Many of you know how I feel about taking partial profits in winning trades (you probably shouldn’t!). To put it more mildly, you should recognize the tradeoff you’re making when you take a partial profit. It’s not free.
If more traders acknowledged what you’re giving up, I believe you’d see a LOT fewer of them taking partials. Since writing that post I’ve thought a lot about it as I trade and I’ve found that there’s one important situation where I actually ENCOURAGE traders to TEMPORARILY take partial profits.
So when do I encourage it? When you’re stepping up your trade size. Some traders have a really difficult time sizing up even when all their results tell them they should be. There’s usually a psychological barrier that’s hard to break through. That level is different for almost all traders. Some traders will simply never get past it.
If a trader is having difficulty sizing up like they know they should, I’ll often suggest temporarily taking some partial profits in some of the winning trades. This can be an important step that allows them to move through the psychological barrier that accompanies trading with bigger size. I always include the caveat that this should be treated as an isolated part of a bigger plan to trade with more size and quickly return to more efficient partial-free trading.