Are You Prepared for the Next Market Cycle? Here Are The Exit Strategies For Building Long-Term Wealth

The ongoing crypto bull run has traders and investors seeking ways to maximize their returns. The simplest principle, “buy low and sell high,” underpins all successful trading. However, simple as that may sound, the crypto market dynamics imply traders and investors need to pay attention to critical factors if they want to make the most of the crypto bull cycle.

Finding the right market entry point is as critical as having an effective exit strategy. For long-term holders, accumulating crypto during bear markets at lower prices simplifies this process. 

Short- and mid-term traders, however, can look for pullbacks during a bull run. Waiting for the market to pause after a rally, identifying support levels, and taking positions when prices bounce off support can reduce risk and increase profit potential. 

Adopting this strategy will help you as a trader to minimize the risk of losing your capital and allow you to make significantly high profits.

What is a Crypto Exit Strategy

In crypto trading, an exit strategy defines the rules for closing an open position by converting crypto holdings into stablecoins or fiat currency. Since, the ultimate aim of every crypto trader during a bull run is to capitalize on the skyrocketing crypto prices to make significant gains, not having the right strategy could result in the wrong decisions and the potential to lose money.

Having the right exit strategy could be the most crucial decision you can make during a cryptocurrency bull run. It could be the difference between maximizing your profit, losing out on opportunities, and making losses in the middle of plenty. Therefore, it is essential to have a prepared set of rules to help you decide when you have had enough and set to go home.

It is crucial to note that there are various exit strategies for closing positions when trading cryptocurrencies in the bull market. The particular strategy to adopt depends on individual preference and personal targets. As a trader, you can adopt one or more of those strategies and maximize their potential. However, ensure that you do not mix them up and confuse yourself. Below are some of the exit strategies and how you can apply them in your crypto trading experience.

Types of Exit Strategies

Exit by Price Targets

Setting price targets for each cryptocurrency in your portfolio is a disciplined approach to exiting trades. This strategy removes the emotional factor that often leads to bad decisions resulting from wanting more until the market turns against you. However, you may miss the opportunity to earn more if the market continues to rally after you exit.

By selling when a token reaches its predetermined value, traders avoid the emotional temptation of holding on too long. While this strategy limits gains if prices continue to rally, it aligns well with traders who have financial goals tied to specific targets.

Exit by Portfolio Value

Traders with diverse portfolios may prefer to exit when the total portfolio value reaches a predetermined target.

This is one of the simplest strategies to implement and could be useful in managing one’s financial goals. However, it is crucial to note that this strategy lacks flexibility and does not consider the crypto assets’ performances. It could also lead to missed opportunities, as the crypto prices may not always move at the same rate. This strategy is best applicable to traders who do not indulge in constant market and portfolio monitoring.

Exit by Return

Exit by return is a crypto trading strategy that involves setting a target return, such as a 100% gain, and exiting trades once that level is achieved.

For instance, a trader might target a 100% return on a particular crypto and exit the market when the digital asset’s price rises to that level. This strategy is ideal for traders with a reasonable understanding of the crypto market and can predict the potential movement of individual cryptos.

Applying the “exit by return” strategy helps traders not miss out on potential gains and helps them manage the risk of losing profit. It also removes the emotional factor from traders’ decision-making processes.

Exit by Dollar-Cost Average (DCA)

The Dollar-Cost Average exit strategy is religious in nature, at best. The method involves selling portions of your portfolio at regular intervals, no matter the market condition. The strategy involves a lot of discipline to implement, considering the potential to sell digital assets during losing moments.

This strategy does not require constant monitoring and allows you as a trader to spread your risks over time, against selling all their assets at once. Dollar-cost averaging could lead to missing out on profitable opportunities when the market rises sharply. It could also lead to lower returns when compared to selling all digital assets at once.

It is best to use the dollar-cost average method during high market volatility and future price trend uncertainty. It also takes away the emotional stress of trying to monitor the market often.

Exit by Market Cycle

Targeting the peak of a crypto market cycle is a thing for experts and experienced crypto traders.

This strategy allows crypto traders to maximize profits and minimize the risk of loss and missed opportunities. However, predicting the peak of a market cycle wrongly could expose you as a trader to the risk of having the market turn against you, leading to the loss of initially acquired profits.

Nonetheless, exit by cycle is an ideal method of growing wealth via crypto trading and requires users to be conversant with both the technical and fundamental aspects of crypto market analysis. This strategy prevents premature exits during temporary market pullbacks and allows traders to maximize the entire market rally during a bull run.

Choosing the Right Strategy

Choosing an exit strategy depends on a trader’s expertise, financial goals, and risk tolerance.

It is crucial to assess one’s capability while engaging in cryptocurrency trading, gauge your level of understanding, and know what works for you. In the end, the overall idea and intention when trading the crypto market is to buy low and sell high. How low traders buy cryptos and how high they sell them is a factor of individual ability and know-how. Identify which strategy works for you and stick with it to make the most out of your crypto trading adventure.