Taking Profits

 

It’s easy to fall into the trap of always waiting for “just a little more” — but experienced investors know that locking in gains is essential to long-term success.

 

Whether you’re trading short-term or investing for the long haul, having a plan to take profits:

 

• Protects you from reversals

• Removes emotion

• Helps you grow your portfolio consistently

 

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Why Take Profits?

 

1. The market moves in cycles — gains are never guaranteed to last

2. Unrealised gains can disappear if you don’t exit in time

3. Helps you follow your strategy, not your emotions

 

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When to Take Profits

 

There’s no single rule, but here are common strategies:

 

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1. Set a Profit Target

 

• Before entering a trade or investment, decide:

  • What is your exit price or % return goal?

  • What is your risk-reward ratio?

 

Example:
You risk $100 and aim to gain $200 — that’s a 2:1 reward-to-risk.
When the price hits your target, take the profit — no hesitation.

 

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2. Sell in Portions

 

You don’t have to sell everything at once.
This strategy helps you:

• Lock in partial profits

• Let the rest run if the trend continues

 

Example:

• Sell 50% when you’re up 20%

• Hold the rest with a trailing stop to catch more upside

 

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3. Sell at Resistance Levels

 

Use technical analysis to identify key resistance or psychological price levels (e.g., round numbers like $100).

 

If price approaches those levels and volume weakens, it may be time to take profits.

 

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4. Use a Trailing Stop to Ride the Trend

 

A trailing stop moves up as the stock rises.

If the price reverses, your position is automatically sold — locking in profits while allowing further upside.

 

This is a great way to let winners run while still protecting gains.

 

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5. Fundamental Shift or News Event

 

If the company’s fundamentals deteriorate (e.g., poor earnings, management changes), or there’s negative news, it may be a good time to exit — even if you’re still in profit.

 

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Balancing Greed and Discipline

 

Taking profits too early can limit gains.

Holding too long can lead to giving profits back.

That’s why having a defined exit strategy — and sticking to it — is key.

 

Tip: Don’t try to catch the exact top. As the saying goes:

“You’ll never go broke taking a profit.”

 

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Summary – How to Take Profits Wisely