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You are profiting on a trade that you have carefully planned, yet it hasn’t reached the TP point just yet. Should you stay or should you go?  

Continuing through without changes means that you’re following the plan by the book. However, here are 5 cases where you would prefer taking a partial profit.

Following the plan means that every winning trade will enjoy the maximum profit, together with every losing trade having the minimum loss.  Sophia Todorova discussed this topic and has some great points. I am taking some of her points and adding more.

  1. Securing a profit: The basic motivation for taking a partial profit is to secure that this is a winning trade and not a losing one. As long as the pair is floating, it could reverse the gains and turn towards the Stop Loss point, making it a losing one.
  2. The pair is stuck: The pair might have went in your direction but got stuck afterwards. What is the nature of the move? Is it a “dead cat bounce” indicating more moves, or is it oversold / overbought in which you might want to exit? Here is how to identify or dismiss such cases.
  3. Another trade has a bigger potential: While waiting for something to happen, you might have spotted another potential trade, perhaps on another pair, that may seem much more attractive. It’s important to be careful with such cases and not to jump with haste from trade to trade, but verify that you are doing the right thing.
  4. A significant news event appears: News moves the markets all the time, and an unexpected event could have changed the course of your move. Examine it with care and perhaps exit before price makes its way to you stop loss.
  5. You have other things to do: Are you stuck in front of the computer screen, watching the trade and not letting it go? If you can’t let go while the trade is on, you might just want to close the trade and set yourself free, and try detaching yourself next time.

What do you think? Do you cut winning trades and take partial profits?

Further reading:  5 Most Predictable Currency Pairs – Q2 2012