Taking Profits Early

How does a trader know when to exit a trade, if the trade is moving in a positive direction per the traders position direction and the trader is already actually showing profit on that specific trade? When is enough profit enough? When do you cash it in? When do you pull the trigger and end your possession?

When? When you feel as you look at the profit in front of you and emotionlessly say, ’I want out of this current position, I see a decent return and want to exit into the run, enough is enough.’ That is someone with discipline. Discipline is a prerequisite to ‘Taking Profits’, emotionlessly.

However, how many of you look back at some of your trades and feel saddened over money left on the table. It is a common feeling and probably will never go away but, learning to maintain control of taking profits, even those times that the profit is just ok or later find out that a trading associate made more or even much more, than you. Congratulate them, talk with them and share strategies but a trader should never attempt to duplicate another trader or even, moderators.

Many traders, newbies and rookies as well as veteran day traders find themselves not knowing when to exit a trade, when that profit is even just okay but, there are definitely two times when a trader needs to seriously consider exiting any trade: 1) when you hit your stop loss and 2) when you are showing an OK profit. We’re sure there are many more but, these two are what we are trying to key in on. Larger profits come with time and experience. Oh and by the way, patience while day trading can compare to the patience a parent must have with their children; it’s a requirement as well.

A problem many traders encounter is, when they feel they exit a trade too soon they let money on the table. Thing is, when a trader leaves money on the table, (unless they had a crystal ball) they had no way of knowing the trade had more to go, until they saw it happen. Profit is profit, and even small profits add up therefore, never be afraid to take a profit just because you are concerned that there is more profits to be made. The larger profit runs will come with time but you first must attempt to perfect the smaller profits. The perfection part is to control the trades. Remember, day trading is not a get rich quick scheme. Just as anything else, all good things take time, practice and may improve with experience.

Experienced traders will utilize the system of ‘Walking out a Trade’. This merely means that, you exit your position into the run, in smaller blocks instead of one lump block. For example; say you own 500 shares of ‘XYZ’ stock; when the trade starts to move in the profitable direction of your position and you begin to show a profit in your portfolio, you may wish to begin exiting the trade in possibly blocks of 100 shares at a time, for example. By exiting the position with smaller blocks into the run, the day trader can be afforded the opportunity of possibly increasing their profits as the trade moves forward in the direction of the position. Thus, the day trader can reduce the chance of leaving too much money on the table and can help reduce the stress afforded with day trading.

This method can be combined with the use of Trailing Stop’s if available from the broker a day trader is using.

Day trader training costs can be comparable to the amount a trader loses on even one trade. Sometimes a simple suggestion for many day traders is for those traders seriously considering day trading for a living or those who want to attempt to be profitable while short term trading or swing trading at their discretion should consider a One on One Training Session with one of our Expert Moderators.

January 2008