- Uniswap has no orderbooks so it can be tough to know when is a good time to sell
- When coins hit big targets, FOMO selling can crash a token price
- There is a strategy for avoiding selling into red candles and hitting your valuation
Trading on Uniswap can be a challenging time for beginners, and even those used to traditional exchanges. Uniswap has no orderbooks or buy/sell order placement features, meaning that you need to babysit your tokens and manually sell them whenever they hit your target. However, with such low liquidity and no visible buy/sell orders, a rapid amount of action can push the token dramatically in one direction or the other, so how do you avoid missing your target and ending up 50% worse off?
Uniswap Sells Requires a Different Mindset
The worst thing you can do if you want to sell your Uniswap token at your desired valuation is, somewhat counter intuitively, to NOT sell at that valuation. Why? Because most likely you’ve chosen a nice round number to sell at…just like everyone else. And what happens when everyone sells at that price? It crashes and you end up selling for 50% less than you had planned.
Let’s use XIOT as an example. Below, we can see that the Uniswap token experienced a crash on August 24 which took it down to the $100-$200 range, where it stayed for a few days while people accumulated:
Before this crash, lots of the talk on crypto Twitter had been about XIOT being a $1,000 coin and beyond. Following this accumulation period the coin enjoyed a breakout over the weekend, shooting it up past its previous highs, along with other DeFi coins on Uniswap and beyond.
With no order book on Uniswap it’s not possible to know in advance where the heavy selling will take place, but we can make an educated guess of $1,000. How? Not only was this figure touted as a possible target prior to the crash, which it nearly reached in fact, it is also a nice round number that represents a nice 3-4x for those who bought on Uniswap during the accumulation period.
Don’t Sell The First Time
So we have a combination of three things which all point to $1,000 being a target for XIOT – it’s a nice round number, it was previously spoken of as a target on crypto Twitter, and it represents a healthy profit for those who bought both before and after the crash.
It’s not much of a surprise therefore to see what happened when XIOT hit $990 on Uniswap:
We can clearly see that $1,000 was indeed a target for many people, which was where the inequity of the Uniswap mechanism came into play – a huge number of sellers all blindly sold when the token approached their individual targets, which all happened to be the same.
This crashed the token by up to 53% as people were selling, meaning that barely any of those Uniswap sellers got $990 for their tokens – perhaps only one. The rush will also have resulted in plenty of failed transactions as the price was so volatile, meaning lots of lost ETH given the Uniswap system.
This example shows why FOMOing out of a coin at its first principal target on Uniswap is a matake. Those FOMO sellers will have sold into the red candle and then watched as XIOT quickly rebounded and passed $1,000 just two hours later. If those sellers had been a little more strategic with their selling then they could have hit their $1,000 target with minimal slippage.
Avoid Round Numbers
There are two ways to achieve your target price on Uniswap without risking a crash as you sell. The first is to have your sells at an unusual selling point – i.e. not a round number or within a few dollars of one. This is a common strategy in trading, but one that is even more important when it comes to Uniswap.
As our example shows, amateur traders love a round number, and even front running by a few dollars isn’t always enough to ensure that you get anywhere your target. By choosing a target price that is some way off a round number you decrease the chances of others selling at that point.
For example, selling at $896 as the price was heading up towards $1,000 would have been a much better bet than waiting for the high $900s. The more random or unusual your selling point, and the further away from a big, round figure the better.
Exceed Your Target, Then Sell
The other option is to wait until the price has settled above your target price, then sell. Some with $1,000 targets will have waited until XIOT hit $1,050 two hours after the $990 crash before selling, giving them a much better chance of getting their $1,000 per token because the change of slippage was far reduced thanks to the rash of $990 selling:
Yesterday saw one more spate of $1,000 selling, where once again the token price dipped down to $750 in the same candle. This shows that the $1,000 sellers are not yet done, meaning it would be best to wait until XIOT has comfortably got over $1,000 before selling, unless of course you think the coin has little more upside. By waiting until, say, $1,100 before selling, you can endure $100 of slippage and still hit your target, compared to those who FOMOd out of the coin when it first reached this target.
Uniswap and the exchanges like it present huge opportunities to multiply your wealth overnight, but paper profits are very different from realized profits. Uniswap’s mechanics, plus the low liquidity of many tokens, means that selling requires much more careful planning than other exchanges if you want to actualize your gains.