Take Profit

Taking profit means selling while you are ahead. It is the twin of the stop-loss, and many people find it the harder of the two, because selling means giving up whatever comes next.

It matters because an unrealised gain is not yet your money. A 30% profit on the screen is only a number until you sell, and it can disappear in a single session.

Setting a target price in advance makes the decision easy. Decide what price you will sell at when you buy. Without one, people hold through the rise for fear of missing more, then hold through the fall waiting to break even, and often end up with a loss.

Selling half is a common compromise. Take half off at the target to recover your capital and let the rest run. You keep exposure to further gains while locking in part of the profit. Selling a good company too early is its own cost, though. For short-term trades, honour the target; for long-term holdings, judge by whether your original reason for buying still holds rather than by the price.