Take Profit

Take profit explained

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

To avoid these issues, divide your take profit targets into several parts: set closer, shorter term targets to help secure profits; set farther, longer term targets to give the trade more space to make more money if it goes in your favor.

For example, if you decided that the trade had three good potential profit targets, you could split your position into four parts. Sell part of your position at each target and, optionally, leave a small portion of your position as a "moon bag" once your last 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 your risk tolerance, confidence in the trade, and position size, you may wish to sell more or less of your position at each Take Profit area.

The image below demonstrates a strategy that you can use if you wish to minimize risk or are not 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.