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.

BREAKING DOWN '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. Home Country Bias

    Investors' natural tendency to be most attracted to investments ...
  2. Profit Target

    A predetermined point at which an investor will exit a trade ...
  3. Weak Longs

    Refers to the group of investors that holds a long position and ...
  4. Buy Weakness

    A proactive trading strategy in which a trader takes profits ...
  5. Trader

    An individual who engages in the transfer of financial assets ...
  6. Friendly Hands

    A nickname for investors in an IPO who will likely hold onto ...
Related Articles
  1. Trading

    The Art Of Cutting Your Losses

    Taking corrective action before your losses worsen is always a good strategy. Find out how to keep your capital losses small and let your winners run.
  2. Trading

    The Multiple Lives Of A Stock Trader

    Any trading career will have its ups and downs. Find out how to maximize the good times.
  3. Trading

    Removing The Barriers To Successful Investing

    Learn how to stop using emotion and bad habits to make your stock picks.
  4. Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  5. Trading

    Using Feedback To Improve Your Trading

    Positive and negative trading experiences can affect the way you trade. Find out how.
  6. Trading

    The Secret to Forex Trading: Limit the Downside

    The odds against becoming a profitable Forex trader are high, but many small investors still try to tame this beast.
  7. Trading

    Master Your Trading Mindtraps

    Traders are only human; therefore, they are subject to psychological traps when they trade. Read how you can manage your emotions so that you can profit from your trading.
  8. Trading

    The Importance Of Trading Psychology And Discipline

    Find out how investing success can be more about your mindset and less about the markets.
  9. Investing

    The Art Of Selling A Losing Position

    Knowing whether to sell or to hold is tough. And no rule fits all. Find out what to consider.
  10. Taxes

    When To Dump Portfolio Losers

    The IRS lets investors sell losing investments and use the losses to offset gains on other investments, thereby reducing their tax bill.
RELATED FAQS
  1. What is the difference between investing and trading?

    Investing and trading are two very different methods of attempting to profit in the financial markets. The goal of investing ... Read Answer >>
  2. How do investors lose money when the stock market crashes?

    Over the last hundred years, there have been several large stock market crashes that have plagued the American financial ... Read Answer >>
  3. What taxes will I pay if I win a lot of money while gambling in Las Vegas?

    Travel to Vegas and try to win big at the casino; but before you do, make sure you understand the tax laws that govern gambling ... Read Answer >>
  4. When short selling, how long should you hold on to a short?

    Explore the reasons for short selling and the various factors that influence how long an investor may wish to maintain a ... Read Answer >>
  5. What are common investing mistakes in bear markets?

    Learn why investing in a tumultuous market can be challenging even for the most experienced investors. Avoiding these common ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center