Stepwise Guide on how Take Profit Works on Cryptocurrency Exchanges

by Trailing Crypto cryptocurrency experts

You’ve probably been hearing so much about Bitcoin and other cryptocurrencies’ prices moving up and down with each passing hour. In the volatile crypto sphere, you need an effective strategy and a winning game plan to take advantage of this price action.

Crypto trading has become the hottest trading market these days than stock trading, gold trading, and even oil trading. Finding the best crypto exchange platform is also important to ensure that you can sell and buy cryptos easily. There are tons of cryptocurrencies and cryptocurrency trading strategies that promise to make you rich. And, our team at TrailingCrypto understands that everyone of us wants a bit of the pie. And, this is the reason we have put together the best strategies to let our traders earn profit.

We all know that volatility has become synonymous with crypto markets. The violent upwards or downwards swings can move crypto pairs extremely quickly, leaving the beginners wondering how the expert traders may turn these moments’ riddles with panic into opportunities. Cryptocurrencies like Bitcoin breaking multiple resistances within hours is not uncommon these days.

So, how can you know that how strong the next move should be which may maximize your chances of catching the top or bottom?

Setting limit orders is the solution for traders who want to earn profits by a particular price. This feature will help you makea profit in time and won’t let you lose your money. Just select the price when you want to sell or buy your cryptocurrencies, and when the price reaches at this point, your order will execute.

Of course, you may go with Take Profit or Trailing Take Profit orders to ride the double-digit gains. These tools will help you to secure your profit and control your losses. Let’s understand this one by one:

Take Profit

Take Profit is an order that locks the profit when any asset price reaches at a certain level.  If the price of an asset reaches at that limit, it will automatically trigger the sale. If the price doesn’t reach that limit, the order is not acted on.

It is a short-term strategy that is useful for those traders who want to take advantage of a quick rise in the cost of cryptos to make immediate profits. Take Profit orders are also known as a Limit Order or Sell Limit orders.

How does Take Profit work?

To use a Take Profit order, the traders set a price at which they wish to sell their asset. The price is one above the price at which the asset was bought to make sure that the trader will make a profit on its sale.

Once the Take Profit limit is reached, the order will be triggered and the sale goes through at the day’s current market value. And, the sale will not be executed if that limit is not reached and the trader has to hold onto that. This order will allow you to limit your risk by exiting your trade as soon as the market reaches to a favorable price for you.

If you are a trader with a short-term strategy, you may find Take Profit orders helpful. Let’s understand it with an example:

1.    Let us assume that you bought BTC at $100 and set a Take Profit (TP) at 10%.

2.    This means that whenever the price reaches $110, your TP order will be triggered and the trade will be closed.

The benefit of using a TP order is that the trader doesn’t have to worry about executing the trade manually. These orders can be executed at the best possible price regardless of the underlying asset’s behavior. There are chances that the stock could start to breakout higher, but the TP order will get executed at the very beginning, resulting in high opportunity costs.

Most traders use take-profit orders in conjunction with stop-loss orders (S/L) to manage their open positions. If the security rises to the take-profit point, the T/P order is executed and the position is closed for again. If the security falls to the stop-loss point, the S/L order is executed and the position is closed for a loss. The difference between the market price and these two points helps define the trade’s risk-to-reward ratio.

Take-profit orders are often placed at levels that are defined by other forms of technical analysis, including chart pattern analysis and support and resistance levels, or using money management techniques.

Another Example for Take Profit order with Stop Sell order

Suppose the trader spots on the ascending triangle chart pattern and opens the new long position. If the asset has a breakout, and the trader expects that it will rise to 15% from the current market value. And, if the asset doesn’t breakout, the trader wants to exit the position quickly and move on. Here, the trader might create a T/P order that is 15% higher than the market price to automatically sell when the asset price reaches at that certain level.At the same time, the traders may place a stop-loss order which is 5% below the current market price.

The combination of Take Profit and Stop Loss order creates 5:15 risk to reward ratio. By placing a TP order, the trader needs not to worry about diligently tracking the asset price throughout the day. And, as there is a well-defined risk to reward ratio, the trader knows well what to expect before even the trade occurs.

How to place Take Profit Limit with TrailingCrypto

·         Create an account on TrailingCrypto and login.

·         On the settings page enter your API Key and Secret( Click here to know how to create API and Secret and Click here to know how to configure it on TrailingCrypto)

·         Select exchange. (A drop-down menu on the top left)Select Take Profit/Take Profit Limit order type.

·         Select Base and Quote coin.

