One of the common beliefs in trading is that winners should always be held longer—the idea being that the longer a trade moves in your favour, the more profit you can capture. While this notion can sound appealing, the reality is more nuanced. Simply holding onto winners for an extended period doesn’t guarantee higher profitability and may, in fact, lead to missed opportunities or unwanted risks.

The decision to hold winners longer should be based on a trading strategy, market conditions, and risk management, not just a blanket rule. Let’s explore why holding onto winners for longer isn’t always the best approach and when it might actually work in your favour.

Why Holding Winners Longer Can Be a Mistake

1. Risk of Giving Back Profits

• One of the biggest risks of holding a winning trade for too long is the potential to give back profits. Markets can be volatile, and even when a trade is moving in your favour, it can quickly reverse. If you don’t have a solid exit strategy or a risk management plan in place, you could end up turning a profitable trade into a losing one.
• By not taking profits at predetermined levels, you expose yourself to the possibility of the market retracing and erasing your gains. This can be particularly painful if the reversal is swift or unexpected, leading to a significant drawdown after what seemed like a winning trade.

2. Lack of Discipline and Emotional Influence

• Holding winners longer than planned can sometimes be the result of greed or an emotional desire to capture more profits. This can lead to a lack of discipline, where you deviate from your original trading plan. Traders who hold onto trades hoping for bigger profits may also experience fear when the market starts to show signs of a reversal, which can lead to indecision and missed exit points.
• The best traders are disciplined in their approach, sticking to their entry and exit plans. Greed and emotions should not dictate when you exit a trade. By sticking to a plan, you avoid the mental traps of wanting more than what the market is offering.

3. Uncertainty in the Market

• Markets can change quickly, and what seems like a strong trend today can turn into a sideways range or reversal tomorrow. By holding onto a trade for too long, you might risk being exposed to conditions you didn’t anticipate, such as lower momentum, reversals, or market volatility.
• A winning trade today might lose its edge tomorrow if it encounters resistance or key market levels. Traders who hold positions for too long without adapting to changing market conditions might end up stuck in a trade that eventually goes against them.

4. Opportunity Cost

• Holding onto a trade for too long can also mean you’re missing out on other opportunities. In fast-moving markets, there may be other setups forming that could offer better risk-reward ratios than the position you’re currently holding. By holding a winning trade for longer than necessary, you may miss the chance to take profits and reallocate capital into more promising trades.
• Opportunity cost is a critical factor in trading. Even if your current position is still profitable, it could be wise to lock in those profits and use that capital for other opportunities with a better potential return.

Why Holding Winners Longer Can Be Beneficial

1. Maximising Profit Potential

• Trends can often run for longer than expected, and holding onto a winning trade through the middle of a trend can result in higher profits. Traders who allow positions to run until the trend shows clear signs of reversing can capture a much larger portion of the move, increasing their profitability.
• This is particularly true for traders who employ swing trading or position trading strategies, where the goal is to capture the larger market trend over time. Holding a trade longer gives you the potential to benefit from a bigger price movement, which smaller trades might not offer.

2. Avoiding Premature Exit

• Sometimes, traders exit their winning positions too early out of fear or a lack of confidence. In such cases, holding a trade longer might be a more prudent option. If the market is clearly moving in your favour and there are no immediate signs of reversal, it could make sense to give the trade room to develop further.
• If you have a well-defined take-profit level or are using trailing stops, you can allow the trade to run while still protecting yourself from reversals. This approach combines the best of both worlds: profit-taking with risk protection.

3. Capturing Larger Trends

• Longer-term trends are often where the biggest profits are made. Position traders and trend followers aim to capture the full scope of a market move, sometimes holding trades for days, weeks, or even months. By holding onto trades during strong trends, you can maximise your profits by riding the trend as long as it remains intact.
• The key is to manage the trade with patience and a good risk management strategy, ensuring that you don’t give back too much profit if the market eventually reverses.

4. Using Trailing Stops for Flexibility

• A good way to hold a trade longer while still protecting your profits is by using a trailing stop. A trailing stop allows you to lock in profits as the price moves in your favour, but still gives the trade room to continue in the desired direction.
• This way, you can allow a position to run, capturing larger trends while protecting against any reversals. If the market starts moving against you, the trailing stop will close the trade, securing profits along the way.

When Should You Consider Closing Winners Early?

1. Market Weakness or Reversal Signs

• If you notice signs of weakness in the market or indications that the trend might be losing momentum (such as price stalling at key levels, lower volume, or reversal candlestick patterns), it might be wise to close the trade or take partial profits.
• Key support and resistance levels can also be critical indicators that the market may reverse. Exiting early at these levels can help you lock in profits before the market turns.

2. Risk Management and Position Sizing

• If your risk management rules suggest reducing your exposure or locking in profits at certain points, scaling out or closing winners early might be part of a more conservative approach. For example, if you’ve already achieved a solid profit but are worried about the next resistance level, closing part of the position allows you to secure profits while maintaining exposure to the trade.

3. Rebalancing Your Portfolio

• If your current trade is becoming too large relative to the rest of your portfolio, taking profits early or scaling out can help you rebalance your exposure. This helps ensure that you’re not overly concentrated in one position, which could lead to significant risk if the market moves against you.

Conclusion: Holding Winners Longer Is Not Always the Best Approach

While holding winners longer can sometimes be beneficial, it’s not a universal rule that applies to all trades. The key to successful trading lies in adaptability—the ability to assess the market conditions and make decisions based on your strategy, risk management, and emotional control.

In some cases, holding winners longer can maximise profits, especially during strong trends. However, in other cases, taking profits early or scaling out can help you lock in gains and protect your capital from unexpected market reversals. It all comes down to managing risk and maintaining discipline.

If you want to learn how to manage trades effectively, capture larger trends, and improve your risk management, check out our Trading Courses. Our expert-led training will help you refine your trading strategy, adapt to market conditions, and build a more disciplined and profitable trading approach.