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Taking profits is extremely important when trading. After all, you only make money when you actually close the position and take money off the table.
The key question is:
When exactly do you take profits?
Most traders take profits either too early and leave money on the table. Or they take profits too late — after a stock has already made a high and is now turning around.
In this article, I will show you my favorite profit taking strategy for stock market trading.
What Is A Profit Taking Strategy?
A profit taking strategy defines when exactly you sell your stock (or option) to realize a profit.
Many traders don’t have a profit taking strategy in place when trading.
Often they say: “I’ll sell the stock when I made enough money.”
The problem: There’s never “enough money.”
And often traders are too greedy and expect ONE stock to make up for all the money they lost in the past.
That’s why they hold onto a stock for too long. These days, trends are short-lived, and markets can turn around on a dime.
If you don’t have a solid profit taking strategy for your trading, you could end up leaving a lot of money on the table!
