Knowing When to Cut
Most traders don't blow up from one bad trade. They blow up because they refuse to cut when it's obvious they should.
The goal isn't to avoid losses. The goal is to keep them small and move on.
Cutting isn't failure. Refusing to cut is.
When to cut
These are warning signs that it's time to exit:
Attention has disappeared (tweets slowing, engagement dropping, no new buyers)
Volume dries up
New coins are taking all the hype
Devs vanish or stop communicating
Community goes quiet
You're holding purely because you don't want to take the loss
If multiple signals show up together, the narrative is probably done.
When conversation dies, price usually follows.
How to decide your cut level
Before you enter, identify what would make the trade wrong.
Examples:
If it breaks below a key support level
If volume disappears within 2-3 hours
If the catalyst you bought for didn't play out
When that thing happens, you cut. No negotiating with yourself.
Simple rule: cut at a fixed drawdown from your entry.
Common approaches:
-20% to -30% for higher conviction plays
-40% to -50% max for lower conviction / smaller size
Pick a number that lets you survive multiple losses without major damage to your account.
This applies mainly to fresh launches, not established coins.
For new launches:
Bought something that didn't move in 30-60 minutes? Probably dead.
No one talking about it after a few hours? Move on.
For established coins: Time-based cutting doesn't work the same way. Coins like $67 or $italianrot sat sideways for days or weeks before running. If the community is still active and engaged, sideways price action doesn't mean it's dead.
The difference is whether attention is building or fading. Flat price with growing interest is accumulation. Flat price with silence is a slow death.
The mental side
Cutting feels bad. You're locking in a loss and admitting you were wrong.
But consider the alternative: watching a small loss turn into a big one while you hope for a reversal that never comes.
A few ways to think about it:
A small loss is cheap tuition
Every cut protects capital for the next opportunity
Being wrong fast is better than being wrong slow
Hope is the emotion that destroys most accounts. If you're holding because "it might come back," you're probably already too late.
After you cut
Don't immediately jump into something else to make it back. That's revenge trading, and it usually turns one loss into two or three.
Step away, even briefly. Come back when you're thinking clearly.
This is covered in Common Mistakes if you need a refresher.
The real test
Ask yourself honestly:
If I didn't already own this, would I buy it right now?
Is the narrative still alive or am I just hoping?
Is there real volume or am I watching a slow bleed?
If the answer to any of these makes you uncomfortable, you probably already know what to do.
Going deeper
Pros cut faster in bad environments, not just bad trades. This thinking is explained in: Why Most Traders Lose in New Pairs
Taking profits is for when strength remains. Cutting is for when strength disappears. Know the difference.