Why do you close profitable positions too early?

Imagine that you open a position for 10,000 PLN. The price rises, bringing you a profit of 2,000 PLN. You close it, only to see it continue to rise shortly after, and you could have made another 3,000 PLN. Such situations happen regularly. For many traders, this is a daily reality: they close positions too early because they fear losing the profit they already have. Monthly, this can mean a loss of several thousand PLN in potential profit. If you lose 3,000 PLN on each of five such trades in a month, that's a total of 15,000 PLN. That's money you could have invested or saved for other purposes. The fear of losing already gained profit is costly and ineffective.

Fear of losing profit is a psychological mechanism that operates on the principle of scarcity. A thought arises in your mind: 'better to gain something now than nothing at all.' This is a natural reaction associated with the desire to protect what you have already earned. The brain, under market stress, often prefers the certainty of a smaller profit over the risk of losing it. This is an evolutionary mechanism that was meant to protect us from losses, but in trading, it often works against us. Instead of allowing profits to grow, we limit our possibilities.

From the experience of many traders, it follows that closing profitable positions too early limits the potential of the portfolio. Each profitable position you close prematurely is a lost opportunity for greater earnings. Market logic suggests that we should let profits grow while limiting losses. Closing a position out of fear of losing a profit contradicts this principle. It's like braking a good sprint just before the finish line. The one who wins is the one who can withstand the pressure and give profits time to develop.

A practical solution is to establish profit management rules that include elements of flexibility. One such rule is the 'trailing stop'. It allows for moving the stop loss as the price rises, protecting profit while allowing for further increases. Another rule is position splitting – closing part of the position to secure some profit while leaving the rest open for further gains. The key is to change the approach and understand that not every position needs to be closed at the first profit. It is important to create a strategy that provides a sense of security but does not limit growth opportunities.

In the new week, start using 'trailing stop' or position sizing. Observe the effects and gradually implement changes in your profit management approach. This is a small step that can lead to significant differences over time.