[The Trading Edition] Episode 28: How long should you ride the wave? The art of “enough” — securing profits without greed

In the previous sessions up to the 27th, we spoke about “risk management (capital management)” to protect your account funds, mixing in some harsh realities. Acknowledging your own weaknesses and occasionally stepping back from the market with humility is what keeps us in the market for a long time, right?

Now, we enter the final chapter, “Chapter 10: Practical Details of Trading.” This is the step where we integrate the analysis tools and capital management rules we have learned and apply them to actual trading.

This time, let's think about “profit taking” — which, just as much as, if not more than, entry, confuses many traders. When you have unrealized gains, at what point do you close the position?

1. The trap of beginners who hate to cap profits

Before entering a trade, have you clearly set a “profit target”? When I was just starting, Dr. Elder reportedly would answer that question by saying, “I don’t want to limit the potential for profit.” As a novice, he didn’t have a clear profit target, simply praying that the stock price would rise, and the higher it rose, the happier he felt.

But what happens if you maintain such vague attitudes? The market may top out and you may reluctantly sell at an unpleasant price, or the market may reverse and the unrealized gains seem to vanish, forcing you to close near your entry price.

“Beginners who do not have a clear profit target become even happier when prices rise, and become more discouraged when prices fall.”

Many of you may recognize these words. We tend to miss the right moment to lock in profits out of greed, and in the end, we hand profits back to the market.

2. The powerful magic of the phrase, “Already enough”

So, where is the correct place to lock in profits? Dr. Elder emphasizes the importance of a “modest target” based on technical analysis. It is not a lofty goal that reaches to the moon, buta realistic level of profit taking.

The doctor expresses this level with the words, “Already enough.”

“Please do not forget the powerful words ‘Already enough.’ These words carry the same strong meaning in both life and trading.”

With this phrase, we can view situations objectively without being overwhelmed by greed. By cutting the attachment that “it may go higher,” we can continually lock in profits that are already enough, achieving long-term superior performance.

3. Guidelines for “Already Enough” by trading style

So where exactly should we set the level of “Already enough”? The doctor provides several guidelines tailored to the duration (style) of trading.