The Importance of Taking Profits

Back in the trading psychology chapter, I briefly talked about exiting trades and locking in profits. Let’s just briefly expand on that a little bit more in this chapter.

It is very important to react when you are right and the trade is working out according to your plan. You’re in control that’s when it’s best to lock in the profits. It doesn’t mean you have to sell it all, but for example, if you are anticipating a breakout and it happens, take some off, meaning sell some of your position, maybe one-fourth, maybe one-half, lock it in.

Trading for income is about getting paid, getting a paycheck. It’s not about maybe this could keep going, maybe it can go higher and higher. Remember as a day trader you are going to be trading volatility, so you don’t know what is really going to happen.

Sell into the big moves as a lot of times they will trickle back down or end up even lower by the time the day is over.

It’s all about wanting steady income or potential income.

You don’t want to be in a position where you are thinking “Well I could make…” If you are up on the trade right then and now, you need to say, “You know what I’m going to take it.”

Don’t risk watching your profits dwindle down, to the point where you’re selling back at break even, or even worse, at a loss, because you held on thinking the stock was going to go to the moon.

When you are up, you’ve hit your goal, don’t be stupid and let greed start to creep in and take you away from your plan.

Remember you are never going to be wrong for taking profits. Profit is profit regardless of how small or large it is.

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