Bull Market Profit-Taking Strategy

*Forward the Original Title：How to take profits correctly in the crypto bull market?

A lot of people made insane amounts of money in the last bull run. But what’s really important is not how much you make.

But how much you manage to keep when the bear market inevitably comes.

Many of those who made it in the last cycle eventually lost everything due to greed, fear of missing out on potential future gains, or a terrible exit plan.

With this in mind, today I’ll cover my crypto take-profit strategies to maximize my profits in the bull run.

Profit-Taking strategy

Your take-profit strategy should be adjusted based on 2 things:

• your time horizon
• whether you’re a technical analysis trader or a fundamentals-based investor

Most of my capital is allocated to long-term investments. I also trade narratives occasionally based on fundamentals and pumpamentals.

So in this issue, I’ll focus primarily on my strategies for taking profits on long-term positions and on short-term narrative plays.

But before starting, here’s a tip:

No matter your time horizon, strive not to become a loyal crypto community member who never sells. Nothing goes up forever.

The main reason why many people have a hard time taking profits is because they feel like they become part of a project’s community and no longer think objectively.

The harsh truth is that 95% of cryptocurrencies will eventually die, and if you don’t take profits, someone else surely will.

Short-Term Positions

I open short-term positions based on what crypto narratives I expect to gain massive traction next.

There are lots of things that I take into consideration when I’m trying to predict this, but the 3 most important ones are:

• social media hype. What projects are trending on Crypto Twitter now?
• upcoming catalysts (the launch of a new product, a multichain expansion, etc.)
• smart money’s recent token buys

I take profits on these positions based on both fundamental & technical triggers.

First of all, the most important thing to keep in mind as a narrative trader is that 90% of hyped events end up being sell-the-news events.

Let’s take a look at the BTC price action after the spot Bitcoin ETF approval.

Even though the spot Bitcoin ETFs are now seeing massive inflows, in the short term their approval ended up being a major sell the news event.

The reason for this is probably that the approval was already priced in due to the insane hype around this event on crypto Twitter.

So when I buy a token that I plan to hold for a short period of time due to an upcoming catalyst, I generally take profits on my position or close it completely right before the date of that catalyst.

Moving on, as I said above, I also use technical triggers for taking profits on short-term positions.

I’m not a big trading analysis guy, but I believe that there’s a psychological element to price trying to break previous resistance levels.

Here’s for example a chart with FXS price action.

As you can see in the image above, I marked with a blue line the price levels that the token struggled to break several times in the past.

To take profits gradually on a crypto position, one way to do it is to mark all the key resistance zones for that token and sell a % of your bag whenever that token reaches another resistance zone.

You can easily do this on TradingView and create there a watchlist with the tokens you’re currently holding.

Now let’s take one more example.

PENDLE, a token that I’ve mentioned several times in my weekly watchlist series on X lately, has recently surged to its previous ATH and beyond.

The reason for this pump is that Pendle TVL has recently also skyrocketed due to its new yield trading pools for Eigenlayer’s liquid restaking tokens.

For a token like this that has entered price discovery and constantly hits new ATHs, you can’t take profits based on the technical triggers I mentioned above.

However, there’s one strategy that you can use: Reverse Dollar-Cost Averaging.

Reverse dollar-cost averaging is the opposite of dollar-cost averaging - and it involves taking the same amount of money out of your investments at regular intervals.

For example, you can sell 20% of your bag every week.

It’s not a perfect strategy, but with this one, you’ll be able to lock in some profits while still letting a % of your bag run in case it continues to pump.

Long-Term Positions

By long-term investments, I don’t mean tokens that I wanna hold for the next 5 years. But rather tokens that I plan to keep until the late stages of the bull run.

I believe that the crypto market will continue to be cyclical. So it makes no sense not to sell my bags in the bull run and eventually buy them again at lower prices in the bear market.

I take profits on my long-term positions primarily based on fundamental triggers when I believe that the top of that bull cycle is in.

Until then, I simply hold onto my bags.

I covered some crypto top signals from the last bull market below:

I’d say that a few other good top signals are:

• People who flex expensive things are all over your crypto Tweeter
• Every single shitcoin pumps regardless of fundamentals
• Google Search Traffic for “crypto” skyrockets and hits new ATHs

When these things start happening, you can assume that we’re in the final phase of the bull market and it’s time to sell most of your bags.

I plan to do it by using a Reverse Dollar-Cost Averaging strategy from the moment when some of these top signals are in.

Moving on, it might seem crazy, but there’s one technical indicator that actually predicted the tops of the last three BTC’s bull cycles.

That indicator is called “Pi Cycle” and can be found on Tradingview.

Pi Cycle’s top signals are generated by putting together a combination of 2 daily moving averages.

When one of these moving averages crosses above the other, Pi Cycle signals that the BTC ATH for that bull market is in. (as in the image above)

Pi Cycle is by far the most accurate indicator for Bitcoin based on historical data.

Why does this indicator work so well? That’s a mystery, but I personally plan to also take some profits on my long-term positions next time when Pi Cycle gives a sell signal.

No one really knows what’s going to happen next in financial markets, but in many cases you can increase your chances of success by studying historical data.

That’s all for today. I believe that we’re still far away from the top of this bull cycle. But it’s a good idea to create your profit-taking strategy now.

When the peak euphoria stage comes, it will be hard to convince yourself to take profits if you don’t already have an exit plan.

Disclaimer：

1. This article is reprinted from [[MarsBit], Forward the Original Title‘Safe in pocket, how to stop profits correctly in the crypto bull market?’,All copyrights belong to the original author [THE DEFI INVESTOR]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.