Skip to main content

Cut Your Losses And Let Your Profits Run

Cut your losses and Let your Profits run!

How many times we have heard this simple rule of trading? A rule often used in trading that acknowledges the tendency among traders to sell winning positions too early and while they also hold onto losing positions in the hope that the stock will come up quickly.

Most traders tend to take quick gains off the table so early out of fear that the Profits will evaporate quickly.The key to letting your profits run is to not to panic when volatility increases and to maintain your convictions about why you entered into the trade.

Nitfy Trading

How to "Let Profits Run"

Letting profits run isn’t really a trading strategy until an actual exit method is implemented. How long do you let it run for? How do you know when it is no longer “running?” The easiest way to answer these questions is with a trailing stop.

A trailing stop is implemented in a number of ways, number of points, a fixed percentage, below certain moving averages etc.. One strategy isn’t necessarily better than the other. Ultimately, which strategy is better is the one that works for the individual.

Cutting your losses and letting your profits run is nothing more than making decision about the trade before the trade has been initiated. When attempting to make all these decisions during the trade, you get yourself into trouble and make emotional decisions.

Define your discipline prior to investing/trading and not after.

Popular posts from this blog

Historical Sensex Returns Updated - 2024

Historically Sensex has given returns of about 15% per year, despite volatility and price fluctuations of about -20% to +60%. The following table shows S&P BSE Sensex historical data - start  & close values and the yearly returns of the sensex from 2000 to 2024. So far during the year the   index has hit an all-time high of  75,124   and despite markets hitting all time highs not all stocks make all-time highs. There are many stocks still below their highs. Stocks like HDFC Bank, ITC, Asian paints are still well below their highs and some of them have given low returns over last 3-5 years. Individual or Retail investors can achieve consistent returns through investing via mutual funds , whether it be active or passive. Chasing returns from individual stocks is futile. Be a wise investor !

Mutual Fund AUM Surge 35%

 Mutual fund assets surge 35% in fiscal 2024 to a new high. According to recent report from AMFI, fiscal 2024 turned out to be one of the best years for the domestic mutual funds industry as assets under management (AUM) spurted by nearly Rs 14 lakh crore to a record Rs 53.40 lakh crore as of March 2024 compared with Rs 39.42 lakh crore as of March 2023. Women comprised ~23% of the investors based on their share of the AUM and men ~77%, while individual investors comprised ~60% as against institutional investors ~40%. Equity-oriented fund categories gain on inflows and mark-to-market (MTM) gains. As Nifty 50 gained 33%, most of the AUM increase are from MTM gains. Passive funds growth was muted around 27% as compared to Active funds. Another key take away is investors' adoption of systematic investment plans (SIPs).   SIP continues to rise with monthly net inflows at Rs 19,300 crore in March 2024. For fiscal year 2024, the net inflows through SIPs stood at nearly Rs 2 lakh cro...