Take your winnings. Take-profit, or TP in crypto-bro jargon, is the symmetric of stop-loss: a conditional order which automatically closes a winning position when the price reaches a threshold fixed in advance. Where stop-loss limits losses, take-profit secures gains, without waiting for the trader to be in front of his screen or relying on his composure at the exact moment when the market hits the target target. On paper, it is the simplest tool to understand. In fact, it is one of the most difficult to use, because it requires you to accept, in advance, that you will never sell exactly at the top. A subject that we already covered in our masterclass on stop-loss and take-profit.
The key points of this article:
Take-profit has been described as the positive equivalent of stop-loss, allowing gains to be secured automatically before they disappear. Experienced investors, such as “whales,” have often sold before reaching the all-time high, illustrating the importance of a well-defined take-profit.
Take-profit, or the art of leaving before the end of the party
The natural reflex of a winning trader is to let his position run as long as the trend appears intact, in the hope of capturing even more upside. The problem is that no one rings the bell at the summit: the reversal, when it happens, is usually only visible after the fact. Fix a take-profit in advance amounts to agreeing to leave a little potential upside on the table, in exchange for the certainty of materializing the gain before it evaporates. This is not an admission of lack of ambition, it is risk management applied to gains rather than losses.
November 2021: large portfolios were already selling when the general public was still buying
Bitcoin reached its then all-time high, around $69,000, on November 10, 2021. Forbes still remembers it. That week, the on-chain analysis platform (the study of transactions recorded publicly on the blockchain) Glassnode already observed a revealing shift: after months of accumulation, long-term holders had started spending around 150,000 bitcoins since October, or 1.11% of their total balance, a classic sign of the start of distribution rather than waiting for the very last price. Concretely, this amounts to automating its output.
Lose money to gain more
In other words: the most experienced traders generally do not seek to sell exactly at the top, which is statistically almost impossible to be performed repeatedly. They set profit-taking objectives in advance, sometimes spread over several levels, and execute them without waiting to see if the market will go a little higher. It is often the least experienced investors, who entered the market late on the strength of the prevailing euphoria, who remain invested until the end, without a defined exit objective, and who then materialize losses during the reversal. Take-profit never guarantees selling at the best possible price. It guarantees something more useful in the long term: exiting with a defined gain, decided cold turkey, rather than in the urgency of a market turning around. The real question to ask yourself before opening a position is therefore not only «at what price am I prepared to exit in the event of a decline», but also, with the same rigor, «at what level of gain am I prepared to say stop, before the lure of a little more costs me everything». The question mirrors the one asked in our column on stop-loss.