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Should You Let Your Winners Run Or Take Profits Off The... http://www.contracts-for-difference.com/ If you've enjoyed this video, please click the like button below and share it with your friends and remember to SUBSCRIBE! There's an old trading adage that says you should "cut your losses and let your winners run". Many traders try to stand by this advice, and it has a sound basis. Cutting your losses means that you accept a losing position quickly and make your exit, rather than waiting on in hope that it will turn around and come back to a profit, or at least to breakeven. This makes a lot of sense for short-term traders. The natural inclination is to deny internally that you have got the trade "wrong", which is identified with losing money, so you really want it to turn around and come into profit, and feel inclined to give it time to do so. The trouble is that more often than not the price continues going down, and you end up losing much more than you intended. If you have several trades going this way, you will rapidly find yourself out of capital. Similarly, letting your winners run means that you try to extract the best product possible returns from each trade. This is to avoid the inclination that some traders have to "lock in the profits" as soon as a position becomes a winner. This tendency is particularly strong if you have had a succession of losers, and there is no doubting the gratifying feeling that you have when you close a winning trade and can look at the amount you made. The problem with letting your winners run is if they run out of steam and start coming back. Then you have to deal with the psychological issue that you could have had a certain price, and you didn't take it. This can set up a conflict in your mind, whether to take the lesser profit now on offer or to hope that the price will go back to the level it reached – after all, it got there once. Once again, the psychology of trading is complex and often conflicts with natural feelings and tendencies. Nonetheless, for short-term trader letting your winners run is still good advice, though you must realize that you will never be able to sell at the peak consistently, so you will always leave something on the table. The situation is somewhat different if you are a day trader. In this case, you rely on fast action, doing all your trading in a day and closing the positions each night. It can make sense to take your profits when they are offered, and move on to the next trade. It does not matter so much if you leave half of the theoretically potential gains unrealized, as you might well not even be in the trade long enough for them to come about. In the meantime, by closing the trade early your money can be made available to use again. It may be better to accept the gain and look for the next good opportunity that you can take with the money that you have freed up.
