How Do You Know When to Sell a Winning Position?

BellaMike Bellafiore's (Bella's) Blogs1 Comment

Dear Mike,

I’ve recently read One Good Trade and found it a quality read relative to all other books I’ve read. It has been immensely helpful as am currently full time employed and am at a point where I am thinking that that trading full time could be an option, provided I can become consistently profitable and have the confidence of putting  “bread on the table” from trading.


As a result of reading the book I have adopted a methodical and disciplined approach and my results have improved as a result of this. What I’m finding however is I become indecisive when I’ve had some reasonable gains on a trade and now adopt a “bird in the hand” approach and take the money off the table once I am up a few percent in a trade and before there is a pullback. I understand this is the wrong approach as I am supposed to let profitable trade run however I have seen many decent gains evaporate or worse turn into a loss because I decided to hold. I’m not sure there is a question there but in any case would be grateful for your views.


I love how you are approaching trading pro. You are working on your game while you are employed and being very patient and gaining valuable screen time before deciding whether to trade pro. Too many just start, without any past trading experience, and expect to make bank immediately. As if true of any professional discipline you do not reach the stage of competence until after training, concerted practice, experience and review.

In my next book, The PlayBook, I tackle the issue you raised. When do I know when to sell? How do I know when to cut my winners?  Please read The PlayBook for my comprehensive answer, but I will give you some highlights.

When you are developing your PlayBook, an archive of trades that make the most sense to you, distinguish between Move2Move trades and Trades2Hold. An example of a Move2Move trade is a scalp, trading for the next move in a stock.  Trades2Hold our are intraday swing trades, where we are trying to capture multiple points. With our Trades2Hold we do not sell until there is a Reason2Sell.

Each trader must develop their list of Reasons2Sell. If you spot a reason then consider selling. If you do not then the position is not a sale. This is true even if the position trades against you and you give back significant open profit. Your job as a trader is to do the right thing. Judge your trading not by your P&L but whether you traded a setup well.

Some examples of Reasons2Sell are:

  • the stock breaks its uptrend
  • breaking news
  • overall market resistance
  • technical resistance in the stock
  • the selling pattern dissipated
  • breaking news in the market

This is not our proprietary exhaustive list of Reasons2Sell inside The SMB Foundation, but it gives you a feel of the right thing to do with your positions. Develop your list of Reasons2Sell and start applying them to your Trades2Hold.

I hope that helps.

You can be better tomorrow than you are today!

Mike Bellafiore

One Good Trade
The PlayBook

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One Comment on “How Do You Know When to Sell a Winning Position?”

  1. I also sell a position right before earnings. The volatility compression will kill an options value.

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