This article on the popular adage ‘let profits run’ has been re-purposed from Global Prime’s academy courses.
First of all, let me break down my thoughts as they relate to the recurring behaviour of not letting profits run.
I’ve written this article after the following interaction with the member of my mentor room Egil Viking, who asked: “Ivan, do you find many trades reach 1R or 2R, do you consider taking a small profit at these levels or are you aiming for 3R? I dont know statistics but I guess if many trades ends in BE case then one should make at least some profits…”
Here is my answer: “It depends on the context. For instance, in gbpusd this week we had 1.39 RN. That was an area I imagined we’d struggle. Also, early on the week, I like to start accumulating wins so that I can use existing profit to act more aggressive at times. So yep, I can be more conservative early Mon or Tue but not exact science. It’s all about probabilities and random distributions. What is way more predictable is that as you increase the sample, the 2s and 3s R start to pop up quite frequently as well. To get those rewards, we must be consistent in keep pulling the trigger and be grounded regardless of the outcome. BE feels like a ‘negative’ experience because we think profit was taken away from us. Can’t think this way until position closed. Until that happens, it’s all an illusion and imaginary results you project, not the reality… let odds play out.”
The action of wanting to guarantee the taking of profits ahead of a predetermined target, over thousands of trades, I found it tends to be quite detrimental in optimising the trading results. Don’t get me wrong, there will be certain times when cutting a target from 3 to 2 may be justified if a major news catalyst is ahead, re-calibrating a target or early in the week if that’s your preference.
However, if you find yourself repeating this action way too often with no proper structure, there may be an underlying psychological issue here. You see, your trading account is a reflection of where you are in your development as a trader. When it comes to taking profits, an important trait that is manifested is your ability to be patient for your projected target to be hit.
In retrospect, the hasty action of taking profits before you let the market hit your profit also carries psychological benefits, as it reinforces your self-belief that you just simply let the market dictate the outcome of the trade, without you intervening to alter the results.
What sets out a very wrong habit is to be monitoring the trade live and just as the trade moves in the direction of your target, you cut the trade short significantly as the fear of your trade turning against you for a break even trade grows. That action is an admission from your side that you haven’t accepted the market to determine the outcome.
This tinkering of your positions can be an endless rabbit hole if you don’t set the right foundation and habits. The key here is to accept the randomness and unpredictability of each single outcome, while having blind trust, one that is supported through your backtesting/forward testing.
You’ve essentially come to trust your numbers. You’ve ingrained in your brain that over a large sample of trades, some of these targets will be reached, it’s the distribution we can’t pretend to know. That’s the random part that must be accepted. If too frequently you are altering the results, you are also disrupting the potential maximisation of your profits.
The more you detach yourself from the outcome of your next trade as the make-or-break in your level of confidence, the more relaxed and easier you will find it to accept as a random event where the price will be headed, yet each time your target is hit, you will gain a deeper and deeper sense of satisfaction as you remain true to yourself and the strategy.