Not Taking Profits: How Greed Turns Winners Into Losers

Your trade is up 20% and you are feeling great. You think about taking profits, but then greed whispers in your ear: "It could go higher." You hold on. The next day it is up only 10%. You keep holding, waiting for it to come back. A week later, you are selling at a loss. This is the painful reality of not taking profits.

Why Traders Fail to Take Profits

Not taking profits is one of the most frustrating trading mistakes because it turns winners into losers. Several psychological factors drive this behavior:

• Greed: The belief that the trade will continue moving in your favor forever
• FOMO: Fear of missing out on additional gains
• No exit plan: Entering without a predetermined profit target
• Anchoring: Fixating on the highest price the position reached
• Overconfidence: Believing you can perfectly time the top

The Anatomy of a Winner Turning Into a Loser

This pattern repeats constantly in trading accounts:

Why You Cannot Catch the Exact Top

Many traders refuse to take profits because they want to sell at the absolute highest price. This is mathematically impossible for several reasons:

• Tops are only visible in hindsight
• The highest price often happens for just seconds
• Markets reverse without warning
• Even professionals cannot consistently time exact tops

The Importance of Profit Targets

Having a profit target before you enter a trade removes emotion from the exit decision. Here is how to set effective targets:

• Technical levels: Previous resistance, round numbers, Fibonacci extensions
• Risk-reward ratios: Target 2x or 3x your risk amount
• Percentage targets: Consistent targets like 10% or 20% per trade
• Time-based exits: Exit after a certain holding period regardless of profit
• Trailing stops: Lock in profits while allowing for additional upside

Scaling Out of Positions

One solution to the profit-taking dilemma is scaling out, selling portions of your position at different levels:

• Sell 1/3 at your first target (locks in profit)
• Sell 1/3 at your second target (captures more upside)
• Let 1/3 ride with a trailing stop (allows for home runs)

This approach satisfies both the desire to take profits and the fear of missing bigger moves. You lock in guaranteed gains while maintaining exposure to further upside.

Signs You Are Not Taking Profits Properly

Watch for these warning signs in your trading:

• You regularly watch winners turn into losers
• You move your profit targets higher as the trade moves in your favor
• You have no predetermined exit plan when you enter trades
• You feel physical discomfort when closing a winning trade
• You constantly check prices after selling, hoping to see it drop
• Your journal shows many trades that were profitable at some point but closed at a loss

The Mental Shift Required

Successful profit-taking requires changing how you think about trades:

• Think probability, not perfection: Capturing 70% of a move consistently beats trying to capture 100% and often getting 0%
• Accept good enough: A profitable trade is a successful trade, period
• Focus on execution: Did you follow your plan? That is the measure of success
• Remember opportunity cost: Money tied up in a stagnant winner could be working elsewhere

Using Trailing Stops

Trailing stops let you capture more upside while protecting gains. Here are common methods:

The Data on Profit-Taking

Studies of trader behavior consistently show:

• Traders hold losers twice as long as winners
• Winners that are held too long frequently become losers
• Traders who use predetermined targets outperform those who do not
• The best traders are quick to take profits and move on

Creating Your Profit-Taking Rules

Build systematic rules for taking profits:

• Always set a profit target before entering
• Never move targets further away once set
• Take at least partial profits at the original target
• Use trailing stops for remaining position
• Accept that some trades will run further after you exit
• Never look back and calculate what you "could have" made

Summary

Not taking profits is a greed-driven mistake that turns winning trades into losing trades. The solution is simple: set profit targets before you enter, take profits when they are hit, and use trailing stops to capture additional upside without risking your gains. Remember that you cannot consistently time exact tops, and capturing most of a move is far better than trying to capture all of it and ending up with nothing.

Want to improve your exit strategy? Learn about when to take profits or read our guide on overcoming greed in trading.