How To Let Your Winners RUN When Day Trading

So as traders, one of the hardest things that we kind of deal with is not knowing when to exit and not allowing our winners to run. I have that problem, and so many other traders that I know have the same problem. You get into a position, you get in at $10, you get out at 11, and next thing you know, stock is at 13, 14 bucks and so on. So basically, how do you overcome this and what is the psychology aspect behind this? So I'm going to break that down in this video and I'm going to show you what I.

Now I'm gonna show you guys what happens in a typical situation and how we're gonna overcome it together, right? So let's say on a typical trade, right, you see a stock, a stock is trading at, let's say, $100. Now, as the stock is trading at $100, you think the stock has potential to go higher. It's a, a quality setup. You have your risk management and all these things in place. So you're like, you know what? I'm going to take this trade. So when you take this Trade, you buy 100 shares, 100 contracts, put contracts, call contracts, whatever it is. But right now we're just gonna focus on shares. And this applies to any financial security, by the way, right? So you buy 100 shares at $100, right? So this is your entry point. Now, let's go through each situation that happens. Now, when you take this trade, you obviously have a profit target area. So in this point, let's say our profit target, where we anticipate the stock to go, where the stock has profile probability to go, is, let's say, 105. So we're like, hey, we think this stock has room to go to 105. So typically, let's say the stock goes to 105 in the next 20 minutes, 30 minutes, whatever the case is. Right now, at this point, you are up $500 on your position. Now, a few things happen. The first thing that happens is emotions kick in and you're like, oh, my God, I'm up 500. I'm up 500. I'm UP 500. I'm so excited. I'm. And I know a lot of people get to that point, including myself, when we take a nice position and it works out where we see a nice chunk of profit and we wanna take it. The other problem some people have is they see a nice chunk of profit and they're like, well, what if it goes higher, right? And there's two sides to this story. Now what you have to understand is before you do anything, you wanna look at the stock from a point of view where you understand, does this stock have potential to go higher? Yes or no? Now, if it does have potential to go higher and you understand that your emotions kick in a lot during times like this, what I recommend you do is I recommend you take half off the table. Now, what do I mean by taking half off the table? I mean, since you have 100 shares and your unrealized profit, meaning you haven't locked anything in yet, is $500, at this exact moment, I would sell 50 shares. So at this point, I would say, you know what, I'm going to take some profit off the table. Meaning I'm going to lock in profit. I'm also going to take risk off the table by selling 50 shares at 105. Now, if I sell 50 shares at 105, I am basically locking in 100%, a profit of $250. Because remember this, 500 is not guaranteed locked in profit. This is unrealized profit, right? This could go higher, this could go lower. But now at this point, what we're doing is we are selling 50 shares, locking in $250. Now, the great thing about this is, A, we locked in profits and B, we've also taken size off this position. We are not as emotional as we would be, but by holding the full position. Now let's look at all the scenarios that could possibly happen. Scenario number one, this stock goes back to 100, right? You still made $250. As long as you sell your other 50 at 100, right? That's number one, you still walk out green. Scenario number two, this stock goes higher to, let's say 110. It goes to 110. Now, what you were able to do, you were able to ride your remaining 50 shares to a higher point and you're able to make more money and ride that position out. Now, some people might go against this and say, well, Umar, why would I sell 50 shares at 105? Why not just hold my full position until a higher price point? And yes, you could do that, but you have to understand the downside. If you're an emotional trader or your emotions get the best of you, this holding tilt from 105 to 110 is going to be very hard to. Because you have to understand a stock is not going to go up straight. It's not gonna go up from 105 to 110. It's probably gonna go up to 105 to 106, 107, then back to 106, then back to 107, then maybe back to 106.5. As the stock goes up and down, your open P and L, right, your open profit and loss is going to fluctuate, which is going to cause more emotions. But if you already locked in profits and you've taken more risk off the table, you are now able to hold through these price fluctuations that are happening up and down. So, yes, you are giving up, quote, unquote, some profits by not holding your full position, but you are increasing your probability of holding the trade and writing out the remaining amount instead of just getting washed out, right? Because flip this. Let's say you don't sell at 105. Let's say you hold at 105 and you're like, you know what? I'm not gonna sell this at 105. I'm gonna hold my full position. And at 105, you're up 500 bucks, not locked in. The trade starts going against you to 104. Now you're up $400, right? Let's say it goes to 103, right? Now you're up $300, right? I know it's messy, but just try to get to the point. You're up at 300. Now. What happens is, because you are up 500 now, you're up 300, emotions start kicking in. You stand a bag holding. You didn't lock in profits. You don't know what to do. Your emotions go all over the place because you lost 200 bucks in a short period of time. And that just throws your emotions all over the place. But if you locked in profits, if this trade goes back to your entry point, you still walk out making $250. You're still green on the trade. And as traders, our focus is to be green, build consistency, and try to maximize our profits on each trade and give ourselves the highest probability for success by taking risk off and trying to have the most amount of exposure to profit and eliminate risk. So that's my way of actually, you know, holding onto winners. Like, most of the time, I'm never gonna be holding the winner from 100 to 110. A lot of times I'm scaling out now in this situation, let's say this one, to 108, I probably sell 20 more shares, and I keep writing it out. And this works very good, especially when you're trading options as option traders. Let's say you get in a call contract at $2.80, and that call contract goes to 4 right? Take half off. Sometimes take off your initial investment, let the remaining shares or contract ride out and that's where you'll make the 100% 200% plays. But the idea is to know when to scale out and actually scale out and and be okay with it and look at it from a trading perspective and not agreed perspective where oh no, let me hold on to my full position of 105 cause if I hold on at 105 and I hold on to 110 I'll make more money. That's not a good approach. So once again as traders learn to scale out that's the best way to let your winners run. If you guys have any questions please follow my Instagram. I'm gonna post my Instagram right here. DM me. I'll be answering any trading related questions at all there. Once again if you like the video please give it a thumbs up and subscribe to this channel and I'll see you next time. Thank you.