So you can cut your losses. Can you keep your winners?

One of the most common challenges for traders is knowing when and how to cut losers and hold on to winning forex trades. Let’s talk about the latter today.

have you ever asked yourself “Should I lock in the profit now or should I let it run?” in the middle of an open trade?

There may have been times when taking profits early turned out to be the best decision. But I’m sure there have also been times when you’ve hit yourself on the back of the head for closing the deal too soon.

Why do traders tend to cut profits early? Here are three possible reasons:

They don’t have clear profit targets.

There is nothing wrong with determining your profit target as you trade. It’s just so much easier to stay in a trade with a CLEAR profit goal because it’s easier to complete a task with a goal.

They have a low tolerance for risk.

A trader’s lack of risk appetite can also lead to premature profit locking.

Some traders would rather feel confident and make a $100 profit than risk part of the unrealized profit for another $50.

They are not confident in their trading idea or trading skills.

Holding your trade until the price reaches your profit target requires not only a lot of patience, but also a good amount of confidence.

There will be a lot of uncertainty along the way, which means staying confident in your trading idea becomes even more difficult.

It doesn’t help that as you watch your potential profits grow, it becomes even more tempting to lock in those wins rather than risk losing them by keeping the trade open.

They say a bird in the hand is worth more than two in the bush.

But more than the potential loss of unrealized profits, it’s the frustration that often accompanies these missed opportunities that deters a trader.

As traders, we tend to be too hard on ourselves, especially when paper profits disappear into thin air. We may be cutting our profits so we don’t blame ourselves if we lose unrealized profits.

That’s probably why my favorite trading psychologist, Dr. Brett Steenbarger, pointed out that it takes a lot more confidence to hold a winning trade because it’s working in your favor. But how exactly can you achieve this level of confidence?

Trust yourself.

Yes, it’s that simple. Unfortunately, it is not as simple as it seems. You must be able to trust your trading idea enough to stick to the plan and hold your trades until they reach your planned profit targets.

Dr. Steenberger says there are two ways to build self-confidence:

1. Instill a confident mindset

This is the part where you mentally prepare yourself in case the price pulls back and your paper profits disappear.

When you are trading, for example, you identify potential pullback areas and set trailing stops accordingly.

There will be times when you will be stopped by fakes and pullbacks that have turned into reversals. Don’t beat yourself up over the lost gains. Instead, remind yourself that you’ve done your due diligence and that there are other opportunities to take advantage of next time.

2. Build on small changes

By this, Dr. Steenberger means that you should do the right thing a little at a time and build on those efforts to start making bigger changes.

For example, you can try to lock in part of the profit at some point and leave the rest open to reach a target profit or stop loss. This way, you will be able to make a profit and at the same time be sure that you are looking after your deal until the very end.

It’s not every day that the market goes in your favor. But when it does, don’t you want to make the most of it?