Taking Profit

Some traders miss out on profits because they sell too early. Others end up losing on a winning trade because they failed to lock in profits.

To avoid these issues, split your take profit targets and conditions into several parts.

Set closer, shorter term take profit targets to help secure profits. Set farther, longer term take profit targets to give your trade the space to harvest more profits if it really goes in your favor.

For example, if you decided that the trade had three good potential profit taking areas, you could split your position into four parts. Sell part of your position at each profit taking area, and (optionally) leave a small moon bag once your last take profit target is reached. This moon bag can be managed with a trailing stop loss to help you lock in profits while also giving you the chance to lock in more gains.

Depending on how much risk you are willing to take or your confidence in the trade, you may wish to sell more or less of your position at each Take Profit area.

The image below is an example of what you might do if you want to minimize risk or are not very confident that market conditions will allow your trade to run all the way up. In this case, you would sell more at the closer, safer targets, and less at the distant targets.

Close more of your position at closer targets if you want to minimize risk

If you are very confident about the trade's potential to reach higher targets, you may wish to close less of your position at TP1, and save the majority of your position for the higher targets.

Close more of your position at further targets if you are willing to take more risk