3

In such a volatile market as cryptocurrency, I have heard many people stress the importance of taking profits. For example, when a coin doubles in value, they sell 50% of their holding. This ensures profitability (if a coin goes up) but results in the investor missing the peak. I was wondering, could stop orders be better?

For example, if each time a coin goes up 10%, an investor sets a stop order at 90-95% of the present value. That way, there is no sale if it keeps going up, and if it plummets, it ensures that you sell it close to the peak (90-95% of it). I never read about something like this online. What are some flaws with this strategy / thinking?

  • 2
    Use a trailing stop order though there's no guarantee that you'll get a fill at that price if it's a very volatile issue. – Bob Baerker Apr 18 at 20:01
  • 2
    Why ever take any profit? – quid Apr 18 at 20:13
  • @BobBaerker unfortunately Coinbase Pro doesn’t offer that functionality :( – Nick Solonko Apr 19 at 3:52
7

The big issue is that there has to be a buyer. If BTC (or whatever you trade in) drops 20% very suddenly, your order might not be filled. There has to be someone willing to buy at that price, so a sudden decrease can leave orders unfilled. Your stop-orders can and many times will work to protect your gains, but they are not guarantees.

  • If I set a stop order for $1000 and the price suddenly drops to below that, wouldn’t it still execute? It would be at a lower price, but wouldn’t the transaction still occur? – Nick Solonko Apr 19 at 3:51
  • @NickSolonko depends on exchange and mechanism used. Some have an option to trigger a sale at current market price when a threshold is reached. Others only place your sell order at a defined by you price when the threshold reaches. The latter means you will only sell at that price but also may not sell at all. – Leon Apr 19 at 9:57
  • @NickSolonko And in that case, if it actually dropped to $500 before the order could be filled, there wouldn't be much protection on your gains. – Hart CO Apr 19 at 13:21

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.