Let Your Profits Run

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DEFINITION

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

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.


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