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What Does "Taking Profit" in Crypto Mean?
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Best Ways to Take Profits in the Crypto Market

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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
By Niki Nikolaou
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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
on March 22, 2023 | 6 min
Updated on Jan 22, 2024
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Charles Archer
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Charles Archer is an experienced financial writer specialising in monetary law. With a background in stock market and private equity analysis, he’s worked for many years as a freelance investment author, and has had articles published in a wide range of regional and national titles, both online and in print. He holds a Master’s degree in Law from the University of Law, the UK’s largest legal training institution. Charles believes the key to successful investing lies in quality research, and aims to offer a unique viewpoint that investors cannot find elsewhere.
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Taking profits in the crypto market can be challenging to get right. In fact, its impossible to get it perfectly right, but you only need to be half-right to net profits. Read on to learn how you can take best take profits from your crypto investments or trades with the most effective methods, including ways that do not require actually selling your crypto holdings.

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What Does “Taking Profit” in Crypto Mean?

Cryptocurrencies present an incredible opportunity to generate considerable profits. Taking these profits usually involves selling a crypto asset when its value has increased significantly thus crystallizing the gains. The take profit “signal” might be triggered by reaching set goals or important events, causing both individual coins and broader markets to fluctuate as well.

Taking Profit in Investing

Long-term investing, also known as “buy and hold” or HODLing, is a popular strategy for taking profits in the crypto market. By holding an asset over time and continuously buying more of it when prices are low, investors can increase their chances of making significant returns. As the price rises, they can sell the asset and lock in their profits.

Taking Profit in Trading

Trading involves buying and selling assets to capitalize on market movements. It enables traders to quickly capitalize on price fluctuations in the crypto markets without having to take a long-term view of the asset’s potential value. Trading allows investors to take profits from both rising and falling prices, by taking both long and short positions at different times.

Ways to Decide When to Take Profits

So, when should you take profits in crypto? Several methods can help you decide the best time to take profits in crypto:

Automated Methods

These methods rely on predetermined conditions to signal an exit from the trade or investment. Some examples of automated methods are trading bots, trailing stops, time-based exits, and take-profit targets.

Discretionary Methods

Discretionary methods are more subjective and require traders to use their own judgment. This involves considering market conditions, the asset’s technical indicators and price action, or the trader’s personal risk tolerance, and possibly other fundamental issues.

Mixed Methods

Some traders may employ a mix of automated and discretionary trading methods to decide when to take profits. Mixed methods may involve setting a trailing stop and manually adjusting it when certain conditions are met or using automated methods as part of a wider discretionary trading strategy.

Automated Profit-Taking in Crypto

Automated trading algorithms buy and sell your cryptocurrencies according to predetermined parameters. The exact strategy you choose will dictate when trades are made, whether based on an asset’s value, technical indicators, or portfolio rebalancing. If you want to avoid spending your free time trading or simply buying and holding cryptocurrency, automated trading may be a good fit for you. Of course, automated trading is only as good as the algorithm it follows – but if properly executed, the implementation will be more reliable than any human’s.

Setting Take Profit Targets

Traders can set “take profit” targets based on technical analysis or risk vs. reward ratios. When using technical analysis, for example, traders use technical indicators, tools, and chart patterns to identify entry and exit points that will maximize profit and minimize risk.

Using take-profit targets based on risk vs. reward ratios is another strategy traders can implement when deciding how and when to take profits. By setting a predetermined level of risk they’re willing to accept in exchange for potential gains, they can ensure maximizing their returns while minimizing their losses.

Trailing Stops

Crypto traders can benefit from utilizing a crypto profit-taking strategy that involves using trailing stop-loss orders and profit targets when precise conditions are satisfied, thus allowing them to maximize their profits. The beauty of a trailing stop is that the further a trade or investment moves into profit, the bigger the profit the trailing stop locks in, even when the trade ultimately reverses, although slippage during a period of high volatility could be an issue.

Stop-loss orders are technically automated conditional instructions a trader gives to an exchange or broker. Once a cryptocurrency price reaches the predefined level, the order automatically converts into a market order and executes at the next available price.

