The methods of taking profit include active profit-taking and passive profit-taking, applicable to different trading styles. Active and passive profit-taking differ in exit strategies due to the indicators used as references. Passive profit-taking refers to the situation where the market does not move as we expected, forcing us to take profits and exit. Active profit-taking refers to the situation where the market moves beyond our expectations, but certain characteristics and signals in the K-line market trend or indicators suggest that the market may soon deviate. Based on these signals and characteristics, we choose to actively close positions and take profits.
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Active profit-taking methods are often used in short-term trading. The logic of active profit-taking is based on the belief that the market has reached support or resistance levels, allowing for profitable exits. Additionally, if the trade has reached our expected profit level and we cannot tolerate too much drawdown, we will actively take profits. Regardless of whether we choose active or passive profit-taking, we will capture some market movements or miss others.
Therefore, both exit methods have their pros and cons, and investors can only choose different exit methods based on their trading style, holding capacity, and varying market conditions.
