Let Your Profits Run

Let your profits run is an expression that encourages traders to resist the tendency to sell winning positions too early. The flipside of letting profits run is to cut losses early. The way to make money as a trader, according to many, is to follow both of these pieces of advice.

While this advice is offered by many, it is followed by few. This is because it is more difficult than it may appear. Most traders tend to take gains off the table early out of fear that they will evaporate quickly. They also tend to hold onto large losing positions in the hope that they will rebound.

Instead of letting profits run, some traders prefer to have a target exit point that will lock in a predetermined profit. Likewise, traders often use stop-loss trading that automatically enables them to exit a trade if a decline of a specified amount occurs.

Trading is generally considered a difficult skill to master and one that cannot be boiled down to a simple maxim. Successful traders are highly knowledgeable about the markets they trade whether stock, options, currencies or commodities. Knowledge of common trading patterns both of specific securities and of the market as a whole is critical. Successful traders typically have gained this knowledge via education and real-world experience.