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RT @rektcapital: Invest in life-changing skills so you can capitalise on life-changing market conditions I invite you to take my 100% free…

Today, I’m giving you a perspective on taking profits. 🎁 I’m sharing this knowledge and don’t wish to keep it to myself. If it brings you value, I invite you to share it in return. I recommend taking the time to read this post carefully. This lesson, like the previous ones, should help you understand that mathematics play an important role in trading. It’s an art that can help you optimize your level. The case discussed here concerns partial profit-taking vs. full profit-taking (which I’ve been using for several months). Slide 1: Scenario: you take a position with a risk-reward ratio of 10. Your initial stop loss is $100, allowing you to earn $1,000 if the final TP is reached. However, when you reach 5R, you decide to take 50% profit on the current unrealized $500, securing $250 (because 50% of 500 = 250). The final TP would therefore bring you a maximum of $500 more. Slide 2: Your actual risk-reward is therefore no longer 10 but 7.5. The total maximum profit goes from $1,000 to $750. The position on the right shows your actual risk-reward after your partial profit-taking. And your stop loss is now $50. Slide 3: Now, compared to the initial RR of 10, you have already secured once, but you secure another 50% when you reach 7.5R, so your secured profit is now $187.5. In total, you have secured $437.5, and the maximum total profit that the position will bring you is therefore $687.5. Your actual risk-reward is therefore 6.87, but only if you reach the final TP. Your actual stop loss is now $25. You should already start to realize that something is off. Slide 4: Position 1: you take no partial profits, you secure 100% of the position at 5R → result: $500. Position 2 (middle and right trades): you took 50% profit twice. Your RR seems to be 7.5, but despite that, you generated less profit than if you had taken full TP right away. This means that by taking multiple partial profits, you have the illusion that the position generates more profit than if you had taken the entire position at 5R. The consequence is that the position runs longer, and you’ll have to wait for the price to move higher while ending up with less profit, so the equation is not ideal. Only mathematics can help you understand this logic and remove the illusion that the further the position goes, the better it is to take only partial profits. Here’s the psychological pattern I’ve understood: When you secure profits, it’s because you’re aware that the market can retrace, which means it could erase your current profits; therefore, you secure a portion of them. The question that helped me resolve this issue was: "If I’m aware that the market can correct, why would I only secure half or part of the position, knowing I could take the remaining part as well?" On one hand, it reassures the trader to pay themselves, but for the remaining part they let run, there’s a part of them that hopes it will keep growing. However, if the top was reached and the position moves toward the trader’s stop loss, the consequence will be that they’ll think about the other part they didn’t secure, because they believed it might keep growing. The result is that this creates frustration and regret in the trader, because one part of them was afraid and secured profits, while another was in hope mode and let the rest run. I explained this in this post: