Profit Taking
Strategy of partial or full gain realization at target levels.
Profit taking is the realization of gains by selling part or all of a position when price reaches a target.
Why a profit-taking plan is essential:
•"Unrealized profit isn't real profit" — until you sell, you can lose everything
•Greed is the biggest enemy — every retail investor has a story about a rejected 10x that became 0
•Discipline says: "If you would have been happy with this gain before, realize it"
Strategies:
•Scaled exit — sell 25% at +50%, 25% at +100%, 25% at +200%, keep rest
•Target levels — research resistance zones and take profit there
•ATH strategy — take profit in new ATH periods, don't wait for "the top"
•DCA selling — sell a small % each week in a bull market
Tax implications:
•Short-term gain (< 1 year): usually higher tax rate
•Long-term gain (> 1 year): usually lower rate