For many investors and traders, it doesn’t matter what it takes to become rich – the most important is the goal. But for some reason, they don’t realise that the process is equally important as the results. You cannot become a millionaire unless you work for it first; that’s the logic. In the context of the cryptocurrency market, most players understand the nature of financial transactions and the risks involved. The only gap is created by miscalculations on when to buy and sell assets. Sometimes traders may sell their winning position too soon, while others are holding onto a losing end for too long. That’s why it is vital to have an expert ally when trading. Most platforms like COINBASE, BINANCE and BITCOIN SUPERSTAR offer expert assistance 24/7.
Before you ever get into a bewildering situation where your capital and profits are at stake, it is important to learn the basics and technicalities of this investment. You can make use of sell signals to determine the best time to trade your assets. For many years, this has been the strategy of players, and it has given results. There are objective criteria when employing this method, and that eliminates the reliance on luck or chances. To better understand the whole concept of sell signals, read on the following facts and think through the best way to use them.
How Crypto Traders Can Use Sell Signals
A sell signal is a measurable condition or level at which an investor is alerted to sell their assets, which would eventually impact the overall investment performance. There are various methods that can be used to generate such a signal, including technical indicators, the predetermined percentage decline in the asset’s value, trailing stop-loss, and a fundamental change in the asset.
The sell signal may close the trade even without conscious action by the trader – this happens when a stop-loss order is used. However, a trader may also manually close the position after getting the sell signal from a given method. This signal is used by all types of traders and investors, such as long-term investors and day traders.
Meanwhile, those who use fundamental analysis could generate sell signals when the asset’s value hits a certain level. Likewise, fundamentals that have historical significance may serve as a reference for a sell signal. For the technical analysts, though, chart techniques are used to generate sell signals based on specific patterns and indicators.
Regardless of the methods employed, many investors and traders have a predetermined level that is used as a sell signal. This can be developed at the start of the investment and may be adjusted over time as circumstances change. It may also be established during the course of an investment as developments emerge or risk tolerance levels change.
- Fundamental Analysis
Sell signals generated through fundamental analysis are anchored on financial models for the valuation of assets based on certain factors. Fundamental analysts are using discounted cash flows that utilise a breakdown of profits and free cash flow to have a market valuation. This method is employed to have a range of values for an asset under various assumptions. There are also different assumptions and scenarios that can generate price level ranges for which the analyst claims as the best opportunity to buy or sell the holdings. Other parameters and metrics may be used to come up with a sell signal.
Charting patterns and technical tools are used by technical analysts to generate sell signals. Some of them may look for a decline that’s lower than a supporting trendline to have the alerts. There are also those who may sell into strength and choose to exit when the price is moving aggressively to the upside. Triangle and head and shoulders patterns can create their own signals. But each of these patterns has a profit target during the financial trades.
Example of a Sell Signal
If you’re currently involved in crypto trading or plan to one day, here’s a classic example of how a sell signal works. Suppose you rely on a 200-day moving average (MA) as part of your trading strategy. You want to buy an up-trending asset that hits 200-day MA but doesn’t fall more than a few percentage points below it. In this case, the signal should be buying the asset when the price starts rising off the MA. On the other hand, you just do nothing when the price drops through the given level. The selling point is when the asset price falls more than 4% below the MA.
Given the highly volatile nature of the crypto market, it is always advantageous to know the best timing to sell your assets. Never rely on gut instincts because this financial transaction is not the same as gambling. As much as your money is concerned, you have to look at objective indicators to make favourable decisions.