Profit Taking Models

Since we’ve recently gone through one of the worst liquidation in our industries history, I thought I’d share a couple profit taking models to try and help those making their comeback arc or looking to survive for longer.

These will be off the basis of portfolio valuation and using 50k, 100k, 200k & 500k for easy maths.

You can scale these numbers to whatever suits your personal circumstances and portfolio.

Model #1: Withdrawing percentages at milestones (my favourite)

Linear:

20% @ 50k = 10k

20% @ 100k = 20k

20% @ 200k = 40k

20% @ 500k = 100k

Dynamic:

10% @ 50k = 5k

20% @ 100k = 20k

30% @ 200k = 60k

40% @ 500k = 200k

Personally I prefer a more dynamic approach as in the early innings, capital is vital to your scaling and you don’t want to be pulling big chucks out early on if it’s not crucial for your lifestyle. The idea is to guarantee your future while getting there as fast as possible.

Model #2: Twapping at milestones (weekly withdrawals)

Linear:

Port >50k = 2% withdrawal per week = 1000 per week

>100k = 2% withdrawal per week = 2000 per week

>200k = 2% withdrawal per week = 4000 per week

>500k = 2% withdrawal per week = 10000 per week

Dynamic:

>50k = 1% withdrawal per week = 500 per week

>100k = 2% withdrawal per week = 2000 per week

>200k = 4% withdrawal per week = 8000 per week

>500k = 8% withdrawal per week = 40000 per week

Chances are if you’ve made a significant amount of money onchain, most of those gains would have been from one or a few high conviction trades in a short time span. For myself, this method feels too slow as when you reach large milestones they come and go very quick. You want to put money in the bank as soon as you reach them.

If you don’t have a lot of responsibilities or family to take care of, something which I believe is critical to trade better is having 2 years of living expenses in the bank.

When stabling, you should be very mindful of the percentages going to your bank and what's going back into shitcoins.

Until you do that, I’d highly advise against buying new cars, watches or anything which would bring short term satisfaction that takes scaling power away from your port.

I remember reading a tweet from jacknuked along the lines of “getting low to mid 6 figs is the most defining part of a traders career, why would you go blow half of it on a BMW M4?”. Which couldn’t be truer.

2 years living expenses seems like the perfect amount where you’re secure enough if shit hits the fan and gives you ample time to find a way to make it back.

Peace of mind is and always should be #1 priority. I’ve been in the spot multiple times where I’ve had a few weeks rent to my name and trust me, it takes years off you. My worst nightmare is having to leave this space due to being zero’d out.

Despite decreasing opportunities for some time now for onchain and alts, show up with high work ethic each day and eventually that one trade will fall on your lap.