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Profit Taking? Let Profits Run

Trend followers know the trick of letting their profits run is key to trading. Once you learn that to maximize your profits you must be willing to give up some part of your accumulated profits, you are on your way to sustained success. For example, let’s say you start with $50,000. The market takes off and your account swells to $80,000. Many people might quickly pull their $30,000 profit off the table. They feel that if they don’t take those profits immediately, they will disappear. Refusing to give up a part of that accumulated income due to fear is their big mistake.

Trend followers understand the nature of the market. They realize that a $50,000 account may go to $80,000, back to $55,000, back up to $90,000, and from there, perhaps, all the way up to $200,000. See the mistake of quickly taking a profit just because you might not like volatility? Those people who took profits at $80,000 were not around to take the ride up to a $200,000 account. Pretend you are one of those people with the $30,000 gain in your account. Instead of simply protecting your entire $30,000 profit, why not be more aggressive with it? Do you think great traders have been successful by taking profits? Or have they compounded their profits?

Letting profits run is tough psychologically. It’s counter-intuitive for most people. It feels risky. But, once you understand that in trying to protect every penny of your profit, you actually prevent yourself from making a bigger profit, you have learned an important reason why trend followers are so successful.

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