there, trust me – nobody ever got broke taking profits.
by Markus Heitkoetter