The Best Exit Strategies to Limit the Losses and Protect Gains In crypto trading, there is a belief among serious crypto traders that if you don’t use stops in your trading, you will soon stop trading. And, this is quite true. Firstly, let’s do some facts checking before moving to stops: What percentage gain would one have to make in order to get even after a loss of 10% on the capital? And, its answer is 11.1% But, what should be after a loss of 30%? Answer will be 43% And, what if you are down 50%? Answer is 100% So, what should one do to protect their capital from such attrition? The answer will be, either cut your losses early or lock in your profits early by making use of stops!While placing any kind of trade, money management is an important aspect that one should consider. Many traders spend hours fine-tuning their entry strategies, but at last, they blow out their accounts taking bad exits due to the lack of exit planning. In fact, most of them are often more likely to take premature profits or run losses. Every investment has an entry and exit plan! And, one needs the right exit plan/strategy to make sure that you stick to the decisions you’ve outlined in your crypto trading plan. Without the right strategy, you are most likely to make decisions based on emotions like greed or fear which will further end up in losses. And, when we are talking about the right exit strategies, take profit and stop-loss orders are referred to as the best exits being made. Conditional orders like Trailing stop sell, trailing stop, and trailing limit sell are also preferred by the expert traders. Level up your trading with stops
For every position that you take in the crypto trading market, try leveling up your trading behavior/technique by creating the right trading plan which clearly states when you should exit. Trailing stop is one such strategy which will limit your losses if the price turns on you and lock in your profits if the price moves in your favor. The trailing stop automatically resets the stop value as the stock price increases. Why do you need an exit strategy? In simpler terms, an exit strategy is required for when and how much cryptocurrency you want to sell. It determines your responses to changes in the market prices of your assets along with including a plan for the non-price changes. Here are a few reasons why an exit strategy is required:
To minimize losses To realize your profits Maximize your gains Responding to the non-price changes Achieve your trading goals
Your exit strategy must align with your overall investment plan. With so many exit strategies available, choosing the right combination will help you achieve your investment goals effectively. For example, if you have invested your coins for a long, your priority might be largely to maximize profits and minimize losses. In this case, your exit strategy could be characterized by higher profit goals. You can either plan pricebased exits, scaled exits, or profit/loss exits. Along with this, planning a timed exit will also be of great help. By incorporating a trailing stop in your trading strategy, you can capture capital gains that develop with an ongoing trend. Let’s understand about different types of trailing stops which you could use in your trading strategy. Trailing stop It is a risk-management technique where the stop-loss level trails the current market trends by a specific percentage or value. Trailing stops can be used in two waysTrailing stop buy and Trailing stop sell which is determined as per your long or short position. If the crypto asset price moves in a favorable direction, the trailing stop price will also move automatically. For short trades, Trailing stop buy orders are executed while for long trades, a trailing stop sell order will be executed. In this order type, trailing stop amount moves up by a predefined percentage and a new stop price will be formed. And, whenever the price of an asset moves down, the trailing stop value will also stop moving further. After that, a
sell order will be issued if the price moves more than the predetermined price from its peak price, and then reaches to the trailing stop price. Afterwards, the trade will be closed with a sell order. Hence, Trailing Stop Sell order always sets the initial stop price at a fixed percentage below the market price as defined by the Trailing Amount. As the market price rises, the sell stop price rises and if the stock price falls, the stop price remains the same. When the stop price is hit, a market order is triggered. Trailing stop buy order is just opposite to the trailing stop sell order. You can easily place Trailing Stop sell orders on Binance and other third-party exchanges like TrailingCrypto. If you are going long, using Trailing stop sell order will let you close the trade with a profit and third party exchanges like TrailingCrypto connects its traders to all the major exchanges by making use of API. Another popular exit strategy that traders can use is Trailing limit sell order. Let’s understand this: Trailing limit sell A sell limit order is executed at the preset limit price or higher. Overall, in this order type, you have to set a price. And, when we talk about a trailing limit order, it allows the traders to specify a limit on the maximum possible loss, with setting a limit on the maximum possible gain. The trailing limit sell order always moves with the market price, and continuously recalculates the trigger price at a fixed amount below the market price, based on userdefined trailing amount. The limit price is calculated based on the limit offset. As soon as the price increases, both limit price and stop price increase by the trail amount and limit offset. But if the price falls down, the stop price will remain unchanged. So, considering the right exit strategies and order types can greatly enhance your trading. Considering the above points and order types in mind will help you to limit your losses and protect the gains. The right exit strategy ensures that you stick to the decisions you’ve outlined in your trading plan. So traders, are you ready to start trading? Use any of the above strategies to earn more!
For more information visit https://www.trailingcrypto.com/