Entry and Exit Points: How to know when to Buy and Sell Cryptocurrency
As the crypto markets continue to increase in popularity and user participation, more and more people purchase Bitcoin as a long term investment. There are however some, more ambitious people, that see the potential in growing their portfolio through trading. They sell the top and buy the dip effectively, increasing their exposure to the asset along the way.
In this article, we discuss how these traders enter into positions using entry points, and how they exit their positions using exit points. After reading this post you should have several resources to go through to better understand some basic charting principles.
What are entry and exit points in crypto?
An entry point is a favorable market position that allows a trader to enter into a trading setup. Some call it a short term price dip, or a “bottom”. In short, it is a point in the market that indicates an opportunity for short to mid-term profit potential.
An exit point, on the other hand, is the exact opposite of an entry point. This situation refers to the moment where traders exit their trade in other to lock their profits. Most are unable to find a “local top” and end up missing the best possible exit point, but generally cash out shortly before or after it is reached.
How to know when to buy and sell cryptocurrency
Knowing when to buy and sell specific cryptocurrencies is a very complex skill to acquire. Not only does it require lots of experience in market cycles and the particular coins you are looking to invest in, but it also requires a good understanding of your own psychology. In short, you need to make sure that:
- You are familiar with charting, price indicators, and technical analysis in general.
- You are familiar with a cryptocurrency’s fundamentals and the market sentiment surrounding it at the moment of your trade.
- A developed level of emotional intelligence (or “detachment”) from market conditions. This is especially important due to the volatility of the markets.
How to predict entry and exit points
To predict entry and exit points, you will need to acquire the skills above and spend a lot of time in front of your screen. Some traders choose to automate the process by setting automated targets using trading bots, but this process does more harm than good. In general, you should be able to predict the next price target based on historical events and follow the patterns that indicate the future direction of the market.
For example, you might notice that the current Ethereum price does not follow the uptrend and seems undervalued. In this case, you can buy it and wait for growth to occur.
To do this efficiently, there are several resources you can follow and learn from:
- Binance Academy – Binance has a resource center that helps investors get a better understanding of trading basics, as well as price indicators, charts, etc.
- Crypto Cred’s Medium channel – This blog contains a wealth of information with regards to technical analysis, which can help you better understand market dynamics.
- Legit traders on Twitter – Follow traders like @Warobusiness, @Rookiexbt, @KoroushAK, @cryptoyoda1338, @CryptoDonAlt, @Venturecoinist, @ToneVays, and more.
- Perform sentiment analysis regularly – Use Social Trust metrics from websites like Lunar Crush, and explore digital platforms and communities to understand whether investors feel positive or negative with regards to the future of the cryptocurrency they hold.
- Trust your gut – Once you have more experience in the crypto markets and manage to control your emotional reactions to the price volatility, you will usually be able to predict dips and local tops, selling efficiently along the way.
What else should I know about?
If you choose to use trading platforms like Binance or Coinbase Pro for your trades, keep in mind the following:
- Each trade is a taxable event, and you will usually have to pay a percentage to the taxman. This of course differs in every country, but keep it in mind before trading recklessly.
- Avoid using leverage. You might feel that you found the perfect entry point, and choose to add more leverage to your trade (trade with 2-10 times its actual value). This is a very risky practice saved for those with the most experience, and should generally be avoided if you are just starting out.
- Always place a stop loss – A stop loss trigger with automatically conduct a sell order for your funds before the value of your money goes under a certain threshold. This is an important safety practice for those that trade with large amounts but still feel unsure of their setup.
You should now have a better understanding of entry and exit points when it comes to trading cryptocurrencies. With your newly gained information, you can now go ahead and set up your first few trades, and try to predict when the next dip will occur.
Keep in mind that the contents of this post are not meant to serve as financial advice and should not be taken as such.
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