Holding On To Winners

In the middle of a winning trade, have you ever asked yourself, “Should I take profit now or should I let it run?” Maybe there were times when taking profit early proved to be the better decision. But I’m sure there were also instances when you smacked yourself at the back of the head for closing your trade too early.

Why do traders tend to cut profits early anyway? Here are three possible reasons:

One could be because they have no clear profit targets in mind. There’s nothing wrong about determining your profit target as your trade plays out. It’s just much easier to stay on a trade with a CLEAR profit target as it is easier to finish a task with a goal in mind.

A trader’s lack of appetite for risk may also contribute to premature profit-taking. Some traders would rather have that sense of certainty and bank in at a profit of 10,000 USD rather than risk a portion of their unrealized profits for another 5,000 USD.

Lastly, there’s also the confidence issue. Holding on to your trade until price reaches your profit target requires not only a great deal of patience but also a considerable amount of confidence. There will be plenty of uncertainties along the way, which means that staying confident with your trade idea becomes even more challenging.

It doesn’t help that, as you watch your potential profits grow, it gets even more tempting to lock in those wins rather than risk the possibility of losing them by keeping your trade open. A bird in the hand is worth more than two in the bush, so they say.

But more than the potential loss of unrealized profits, it’s the frustration that often accompanies these missed opportunities that hold a trader back. As traders, we tend to be a tad too hard on ourselves especially when paper profits vanish into thin air. Maybe we cut our profits short to avoid blaming ourselves in the event that we lose unrealized profits.

This is probably why my favorite trading psychologist Dr. Brett Steenbarger noted that much more confidence is required to hold on to a winning trade as it goes in your favor. But how exactly can you achieve this level of confidence?

Trust yourself.

Yep, it’s that simple. Too bad it’s not as easy as it sounds. You must be able to trust your trade idea so much that you follow through until your planned profit target. I know it’s not exactly a walk in the park, but the only way to maintain confidence amidst uncertainty is to believe in your time-tested strategies and your trading experience.

Dr. Steenbarger says that building trust can be accomplished in two ways. First is by instilling a confident mindset, wherein you mentally prepare yourself in advance just in case price retraces and your paper profits are erased. So when you’re in a trade, determine the possible retracement areas and set your trailing stops accordingly.

There could be times when what initially seemed like retracements turned out to be reversals and you get stopped out. Don’t beat yourself up over the lost profits. Instead, remind yourself that at least there was no damage to your account and that there are plenty of other opportunities.

Another way is to build on small change. By this, Dr. Steenbarger means that you should do a little of the right thing at a time and build on those efforts in order to start making bigger changes.

For instance, you can try locking in some of your profits at some point and leaving the rest open, either to hit your profit target or your stop loss. This way, you are able to realize profits and at the same time exercise confidence in seeing your trade until the very end.

It’s not every day that the market goes your way. But when it does, wouldn’t you want to make the most out of it?


  • Reitz

    Oh Wow – I loved your article.  Great advise to move the S/L to break even. Thanks for your VERY helpful posts 

  • Picpocket

    Yo.. what a good article here!!!!!!  This article helps alot in phychology way!
    As a trader, we know that cut loss early and let profit run….
    sounds easy but hard to do. i am also keep practising this skill.
    I/m also using the technique suggested by HYIPmng by moving the SL to b/even and let the profit run. but most of the time it was really a b/even trade >.<  (hahaha but still better then losing one)
    However, i wonder is there anyother better “techincal” methods that anyone can suggest base on his experience or theoriticallly work? other from Pips School like scaling out and trailing stop..

    Thanks ..

    I’m Pipocket

    Together We learn, Together We Trade
    Together We Trade, Together We Win!

  • Leonnes

    You are so right! speaking from own experience it is the most difficult thing to wait for your profit target to be realized. I often find myself running away from my initial goal instead of trusting in myself. I suppose this speaks to self discipline as well,and I have now opted to place my trades and walk away, doing something else to occupy my time whilst waiting for my profits to be realized. I hope this works as only time will tell for sure. 

  • HYIPmng

    just move S/L to breakeven and enjoy the ride. There’s nothing wrong with closing a trade earlier if markets start to move against you IMHO. But there has to be a reason to do so, for example price is unable to break a trendline.

  • wirabayu06

    In this babypips.com, i already meet someone who teach me how to exit and maximize the trend. With his method, I made small tweak to adjust with my style. Now, I have a solid trading plan. Especially for the exit. Becoz its like the spider web, that can catch trend gradually by using different trailing stop at the same entry… I really admire him… And u Dr.Pipslow, is the second I admire here, becoz u teach me to build my emotion..

  • Kumar786 Ba

    Amazing article as usual..Thank you Dr. Piipslow

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