There is nothing more frustrating than losing a trade; especially if you’ve done the work, made the analysis. If you are like me you’ll sit there and wonder why, why did this happen again when the analysis, the data and market all agreed with you? Again, if you are like me, the reason is simple; you didn’t close the trade when you should have.
Not selling your winning positions when they are showing a profit is the biggest mistake a trader can make because selling is when you recoup the investment, part of the investment or, in the best-case scenarios, the investment and some profit. In all cases the takeaway is the same, you are taking money out of the market. If you let those trades sit in hopes they will make more money.
Let me assure you, hoping a trade will stay in the money is gambling of the worst kind. You’ve already made the trade, the trade has done what it was supposed to do… if you sit on it in hopes of more profit you are risking the original trade PLUS the profits, however small they may be.
I know it’s hard to sell when a trade is only showing 10% or 50% profit, but think about this; is it better to risk that 10% of profit or put it in the bank? If you are having a hard time with this decision ask yourself this question; what will make you feel better? Will you feel better banking a profit, or will you feel better risking a wad on a gamble? And what if that gamble doesn’t pay, how would you feel then? Would you feel good knowing that you lost a small profit, and the whole trade, because you willfully risked a profit you already had?
Remember the adage, a bird in the hand is worth two in the bush. When it comes to trading the meaning is simple; a profit in the hand is worth more than a profit you think you can make. Taking the small profit now means you may be able to make two or three more trades, letting it ride risks your capital and that may wipe you out of the market. Believe me, small gains are the best gains because they are easier to achieve and add up to big money much quicker than a strong of losses.
If you want to stop making this mistake you should have a plan to exit your trades. This may mean taking profits at a set percentage of the original trade, or it may mean closing the trade when price action reaches resistance or support targets. In all cases it means you must put a sell rule in your trading plan, and follow it or else pay the price.Trade now
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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