A re-examination of the maxim that taking profits is always right. Exiting too early breeds small-loss-small-win accounts and forfeits the rare large winners that are the true source of expected value. The discipline of letting profits run, trailing stops, and scaled exits, dissected technically.
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A common market proverb runs like this.
A profit taken is a profit earned. An unrealized gain becomes yours only the moment you close.
This is half right. As a warning that "an unrealized gain is not yet your money," it is entirely valid. Mistaking a floating profit for "money already in the bank," getting greedy, and giving it all back is one of the classic routes to the exit.
But the proverb says nothing about at what level you should take the profit. It says "close," but never says "close at what price."
And almost everyone, without noticing, rewrites this proverb in their head as "close as soon as possible."
An unrealized gain feels good. The urge to lock that good feeling in quickly is not the logic of the market, it is a convenience of the brain's reward system.
Stated precisely, it should read like this.
Mistaking an unrealized gain for "already yours" and getting greedy is dangerous. But cutting a winning trade before its source of profit has dried up erodes your account just as badly. The question is not "close or not" but "have you designed, in advance and separately, the condition for letting profit run and the condition for cutting it?"
How to Read
OANDA:USDJPY
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