Taking Profit: What every crypto investor should know.
November 14, 2022
You may have heard about the crash of the FTT coin, or you might have been holding some of it. Unfortunately, FTX has filed for bankruptcy, meaning those with funds there have likely lost them all. (Sighs).
Now, if you have a friend who’s into trading, investing, or any general business, you may have heard the term “take profit.”
Well, welcome to “Investment 101,” as I like to call it, and the concept of “taking profit.”
I’ll keep it simple so you don’t get confused. Let’s look at a real-world example and what this would mean for an everyday market woman, shall we?
Let’s say Aunty Maggie owns a small provision store in the market where she sells cornflakes, milo, and all those sweet things we like to eat. Aunty Maggie wants to stock up her shop, so she uses 142,000 naira (2,000 Ghana cedis) to buy products from her wholesale customer. Business goes well for Aunty Maggie, and in two weeks, she has sold all the goods she bought. Aunty Maggie made a total of 177,500 naira (2,500 cedis), which means that she made 25% profit from this batch of goods, which amounts to 35,500 naira (500 cedis) in profit.
Now, when Aunty Maggie wants to go back and buy the second batch of goods, she removes the profit she has made and sets it aside in her savings, then goes to her wholesaler with the same amount she invested earlier, and the cycle continues. This is the concept of “taking profit.”
How does taking profit work in crypto?
When making a cryptocurrency transaction, you can set up a take-profit order that will go through at a stated price if the coin is surging or profitable. Taking profits entails active market activity because you must keep an eye on the coin’s price to know when to sell. Since you have been withdrawing a set percentage of your money over time, your trade will be less risky. If there’s an instance where the cryptocurrency you bought comes crashing down ( like FTT did, sighs), chances are that you had already taken some of your money out before that happened.
Similarly, while Auntie Maggie may not be able to increase her purchasing power to buy more goods, this ensures that if anything happens to her shop or the consignment of goods, she will not lose everything.
Because cryptocurrencies can be volatile, many traders manage their trading strategies with take-profit and stop-loss orders.
Oops! Did we talk about stop-loss orders? No? OK.
That’s another term I will explain in the next article.
#cryptocurrency #takeprofit #ftx