How to Take Profits
To take profits, decide the exit before the position exists and place the target at a level rather than at a round sum of money. The target must clear your round-trip cost to be worth taking. Moving a target further away mid-trade is a new trade you did not plan.
An exit decided while a position is open is being decided by the position. Everything below exists to move that decision earlier, to a point where the money is not yet involved.
Before you start
An exit decided before the position exists. Written next to the entry and the stop. If you can name where you get in and not where you get out, the plan is half a plan.
Your round-trip cost, so the target can clear it. A target smaller than the cost of the trade is a losing trade with a green number on it.
A rule that forbids moving a target further away. Written in advance, because in the moment there is always a reason, and the reason is always that the position is winning.
The steps
1. Write the exit at the same time as the entry
Three prices, all decided while flat. The exit written afterwards is written by whatever the position is doing to you.
2. Put the target at a level, not at a sum of money
A prior swing, the opposite edge of a range, the busiest price. The market has no interest in your round number and every interest in where it previously turned.
3. Check the target clears the round trip
On the shared series a round trip is 2% of a median bar’s range. A target that does not comfortably exceed that is paying you to transact.
4. Decide about scaling out honestly
Taking part off reduces the variance and reduces the average result, because the portion you removed was the part that would have run. Both effects are real; pick knowingly.
5. Choose between a fixed target and a trail once
A fixed target caps the trade. A trail gives it room and gives back more when it ends. Decide which before entry rather than switching between them mid-position.
6. Add a time exit for trades that do nothing
If the move your reasoning implied has not happened within the bars you expected, the reasoning was wrong even though the stop was never touched.
7. Check the depth before assuming your exit fills
An exit in a thin period fills away from the price you named. Volume at the moment you plan to leave is part of the plan.
8. Never move a target further away
Moving it closer is a decision. Moving it away is abandoning the plan at the moment it is working, and it converts a finished trade into an open-ended one.
How to tell it worked
Audit your last 30 trades, over at least 90 days.
Count how many had the target written before entry. 30 out of 30. Any exit decided during the trade was decided by the trade, and that is the specific behaviour this whole page is arranged against.
Count how many targets you moved further away. The target is 0 out of 30. This single number predicts more about a record than any entry statistic.
Then compare your average winner against your round-trip cost. If the average win is under 3 times the cost, the targets are too close and the arithmetic never had room to work.
What the trailing data actually says
Trailing stops were tested at four distances across 562 trials each on the shared series. Median survival was 3 bars at 1 ATR, 10 at 2, 22 at 3, and 32 at 4 — and between 91% and 100% of positions were eventually stopped at every distance.
The second figure is the important one. Almost everything gets stopped, so the trail distance is not a choice between being stopped and running forever. It is a choice about how long you hold and how much you give back at the end.
And the relationship is not linear. Quadrupling the distance multiplied survival roughly tenfold.
A wider trail buys disproportionately more time, paid for with a larger give-back when it finally
triggers. The figures are in research/series-measurements.json.
The original data
Of the 24,971 unique videos in research/search-study-corpus.jsonl, 45 have an instruction-shaped
title mentioning taking profit, at a median of 13,526 views across 40 channels, with a maximum of
578,429. Stop losses, the other half of the same decision, appear in 89 at a median of 20,904. The
counts come from site/rank_howto.py.
45 videos on exits against 89 on stops, at two thirds of the median. The entry and the stop attract most of the attention while the exit — which determines the size of every winner you will ever have — gets half the coverage. That imbalance is consistent across the corpus and it is the wrong way round.
The answer to the question on that chart is that the target working is not a reason to abandon it. A target reached and exceeded is the most common regret in trading and the least informative one, because you only ever see the times it kept going. The trades where holding past the target gave everything back do not produce the same feeling, and they happen at least as often.
When it fails
A range punishes fixed targets in a particular way: they work, repeatedly, and then the same level works against you. Price reaches your target, you exit correctly, and a few bars later it returns and keeps going the other direction. The method looks successful trade by trade while the account goes nowhere, because a range gives back everything it offers. Nothing in the exit rules is broken — the conditions simply do not contain the move the targets were sized for.
The second failure is a target below the round-trip cost. It is a loss wearing a positive number.
A third is moving a target away. It abandons the plan precisely when it succeeded.
A fourth is a gap past the target. The order fills far beyond it, or the move reverses before you act.
A fifth is scaling out without acknowledging the cost. It reduces variance and reduces the average.
And a sixth is switching between a target and a trail mid-trade. That is two strategies producing one unattributable result.
Related
Take profit covers the order type and the alternatives to a fixed level. Trailing stop is where the survival figures above come from. And stop loss is the other half of the same decision, decided at the same moment.
The measurement that changed my thinking was the trailing-stop survival test on this site’s own series. I had treated a wider trail as a different strategy, and the numbers say it mostly buys time rather than outcomes — almost everything was stopped eventually at every distance. That reframed the exit as a choice about how long to stay in, not about whether you get taken out.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.