Taking losses is difficult. One of the hardest things to learn as a trader is how to set a stop loss and accept the hit to their portfolio when it fires. We have all experienced it.
What few traders talk about is how difficult it is to SELL. I would argue that taking profit is far more difficult than taking a loss. How many times have you watched an asset’s price rise, failed to take profit, and then been paralyzed as price dropped and turned into a realized loss. Should you have sold before your target and locked in profit? Should you have moved your stop loss up to breakeven? And how many times have you seen price reach your target – but you decide that price can go even higher and choose not to sell, only to see price drop once again.
Selling is hard. My mentor Christopher Inks once taught me a valuable tactic – he told me to teach our students to take profit at a 3% gain on every trade (when possible) for an entire month, no matter what. I thought he was absolutely crazy considering the opportunities in the crypto market at the time. However, I vowed to test it myself and found it to be an extremely valuable exercise. First, consistent small gains compound very quickly and can result in tremendous profit over a relatively short period of time. More importantly, this exercise teaches traders the value and importance of taking profit, regardless of FUTURE PRICE ACTION. It kills FOMO (fear of missing out) and eliminates the greed that is inherent in the human psyche – the urge to squeeze a bit more profit out of an already successful trade.
Try it and let me know how it goes!