One thing that seems to be peculiar with people recently invested in the crypto market is how quickly profit made in the first few trades are easily squandered. Maybe it's because they truly haven't seen crypto currencies as a long term investment or perhaps it's just the eagerness to get some form of ROI albeit prematurely.
Not to be mistaken, profits from any venture always comes with a strong sense of success that sometimes could lead to some impulsive spending or even be used for necessities like groceries, toiletries and general upkeep. Yet it is still important to know when to HODL an asset or when to SODL.
What is Profit-Taking?
According to Investopedia, Profit-taking is the act of selling a security in order to lock in gains after it has risen appreciably. While the process benefits the investor taking the profits, it can hurt other investors by sending shares of their investment lower, without notice.
Many times we pray and wish for assets that we invested in to increase in value by multiple folds but unbeknownst to us, we impede movements in this direction by constantly scalping our profits. Although in some circumstances, there could be unexpected declines in an asset as a result of disaster, wars or scandals. In times like this, it could be a good idea not to continuously hold on to the said asset.
In the past, I thought it wise to always take off all my profit in the name of solving all of my problems until I saw the 80/20 principle that when paraphrased says "80% of the consequences comes from 20% of the actions". I realized that eating all of my profits without any form of reinvesting means setting myself up for no consequence whatsoever which means I am not thinking of the future.
While the 80/20 principle seems very difficult to practice, experience has shown that when practised properly the benefits are enormous. Take Billionaires for instance, because spending even as little as 5% of their daily profit is seemingly impossible, they tend to grow continuously at exponential rates.
Nonetheless, it would be suicide to constantly hodl all your profits when your everyday life needs tending to. Hence everything must be done in moderation and in the right proportion. Take for instance, I started the year with the intention to live solely by the 80/20 principle but as I type this post, I have realized that I am not yet at that level and have decided to take it at a pace that seems will ensure I stay alive.
But When do I Sodl?
Knowing that people have always bought and sold things since time immemorial to be able to make some gains from them.
It is now proclivity to buy an asset when it is on the high and dump it when it hits any road bumps. Nevertheless, when an asset reaches its all-time high it leaves us with the option of selling and taking our profit or holding for a while longer to see if the assets can do even better. People who make the right decisions at these crossroads seem to be dubbed brilliant investors as they were able to make the best decision, For instance, those who were able to sell off their Shiba assets when it was at its all-time high would have to wait and see if they made the right decision or would be left to rue their decision of selling their assets too soon.
Conclusion
In conclusion, I believe you do not have to be an expert trader to know how long it is to hold an asset and when we think it is the right time to sell. Just like every one of the physical assets we own, we hold them for as long as we deem fit and afterwards we do away with them.
With crypto, it's not so different. All we need to do is add a little technical know-how that comes from being immersed in the markets surrounding a particular asset and we already have a head start.
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