Logic behind ‘closing half of the position’?

[Raza]

THIS is precisely why i (a) don't have hard TP targets, and (b) exit a trade when it starts moving against me by N pips. trailing stops, basically, on the full position. i can't for the life of me fathom allowing the market to keep moving against me THAT far and not act. leaving money on the table.... ouch.

Having hard TPs (the way I trade) has its advantages and disadvantages.. the problem with me is I get too excited when trading without a hard profit level. The price makes a retracement, hits a minor resistance (when long) and you start thinking its not going UP any further. More often than not I end up closing my positions early..

I guess this is where good traders are separated from really good traders

I am not saying that I don’t close my positions early, but knowing what is a good level to close your position early is a hard task.. After all, our goal as traders is also to make most out of a profitable trade..

Funny, how 2 years back I was looking for the best entry criteria turns out exit is far more important

I have also used trailing stops. They are fine, but I am sure experienced traders are using better exit strategies..

[Raza]

Kwyjibo, I know exactly how you feel.. happened to me quite a few times

[FringFX]

I have often read traders saying they closed half their position at X number of pips and move stop loss to BE.. While moving stop loss to BE makes sense, but closing half of the position doesn’t.. I have looked around but didn’t find anything useful that explain how this works..

If I open 1 lot and aim for 100 pips.. and I decide to close half my position at say 20 pips. And the other half at when 100 pip is reached.. Am I not limiting the total gain to just $60 (1$/pip)? Whereas the original gain would have been a full $100 had I not closed half my trade at 20pips..
Clearly decreasing my risk to reward ratio..

I hope I am making sense here.. Its just that I am struggling with keeping pips. Very often my trade goes my way 30-50 pips before reversing and either closing with a few pips, at breakeven or worse at a small loss..
I am trying to figure out a way to preserve the small gains I make and that’s why exploring ‘closing half position’ concept.. so far I have not been able to understand the logic behind it..

I’ll appreciate help from all the experienced traders at babypips..

Are you always in front of your computer whenever you trade?
You just have to test several styles consistent with your trading makeup.

Logic behind closing half is 'getting (some) profits' as some here have already said. it puts something in the bank - realized profits as opposed to paper profits.