[Summary]
The problem with taking profits too soon is the mistake of rushing to take profits and missing out on big gains.
For problems where profits are determined too quickly, replacing them with actual examples will make it easier to see the difference between situations where they can be used and situations where they are difficult to use.
In actual investment, the starting point is to distinguish between taking some profits and holding the rest. However, it is important to be aware that it is easy to sell early out of fear of losing unrealized profits.
In this article, we will discuss the issue of taking profits too quickly, not as "knowledge" but as steps to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First of all, divide the problem by taking profits too quickly.
When looking at problems in which profits are determined too quickly, first determine what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. The issue of taking profits too quickly is not the only factor in making a decision. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Consider the problem of taking profits too quickly with an example
If we look at the problem of taking profits too quickly as an example, first of all, we have a narrow premise. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
If you check the following points, things will be much more organized.
| Axis to check | What to see in the problem of taking profits too quickly |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
The problem of making profits too quickly is not only due to a lack of knowledge. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Focus on one situation where the problem of taking profits too quickly works well.
- Even if the price movements are similar, if the background is different, they are treated as different things.
- View not only successes but also failures using the same criteria.
- Check if you can reproduce it with your own amount of funds
The important thing here is not to settle on a single correct answer just because the problem is too quick to determine. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before using the problem of taking profits too quickly as a basis for making an actual decision, check at least these five things.
- Can you explain in one sentence the purpose of looking at the problem of taking profits too quickly?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking the problem of taking profits too quickly is not to act faster, but to reduce unnecessary mistakes in judgment.
Summary
The problem of taking profits too early is a good way to organize your investment decisions. Even if you read it as an example, your judgment will be inaccurate if you treat it as a standalone buy/sell signal.
The points to keep in mind are as follows.
- Decide first the purpose of looking at problems that take profits too quickly
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. It is realistic to treat the problem of taking profits too quickly as a tool to pause before buying or selling, rather than as a word that forces you to make a hasty decision.