Withdraw a Portion of Your Profits is a trading rule which every investor or market player should follow very meticulously. The character of stock market makes this rule significant – you can not predict the way in which the market will move, and it is advisable to avoid re-investing all your profits again in the market. If you continue to re-invest your profits and the market becomes unfavourable, all your paper profits will get reduced, and they may even get wiped out with the sliding market values. It may even turn out to become negative. Thus, it is always a prudent policy to withdraw a portion of your profits, and keep the same in some other form, say bullion (gold or silver) orreal estate. This simple step shall save you from the negative impact of any market falls, particularly when it is sudden.
However, there is certainly a problem in following this simple rule. After a series of successful trades and surge in profits, and bottom line becoming larger, the investor or trader perhaps get a feel of over confidence. He/ she may forget the market reality and the dynamics of the market. Profits continue to pour into and it is re-cycled into the same type of investments. Now, any sudden negative turn in the market scenario shall negatively impact the fortunes of the investor or the market player. The earning spree may turn into losing spree, and the profits amassed over months of trading and investing may evaporate in days and sometimes in a one or two days. One would certainly like to avoid this sad position, and the simplest way is to withdraw a portion of your profits.