You spot a potential low cap coin. You buy $1,000 at the bottom. A few weeks later, it goes up 100x. Your account shows $100,000. You feel like a genius. You place an order to sell everything to lock in your profit. But the price crashes 50% immediately, or your order is stuck and doesnโt fill. You only get a fraction of that $100,000. Why?
๐ธ The Nature of Price and Liquidity:
Market Price is the price of the last executed trade. It is a surface number.
Liquidity is the ability to convert assets to cash without significantly moving the price. It's the submerged iceberg.
There is a paradox between price and liquidity that when a coin goes parabolic, liquidity usually does not increase accordingly. The price may be $10, but the Market Depth will only accept a sell order of $100 at that price.
๐ธWhen you x100 in a small project, you inadvertently become a Whale in that pond.
Your position is too big for the exit door.
When you Market Sell $100,000, you wipe out all pending Buy Orders from the top down to the bottom. Your average fill price will be much lower than the peak price.
๐ธ Selling a lowcap coin is almost impossible. So you need an exit strategy.
Do not wait for the peak. Sell while the crowd is FOMOing to buy. That is when Buy Liquidity is deepest.
Do not Greed The Top. If you try to sell at the exact top, there are no buyers left. Accept selling 10 to 20% early to guarantee execution.
Before dreaming of millions, look at the Order Book. If the Bid side is empty, your millions are meaningless.
๐น Unrealized PnL is the exchange is money. Realized profit that can not be withdrawn isn't money either. Liquidity is more important than Price.
Do you own liquid assets or nonconvertible virtual numbers?
News is for reference, not investment advice. Please read carefully before making a decision.