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 '19 at 20:01
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    Why ever take any profit? – quid Apr 18 '19 at 20:13
  • @BobBaerker unfortunately Coinbase Pro doesn’t offer that functionality :( – shurup Apr 19 '19 at 3:52

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.

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  • 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? – shurup Apr 19 '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 '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 '19 at 13:21

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