How and When to Sell Your NFTs

Knowing when to sell your NFT is a key part of NFT trading. It’s hard to know the perfect moment to sell, but here are some tips for profitable flips.

Have an exit strategy

An exit strategy is your plan on when you are going to sell the NFT and we recommend making one before you buy. The factors to look for when timing the sale are different if you’re planning a short-term trade vs a long-term one. If you don’t have a plan it’s difficult to spot those factors and make a rational trade. Not having a plan can lead to trading solely based on emotions like fear and greed, which can lead to losses.

Short-term hold

A short term hold lasts roughly a few days to a few weeks. This strategy generally revolves around riding the hype around a certain project. You want to get in early at a good price and sell quickly when interest in the project is peaking. Keep a close eye on the project's trading volume and number of users for any signs of slowing growth. If you aren't sure where to check those stats, our Resources page has some helpful links.

Also, frequently check twitter and any other relevant social media or community groups to see the current sentiment about the project’s growth. Are comments positive or negative? Are there more people talking about the project than yesterday or less?

Long-term hold

Some NFT projects have good potential as a long-term investment. For this strategy we do not recommend buying in early. You want to find projects that have been around long enough to show a solid track record of demand and community growth. If the project involves a game it's often best to wait until at least some aspects of the game are playable and a significant number of people seem to like it. Also, make sure to pick an NFT in a good category of rarity that will not have a large supply inflation while you're holding. 

Watch trading volume

Look at how often similar NFTs are changing hands and make sure that rate fits into your strategy. If you are planning a short term flip and there is only one trade a week with many competing sellers, then you are going to have a hard time exiting your trade when you planned.

The way that trading volume changes over time is also important. If market liquidity is increasing (meaning there are more buyers), then it becomes safer to hold onto the NFT and to keep your listing price high while you wait for a sale. On the other hand, if liquidity is decreasing during the time period you are looking to sell, you may want to aggressively lower your prices to get a sale before more buyers leave. Liquidity can dry up extremely quickly, especially if you are trading on a project without much development yet.

Pricing strategy

The price you choose when listing your NFT for sale depends on your planned holding period, market trends (see our NFT Trading Strategies Guide for details), seller competition, and how much profit you're aiming for.

Suppose you have an NFT and plan to sell it in about a day. If it looks like comparable NFTs have been selling about five times per day, then you want to set your sale price so that you are within the five lowest offers.

Setting your pricing this way is not an exact science and becomes less exact as your time frame becomes longer. The closer to the time you want to sell, the more frequently you should re-evaluate your pricing and be sure to take changes in market trends into account.

Before you buy, you should have a loose plan of how much you want to sell the NFT for. Without a plan, it's difficult to make decisions about selling at a good time. However, it's usually more important to price based on the reality of how the market changes than to lock yourself into a plan.

There is a relevant theory in behavioral finance called the Disposition Effect, which is the tendency for traders to sell their winning investments too early and hold onto their losers for too long. We're telling you about it so you can learn to not make these mistakes. If NFT prices are performing better than you initially expected, then you should increase your sale price and if it is performing worse, then you should lower your price and cut your losses. Selling at a loss can be emotionally difficult, but is crucial to do when a trade is not going your way. The value of an NFT can go to 0 and you're better off getting some money back and reinvesting it in a better opportunity. 

Average out your exit

Just like markets for stocks or cryptocurrencies, it's nearly impossible to sell at the exact peak of an NFT market. Selling everything at the top is an unrealistic goal and you are better off averaging your exit from the market. This means that if you have multiple NFTs from the same project, you should sell them gradually instead of all at once. This decreases your risk of selling everything too early or holding onto all your NFTs too long. For a short term hold, that may mean spacing out sales by a few days and for a long term hold it could mean selling every few weeks or months. 

Fixed price vs. auction

The most common way to set your NFT sale price is through a fixed price listing. This just means you put it up on a marketplace (see our Resources page for examples) at a certain price and wait for someone to come and pay it. This is the default way of selling and what you will likely use most of the time.

The other option is to list your NFT as an auction, specifically a Dutch auction. In a Dutch auction, you set a starting price, an ending price, and an auction duration. Then the price that people are able to buy the NFT for gradually drops from the starting to the ending price over the length of the auction until someone buys it or the auction ends.

Dutch auctions are useful when the market price of a NFT is unclear, allowing you to start the listing at an optimistic price and gradually lower it within an acceptable range. They also work well when you want to liquidate an NFT. Set the price to drop from somewhat low to low and you have a chance at getting a sale on the higher end, which wouldn't have been possible if you just listed at a low fixed price. 

 

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