Time-Based Exits

Time-based trade exits are based on how long an investor has held a position and determine when it’s time to exit the trade. For example, you might but a cryptocurrency and decide to either exit the trade at a fixed stop loss, or after one month. This may sound simple and arbitrary, but many investors and traders find that this method keeps them in winning trades, cuts losers short, and produces superior exits to any discretionary method.

Using Robots

Trading bots are a form of automated trading that use algorithms to determine when to buy and sell cryptocurrencies. This eliminates the need for manual intervention or decision-making, allowing traders to set parameters such as how much they want to purchase, how often they want to trade, and how much profit they expect.

Discretionary Profit-Taking in Crypto

Discretionary profit-taking in crypto is a method of trading that requires the manual intervention of traders. It involves assessing different factors, like how much risk one is willing to take, how volatile the cryptocurrency market is, and the demand for an asset.

Technical Analysis

A discretionary trader may use the following technical analysis methods to identify entry and exit points when taking profits in crypto:

Reversal Chart Patterns

These patterns help traders identify when a trend or movement might be reversing direction, signaling a potentially good time to exit the trade.

Support and Resistance

Support and resistance indicators can also be used to identify how much demand there is for a cryptocurrency, which in turn can help traders decide the best time to take profits.

When Buy the Dip Fails

Buying the dip can be risky because it doesn’t always guarantee returns: if the asset continues to fall, those who bought the dip could incur substantial losses. To protect against this, traders can take profits when the trend fails to reassert itself after a retracement, although it can take some practice to achieve competency.

Change in Macro Fundamentals

Trading or investing based on how the wider crypto market is performing is another way to take profits. By paying attention to changes in the overall risk sentiment of crypto markets, and wider market conditions, traders can decide when it’s best to take profits or exit a position before too much floating profit is given back.

Change in Coin Fundamentals / Sentiment

Trading based on how a cryptocurrency is perceived in the market can also be a helpful way to take profits in crypto. By paying attention to the sentiment towards a particular asset changes, traders can pick up potential buying and selling signals before others do.

Pyramiding Out

Pyramiding out is a method of taking profits that involves gradually liquidating your position piece by piece over time. This technique allows traders to take advantage of an averaging of floating profit.

By pyramiding out, investors can spread their risk exposure across multiple points in the market and reduce the overall risk associated with their investments. Pyramiding out can be used in conjunction with any of the other methods mentioned above to take profits when various conditions are met.

How to Take Profit in Crypto Without Selling

Here’s how to take profits from crypto without selling:

Peer to Peer Lending

Peer-to-peer (P2P) lending is a way for people to borrow and lend money without the need for a financial institution as an intermediary. This method can be used by traders who want to take profits in crypto, as it allows them to receive payments directly from their peers using self-executing smart contracts.

Arbitrage

Arbitrage is an option for those wanting to take profits in crypto without selling. It involves taking advantage of price differences between two or more exchanges by buying low on one exchange and selling high on the other. By doing this, traders can quickly capitalize on any potential gains as soon as they are spotted. This is very difficult to do for retail traders, especially with CFD brokers, who usually frown on the practice.

Digital Dividends / Staking and Interest

Another popular way to take profits in crypto without selling is by investing in digital dividends or staking. These are rewards given to people who hold certain cryptocurrencies and either start their own staking node or enter a staking pool to help secure the network.

Conclusion

Overall, the best method for taking profits in crypto depends on your trading strategy, risk profile, competency, personality, and the tools at your disposal. However, learning the basics of crypto trading is the number one step in ensuring you’re set up for success.

By understanding how markets work and how to take profits in crypto, you’ll be able to capitalize on potential gains more efficiently and come closer to achieving your financial goals.

FAQ

  • What is the best profit-taking strategy in crypto?
    There’s no precise answer to this — the best profit-taking strategy for one trader may not be suitable for another. Most beginner traders, for instance, start by buying low and selling high, as well as HODLing through price swings and corrections. However, as you gain more experience, you may find other strategies, like pyramiding out and taking profits through P2P lending, more suitable for your trading style. The best profit-taking strategy is one that fits your overall trading strategy and risk profile.
  • Should you take profits in crypto?
    Yes, you should always take profits in crypto at some point, but exactly when depends on the general circumstances of the market, and in your particular circumstances and whether you are a trader or investors, and what your time horizon is.
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About Niki Nikolaou
With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
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