Taking profits is harder than cutting losses, because cutting losses means overcoming fear, while taking profits means overcoming greed. The better the market is doing, the less you want to
sell—and then when it pulls back, you regret not getting out. Here's the scale-out profit-taking strategy I always use.
【Three stages】Stage one: when it reaches the first target (for example, a 1:1 reward-to-risk ratio), sell a third to lock in some gains,
At this point, the trade can no longer lose money, and your mindset immediately changes. Stage two: when it reaches the second target
(for example, a 2:1 reward-to-risk ratio), sell another third. Stage three: let the rest ride with a trailing stop; exit if it falls below the moving average
or the previous low, and let your profits run.
【Why this works】If you sell everything too early, you'll kick yourself. If you hold everything, you'll often watch your gains disappear and end up back where you started.
The essence of scaling out is turning the impossible task of “selling at the very top” into three pretty good decisions.
[Key move] After reducing your position, move your stop-loss up to your entry price. That’s the legendary “risk-free trade.”
The biggest risk with a profitable position is holding on until it turns into a losing one.
What do you think? Share your experience in the comments.