Charlie Shrem: ‘The Art Of Taking Profits’ (how to avoid getting rekt!)

The majority of traders and investors spend most of their time deciding what they are going invest in and very little time figuring out a future exit strategy for those positions. The truth of the matter is an investment is only as good as the actualized profits obtained at the end of the trade or selling of a position. No game plan in mind for the future not only entangles investor’s profits but also their mindset. It would be no surprise to hear that most of us in the Crypto.IQ tribe has experienced an investment, particularly in cryptocurrency, go from the moon all the way back down to Earth, due to us not having a set target or a system of parameters set in place for us to use when determining when to reap the rewards of our research.

It is our goal here at Crypto.IQ to equip our community with the skills and knowledge needed to navigate the turbulent waters of the crypto space in a simple and profitable manner. At the end of the day, being a part of the next potential monetary revolution is enough for most of us to stick around in the cryptocurrency scene. This means we should be periodically paying ourselves for our endeavors in the meantime. Here are a few tips to help you continuously fill your pockets and plan ahead with your crypto trades and investments.

1. Daily Divergences

A lot of technical analysis can be riddled with hindsight. To be fair, using the past to predict potential future price action is a key component to studying charts. There are, however, a few predictive techniques that anyone can use to make moves before the market does. One of the most powerful signals a technician can use is an RSI divergence on the daily chart.

Via Investitute: “The relative strength index (RSI) is a momentum indicator developed by noted technical analyst Welles Wilder, that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security.”

A divergence is shown in the RSI when price is behaving in a way that differs from what is shown on the RSI. This can signal bulls losing underlying strength or vice versa for bears.

**This article was provided by Crypto-IQ and Charlie Shrem. For more from Charlie and his team click the link! Crypto-IQ

To apply the RSI to a chart, one can simply go to tradingview.com or coinigy.com, insert the ticker for the coin they wish to view (Bitcoin = BTCUSD, Ethereum = ETHUSD, etc.) to pull up the chart, then click the indicator tab which brings up a list of options, from which ‘RSI’ can be chosen.

When looking to take profits before the market changes direction to the downside, investors and traders want to look for what is called a bearish divergence. This occurs when the price is making higher highs designated by candlesticks, but the RSI is making lower highs. Thinking of the word contradiction as a synonym for divergence may be helpful, as in the price action and RSI is contradicting one another.

Many were completely entranced by the parabolic advance Bitcoin displayed on the surge upwards to $20k, and few were able to sell at the top. By simply scanning to see if the RSI was in coherence with the price, one would have seen a simple bearish divergence on the daily chart, allowing you to perceive the true story of what was happening during the final push: bulls were losing strength.

The move to the current all-time high was not the only occasion a bearish divergence displayed on the RSI before a monumental price swing occurred on Bitcoin. You can apply this simple technique to not only Bitcoin but every other coin as well.

2. Fibonacci Extensions

Another seemingly magical and incredibly simple tool to use when scoping out a time and place to take profit on your trades and investments is the Fibonacci tool. Specifically, there are several levels that are displayed above the Fibonacci set after they have been drawn which are called Fibonacci extensions that can be used for profit taking. These are useful when determining potential pivot points for coins which have recently broken their all-time highs.

**This article was provided by Crypto-IQ and Charlie Shrem. For more from Charlie and his team click the link! Crypto-IQ

You can also find a Fibonacci set drawing tool on coinigy.com or tradingview.com, and it is applied correctly by first clicking on an important swing high and then dragging the set to an important swing low and clicking for the second time. The grid-like setup that is laid out afterward will include a mathematical pattern of numbers that abide by the Fibonacci sequence.

The levels designated between 1.0 – 0 are known as Fibonacci retracements and can be seen as great potential levels of support and resistance. Above the 1.0 level are levels that a trader or investor can use to map out potential take profit points, even if the coin has yet to reach said heights in the past. Due to the fact that the study of past price movement creates the bulk of evidence used in technical analysis, having a tool like the Fibonacci extension to determine future levels unreached in the past is a huge addition to any aspiring technician’s arsenal.

3. Emotions

“I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”

This quote by William Eckhardt is often a tough pill to swallow for beginning traders or investors. We often see investing and trading as a purely logical and analytical endeavor, which rarely has any relevance in emotions. However, emotions are the very thing that drives a person to buy or sell an asset when trading and investing, whether that be Apple stock or Litecoin. We, as humans, are the market.

When a flood of red candles appears on the screen, we can experience anxiety, which more often than not instills in us a strong urge to sell. When we feel on top of the world after a month-long bull run that has doubled our money, we want the feeling never to end. Of course, in hindsight, we know the best time to buy is when there is “blood in the streets,” and the best time to sell is when every market participant is euphoric. Since we all experience these feelings, the traders and investors who go against the psychological grain, regardless of how we feel at the moment, are inevitably rewarded the most.

Being self-aware of how you feel at all times when trading and investing, in regards to your position, is a key insight into how others are also feeling. A successful trader/investor has learned to reverse engineer their positive emotions as reasons to sell and their negative emotions as reasons to buy.

The next time you look at your portfolio and it is beaming green and your friends are asking for advice on what coins to buy while you calculate how far away you are from your first Lamborghini, consider taking profit and doing so immediately. Although this may not be your exact behavior pattern, we all exhibit something that relates to positive emotional sentiment regarding the market. Find out what yours is. Social media, news outlets, and other places where the prevailing sentiment is on display are great for gathering additional emotional indicators. Be constantly aware of your mental state, and be willing and eager to act against it.

“Be paranoid of success – never take it for granted. Realize success can be temporary and transient.” Rakesh Jhunjhunwala

**This article was provided by Crypto-IQ and Charlie Shrem. For more from Charlie and his team click the link! Crypto-IQ