You have probably experienced this: you exit a trade with a small profit, only to watch it continue climbing without you. You followed your plan, took the profit, but left money on the table. Cutting winners too early is almost as damaging as holding losers too long - and they often go together.
The Asymmetry Problem
When you hold losers too long and cut winners too short, you create a devastating mathematical asymmetry. Your losing trades become big while your winning trades stay small. Even with a high win rate, this combination leads to losing money.
The Asymmetry in Action
Trader A: 60% win rate
- Average winner: $100 (cuts winners early)
- Average loser: $200 (holds losers too long)
- Per 10 trades: (6 x $100) - (4 x $200) = $600 - $800 = -$200
Despite winning more than losing, Trader A loses money.
Why We Cut Winners Early
Fear of Giving Back Profits
When you have unrealized gains, your brain treats them as already yours. The fear of losing "your" money is stronger than the hope of making more. This fear drives premature exits.
The "Bird in Hand" Fallacy
A guaranteed small profit feels safer than a potential larger profit. We undervalue potential gains and overvalue certain ones. This is rational in survival situations but irrational in trading.
Relief Seeking
Open positions create psychological tension. Closing a winner for a profit provides immediate relief and a dopamine hit. We become addicted to this feeling and chase it by exiting too soon.
Anchoring to Entry
When a profitable trade pulls back toward your entry, it feels like you are "losing" even though you still have a profit. This anchoring to entry price creates panic that drives early exits.
The Cost of Cutting Winners
Missing the Power of Big Winners
In most trading strategies, a small number of big winners account for the majority of profits. By cutting winners early, you eliminate these account-makers and leave yourself with only small wins.
Need for Higher Win Rate
When winners are small, you need to win more often to be profitable. This requires more precision, more stress, and more trading - all of which increase the chance of mistakes.
Psychological Damage
Watching trades continue without you is painful. This pain can lead to overtrading (trying to get back in), FOMO on future trades, or second-guessing your entire strategy.
How to Let Winners Run
1. Use Trailing Stops
Instead of fixed profit targets, use trailing stops that move up as the trade moves in your favor. This automatically lets winners run while protecting accumulated profits.
Trailing stop methods: ATR-based trails, percentage trails, moving average trails, or trailing below recent swing lows. Experiment to find what works for your trading style.
2. Scale Out, Do Not Exit Entirely
Take partial profits (perhaps 50%) at your initial target, then let the rest run with a trailing stop. This satisfies the need to lock in some profit while keeping exposure to larger moves.
3. Stop Watching Tick by Tick
The more you watch, the more you want to act. Once your trade is set up with appropriate stops, reduce how often you check it. Let the market do its work without your interference.
4. Set Wider Initial Targets
If you always exit at 2:1 reward, try moving to 3:1 or 4:1. You will win less often, but your winners will be larger. For many strategies, this improves overall results.
5. Review Your "Early Exits"
Track what happens after you exit winning trades. How often do they continue higher? How much do they continue? Use this data to convince yourself to hold longer.
Partial Exit Strategy
Initial position: 100 shares
- At 2R profit: Sell 50 shares, move stop to breakeven
- At 4R profit: Sell 25 shares, trail stop at 2R
- Let remaining 25 shares run with trail until stopped out
This captures initial profits while allowing participation in extended moves.
6. Use Time-Based Holds
Commit to holding winning trades for a minimum time before considering exit. This prevents panic exits on normal pullbacks and gives trades time to develop.
7. Focus on Process, Not Outcome
Do not judge trades by whether you captured the entire move. Judge them by whether you followed your exit rules. No one catches exact tops and bottoms.
Reframing Your Mindset
Big Winners Are Rare - Protect Them
Most trades will be small winners or small losers. The occasional big winner is precious. Treat it with respect by giving it room to grow.
Pullbacks Are Normal
Every trend has pullbacks. A winning trade pulling back is not a signal to exit - it is normal price action. Learn to distinguish between normal noise and actual trend changes.
Your Entry Price Is Irrelevant
Once you are in a trade, only current price and future direction matter. Stop anchoring to your entry. The market does not care what you paid.
Analyze Your Winner Management
Pro Trader Dashboard tracks how much you leave on the table by exiting early. See what your average winner could have been versus what it was.
Summary
Cutting winners too early creates a damaging asymmetry with holding losers. We cut early due to fear of giving back profits, the "bird in hand" fallacy, relief seeking, and anchoring to entry price. The cost includes missing big winners, needing unsustainably high win rates, and psychological damage from watching trades continue without us. Let winners run by using trailing stops, scaling out instead of full exits, watching less frequently, setting wider targets, reviewing early exits, using time-based holds, and focusing on process over outcome. Remember: you do not need to catch the whole move, but you do need to let winners have room to become the big wins that drive account growth.
Learn more: profit taking strategies and trailing stop strategies.