Nick Goold
Why Letting Your Profits Run Matters
Many traders try to achieve a high win rate, but markets are unpredictable, making it difficult to win most of the time. Instead, it is important to make more money from winning trades than you lose from losing trades.
When your risk-reward ratio is above 1, you can still make money even if you lose more trades than you win. However, many traders close winning trades too early because they are afraid of losing their profits.
The interactive lesson below shows why letting your profits run is important and how to build the confidence to hold winning trades longer.
Start With a Larger Profit Target
Before entering a trade, aim for a profit target that is at least twice your potential loss. This means you can make money even if you lose more trades than you win.
You can reduce your target later if the market starts to turn against you. However, starting with a larger target gives you a chance to make more money when the market develops a strong trend. Sometimes one big winning trade can cover several losses.
Use Trailing Stops to Stay in Winning Trades
A trailing stop allows you to protect your profits while giving the market room to move further in your favour. As the price moves in the right direction, you can move your stop to reduce your risk or lock in some profit.
Be careful not to move your stop too close to the current price. Even strong trends have small moves in the opposite direction. If your stop is too close, you may exit a good trade too early. Accept that you may need to give back some profit to catch a bigger move.
Don't Watch Every Price Movement
Watching the market constantly can make you nervous. When you see your profit fall, even by a small amount, you may want to close the trade immediately.
Instead, decide when you will check your trade. If you entered based on the hourly chart, there is usually no need to watch every movement on the one-minute chart. Give the market time to move towards your target.
Accept Losses Instead of Trying to Be Right
Many traders want to win as often as possible. They take small profits quickly to avoid turning a winning trade into a loss. At the same time, they may hold losing trades because they hope the market will turn around.
Good trading is not about being right all the time. You can lose more trades than you win and still make money if your winning trades are bigger than your losing trades. Accept small losses and be patient with winning trades.
Keep Learning to Improve Your Trading
Holding winning trades takes practice. Start by setting larger profit targets, using trailing stops and checking prices less often. Over time, you can become more comfortable letting your profits grow.
Visit the Titan FX Education Hub for more lessons on trading strategies, risk management and trading psychology.
Explore the Titan FX Education Hub
The Risk of Ruin Calculator in the Titan FX Research Hub shows how your win rate, risk-reward ratio and risk per trade affect your chance of losing your trading capital. Try different settings to see why making more on winning trades than you lose on losing trades is important.
