Closing early "to lock it in": the premature take profit

Selling as soon as your position turns green — "+5 cents and I lock it in" — seems prudent. We simulated it on 222 real entries from one of our systems: every early exit lost more than holding until settlement.

What the simulation measured

We valued each entry by selling at the real bid price at the moment the profit reached each threshold, with its selling fees, against holding until the close. Result per contract:

The sample itself was a loser (holding gave −3.0¢), and even so every exit threshold made the result worse. The most tempting exit, the +5¢ one, was among the worst. An earlier audit of another of our systems pointed in the same direction: early exits performed worse than holding positions until their settlement.

Why it happens

• You sell at the bid price, not the one you see shining on screen: the spread stays on the way, and you pay a second fee to exit.
• You cap exactly the good ones. The intermediate green moments are, in large part, the windows that were on their way to paying in full: you sell those at +5¢ and you stay fully in with the ones that fall to zero. You cut the flowers and water the weeds.
• The ones going to zero almost never give a green exit: "locking it in" does not protect you from the damage you imagined avoiding.

The honest nuance

Closing early is not a sin: it is insurance, and insurance costs. If your initial reading is completely invalidated, exiting limits a concrete harm; in our simulation, that insurance cost on the order of 2¢ per contract on average. What it does not do is make money: use it knowing its price, not as a reflex every time you see green.

The full series

This page is part of the Money-Losing Strategies series, where we cover the traps we have tested and measured in our own systems. And if you want to see how a system that avoids these traps performs, the full history — failures included — is in the public statistics.