E.g. Market: BTC/LTC

·         Select the number of coins that need to be sold. (quantity could be in the fraction)

E.g. 10 coins

·         Now, click on the drop-down menu near Take Profit. It will pop up with 3 options: Market, Limit, and Trailing. Selection of an option means when market price (bid price) rises to the Stop value, the selected order in the drop-down menu will be executed (Market Sell, Limit Sell, or Trailing Sell).

E.g.: if the current bid price of LTC is 0.011184 BTC.

Stop value can be placed at 0.011210, 1% above the current price.

Suppose the market hit 0.011210. This will trigger subsequent orders. Below are the possibilities:

Market Sell: A Market Sell order will be placed.

Limit Sell: A Limit Sell order will be placed having the limit value mentioned during placing the order.

Trailing Stop Sell: A trailing Stop sell order will be placed with the mentioned offset during placing the order.

*Note: Always make sure the Stop Value is higher than the current Bid Price.

A hypothetical example:

Case 1 Take Profit with Market Sell:

·         Suppose the current bid price of NEO is $100. Now someone placed a Take Profit with Market Sell order, for 1 NEO coin with a stop value of $110. Now when the NEO market bid price hits $110, a Market Sell order will be placed at $115.

Case 2 Take Profit with Limit Sell:

·         Suppose the current bid price of NEO is $100. Now someone placed a Take Profit with Limit Sell order, for 1 NEO coin with a stop value of $110 and a Limit value of $115. Now when the NEO market bid price hit $110, a Limit Sell order will be placed with a limit value $115.

Case 3 Take Profit with Trailing Stop Sell:

·         Suppose the current bid price of NEO is $100. Now someone placed a Take Profit with Trailing order, for 1 NEO coin with a stop value $110 and a Trailing offset 3%. Now when the NEO bid price hits $110, a Trailing Stop Sell order will be placed. Let’s say, market hits $120 and then start correcting. In this case, when the market bid reaches $116.4, a Market Sell order will be placed.

 

Trailing Take Profit

Trailing Take Profit strategy is set by choosing the regular Take Profit and the “trailing distance”.  Once the TP order reaches at the trailing distance, it will work as the new selling point. Any time, the profit reaches at a new high, the Trailing Take Profit moves up so you are able to stay in the crypto trading until there is a constant price increase.

The possibilities with trailing take profit feature on are:

·         Once the price reaches at your limit, it will wait until it grows even higher, and after that it drops according to the trailing percentage, and the bot will close the deal.

·         Once the price reaches at your prediction and then falls down, the bot will close the deal according to the trailing percentage.

Trailing Take Profit moves in one direction only and it locks in profit and limit losses. The trailing profit only moves up in case of long strategy, once the price has surpassed the previous higher price and a new high has been formed. If the trailing profit moves up, it can’t move down, and thus, it is securing the profit.

 

Trailing Take Profit allows the trade to remain open and continues to make a profit as long as the price is moving in the favor of the trader.

Let’s understand it with an example:

Say, you are buying a BTC worth $100 and setting the Trailing Take Profit at 10% with a trailing distance of 3%. Once the 10% increase is reached, the trailing distance 3% will work just like the conventional Stop Loss or Take Profit depending on the conditioning if you are shorting or longing. It will work as:

Market Price	10% Take Profit, 3% trailing distance moving with Market Price
$100	$110
$110	$106.7
$120	$116.4

 

And, on the other side, if the price starts moving down but it doesn’t reach at the trailing distance of 3%, then the Take Profit remains the same:

Market Price	10% Take Profit, 3% trailing distance moving with Market Price
$100	$110
$110	$106.7
$108	$106.7 (TTP does not move)
$120	$116.4
$117	$116.4 (TTP does not move)
$116	$116.4 (position closed)

 

By considering the Trailing Take Profit, the position was closed at $116.4, instead of $110.

Use Trailing distance conservatively

It may seem attractive to use a wide trailing distance to gain maximum profits, but this might diminish the losses. If you set trailing distance at 10% with trailing profit of 3%, then once those are reached at 10%, take profit will be moved down to 3%. This way, your effective profit is at 7%.

And, if you set Trailing Take profit at 20% with a trailing distance of 20%, and the trade goes well, then you are risking all profits as your Take Profit will move down by 20%. Set your trailing distance at a maximum of 20% of Take Profit, so that you can hold your gain while maximizing the profits.

You should not use trailing for all the trades. Let’s check out where not to use Trailing:

·         The pair has volume below 1 BTC

·         The pair has too high spread i.e. the price between the buy and sell prices in the order book

·         The pair has very low liquidity

·         You want to catch the big buy, where one purchase may raise the price up to +10% and higher, but within a few seconds, the price moves back to normal level

·         You want to sell the asset at an exact level, not below the target

And, it’s better to use limit orders in all the above cases!

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Created on Sep 15th 2023 11:07. Viewed 97 times.

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