A plan for protecting Bitcoin profits

By Jani Ziedins | End of Day Analysis

Jan 12

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It’s been a wild few weeks for Bitcoin. The last time I covered this cryptocurrency on my free blog was back in mid-December when it first broke the $20k barrier.

As I wrote back on December 16th:

I don’t expect this buying frenzy to cool off anytime soon. As I said [in early December], maybe the top is $25k, maybe it is $30k. Or maybe we keep going to $40k. Who knows. But when something moves this fast, the only choice we have is to grab ahold and see how far it goes.

This is a strongly directional move and we can (and should) follow this higher with a trailing stop. Right now $20k is a good level to protect our profits. When prices get up to $25k, we move our stops up again. $30k, ditto.

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To be honest, my initial $40k profit target was a tad optimistic, but BTC proved all of the doubters wrong and did something that seemed impossible only a few months ago.

But now the $40k euphoria is wearing off and we already find ourselves in the lower half of the $30k’s. This is definitely a challenging spot for Bitcoin. Prices rallied 400% from the October lows and anyone expecting this buying frenzy to continue another 400% is quite honestly, drunk on greed.

All good things come to an end and so will this latest surge in Bitcoin. Maybe this week’s brief poke above $40k was the near-term top for this rally. Maybe we get a little higher. Either way, we need to be thinking about taking profits, not pressing our bets. We only make money when we sell our winners. And unfortunately, as quickly as these things go up, they fall even faster.

Make sure you have a plan to take profits and don’t let these epic profits escape. Maybe you take profits proactively. Maybe you keep following this higher with a trailing stop. Or better yet, do a bit of both; take some profits proactively and follow the rest higher with a trailing stop.

But no matter what you do, have a plan. Only fools hold too long ride these things all the way back down.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.