We need to get better at taking profits, or at least I do.

Every time the market is in a correction or a crash I try to take a step back and see what is and isn't working with my investment strategies. As of lately I have been thinking more and more about taking profits and how much money I have missed out of purely because of FOMO.

The hardest part about crypto is selling

For me at least I struggle with selling. I could be up 20% but get an intrusive voice in the back of my head, 'Hey Ben, what if you sell now and the price doubles tomorrow?' or something similar to this. FOMO is terrible and most people usually associate it with buying or not buying into a position. This is not the whole story. For example I held $1000 worth of SHIB last August but sold after the price increased by 50%. I'd like to say that this is amazing and if you ever get a 50% return on an investment you are very lucky, but if I had held onto my SHIB for another few months it would've went up by 900% from my initial investment. This is an example of FOMO, why sell at 5% if you could sell at 10%? Well this is what I've been try to improve upon recently in order to enhance my profits in this market.

Compounding is your best friend

Something that gets my economics brain wet is compound interest. Let’s ts say for an example you trade crypto very often and you average about a 10% gain per month. This is extremely hypothetical so please bear with me. You start with $1000 in January and you get 10% gains per month and you reinvest that 10% back in every month until December, a whole year, how much would you have? You'd have $3138.43. That is insane. Now of course you would have to factor in taxes and transaction fees but you are landing a 3x in a year that's great right? Well let's say you carry on and do the same strategy the year after using the $3138.43, what would you have at the end of the year? You'd have $9,849.73. So instead of chasing crazy 100x gains and slowly pissing away your money, you could simply take profits and compound.

Actually taking the profits

It's all well and good for me to sit here and say 'simply take profits' but how do you actually do that effectively? Well something that has worked for me is taking out your initial investment slowly. What do I mean by this? Well let’s use the $1000 example again. I invest my $1000 into BNB and make a 10% profit, amazing! So I take my profits by taking the percentage of my gain from my initial investment. So in this case 10% of $1000 is $100. So I will be left with $1000 in BNB and $100 on the side, how cool is that! I would repeat this every time I am in profit from my initial buy in. So the starting $1000 become smaller and smaller until it has all been taken out. Now this is subject to change. Something could pump by a ridiculous amount and I'd encourage you to sell everything at that point and wait for the price to go back down or to reinvest the profits elsewhere.

​

Conclusion

What I see a lot around here is people repeating the rhetoric of 'HODL' but people take it too far. You can't just HODL forever, that's the equivalent to just putting your money in the bin. If you are here to invest money and not touch it for 10+ years, crypto isn't the right place for that, it's just far too risky. Learning to take profits is essential to growing your portfolio and getting into profits. If I've missed anything, gotten anything wrong or you just don't agree with me please comment. Thanks.