Run Your Winners

"The pros will tell you that
it's never wrong to take a profit."

You will often hear this said but when you do, you can be certain of one thing - it won't be uttered by a professional commodity trader!

That's because there is only one time when it is right to take a profit - and that's when your system signals it.

You should not close a trade unless it is signaled by your system.

This is not the end of the matter either - there are important things to add.

You must run your winners, otherwise you will not be trading the correct way - and you can never run your winners by taking profits prematurely.

Cutting a trade short ensures you will not be following your system. You will be breaking the First Commandment of trading.

Why does it matter? It matters because when you evaluated your system, you tested it in simulated live conditions, carrying out all the 'best practice' procedures. Now you are breaking away from your system and moving into 'unknown territory'.

Given that there is so much wrong with taking profits whenever you feel like it - how did the idea originate? Does anybody agree with it?

The origin and followers of this advice are unknown. Perhaps it has been adopted from investors in stocks by guilty commodity traders desperate to excuse their sins.

Whatever its source, it is a piece of advice that is best ignored.

 

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Copyright David Bromley 2006
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