Let Your Profits Run

AAA

DEFINITION of 'Let Your Profits Run'

A saying often used in investing that acknowledges the tendency among investors to sell winning positions too early. Most traders tend to take gains off the table early out of fear that they will evaporate quickly, while they also tend to hold onto large losing positions in the hope that they will turn around. The key to letting your profits run is to not panic when volatility increases and to maintain your convictions about why you entered into the trade.

INVESTOPEDIA EXPLAINS 'Let Your Profits Run'

Cutting losses before they become substantial is a key part of implementing this strategy. Successful investors can lose over half the time as long as losses are not allowed to compound. Giving profitable trades room to continue their upward climb takes a tremendous amount of courage, but it will likely pay off in the future.

RELATED TERMS
  1. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  2. Nervous Nellie

    An investor who isn't comfortable with investing and the risks ...
  3. Panic Selling

    Wide-scale selling of an investment, causing a sharp decline ...
  4. Risk Averse

    A description of an investor who, when faced with two investments ...
  5. Risk Lover

    An investor who is willing to take on additional risk for an ...
  6. Buy And Hold

    A passive investment strategy in which an investor buys stocks ...
Related Articles
  1. Scalping: Small Quick Profits Can Add ...
    Trading Strategies

    Scalping: Small Quick Profits Can Add ...

  2. 10 Tips For The Successful Long-Term ...
    Trading Strategies

    10 Tips For The Successful Long-Term ...

  3. The Stop-Loss Order - Make Sure You ...
    Active Trading Fundamentals

    The Stop-Loss Order - Make Sure You ...

  4. Sell Growth Stocks The IBD Way
    Active Trading

    Sell Growth Stocks The IBD Way

comments powered by Disqus
Hot Definitions
  1. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
Trading Center