Smart Risk Management: How to Lock in Profits While Staying in the Game

Here's a truth most traders learn the hard way: making money and keeping money are two completely different skills. You can have the best entry in the world, but if your position management is sloppy, you'll watch those gains evaporate in a single candle.

I want to walk through how I actually manage positions after they go in my favor, using a real Bank Nifty trade as an example. This isn't theoretical stuff. This is what I do every single time.

The Setup: A Real Bank Nifty Trade

Let's say I go long on Bank Nifty futures at 51,200. My analysis shows a clean breakout above a consolidation range, with a target zone around 52,400-52,700 (roughly 2.5-3% above entry). My stop loss is at 50,800, giving me a risk of 400 points.

With one lot of Bank Nifty (15 units), that's:

• Risk per lot: 400 x 15 = Rs 6,000
• I take 4 lots, so total risk: Rs 24,000
• Target at 52,400: 1,200 points x 15 x 4 = Rs 72,000

Risk to reward of roughly 1:3. That's a trade I'll take every time.

Now, the market moves in my favor. Bank Nifty hits 52,000, up 800 points from entry. I'm sitting on an unrealized gain of Rs 48,000 (800 x 15 x 4). This is where most traders mess up.

The 50% Reduction Rule

When I hit my first milestone, roughly 2% gain or halfway to my target, I exit half my position. In this case, I close 2 out of 4 lots at 52,000.

Let me break down the math:

• Profit booked on 2 lots: 800 x 15 x 2 = Rs 24,000 (locked in, no one can take this)
• Remaining 2 lots: still running with 800 points of unrealized profit

Here's the critical part. I now move my stop loss on the remaining 2 lots to breakeven (51,200). What does this mean in practice?

Worst case from here: I keep the Rs 24,000 from the exited lots, and the remaining 2 lots get stopped at breakeven for zero loss. Total outcome: +Rs 24,000.

Best case: The remaining 2 lots hit the full target at 52,400, adding another 1,200 x 15 x 2 = Rs 36,000. Total outcome: +Rs 60,000.

I've turned a position where I could have lost Rs 24,000 into one where my worst outcome is a Rs 24,000 profit. That mental shift is massive.

Why Not Just "Let It Ride"?

I know what some of you are thinking. "But Mohit, if you'd held all 4 lots to the full target, you'd have made Rs 72,000 instead of Rs 60,000. You're leaving money on the table."

Sure, on paper. But here's what the "let it ride" crowd doesn't talk about.

Markets don't move in straight lines. That Bank Nifty trade at 52,000? It could easily pull back 300-400 points before continuing higher. If I'm holding all 4 lots through that pullback, my unrealized P&L just dropped from +48K to +24K. That swing, watching 24K disappear in real time, does something to your psychology. You start second-guessing. You start wondering if the trade is reversing. You tighten your stop too much and get shaken out right before the real move.

I've been through this enough times to know: protecting gains is not the same as being scared. It's being smart. The best trade I never take is the one where I give back a winning position because I got greedy.

Let me put it another way. Over 100 trades, the "let it ride" approach might give you slightly higher gross returns. But the scaled exit approach gives you dramatically better consistency, lower drawdowns, and honestly, way better sleep. When you're trading with your own money, not hypothetical backtested capital, consistency matters more than maximizing every single trade.

Trailing Stops: The Second Layer

Once I've reduced to half position and moved to breakeven, I switch to a trailing stop mechanism. I don't use a fixed-point trail. Instead, I trail based on structure.

What does that mean? As Bank Nifty moves higher, I identify swing lows on a 15-minute chart. My stop moves up to below each successive higher low. So if Bank Nifty runs from 52,000 to 52,200, pulls back to 52,050, then pushes to 52,400, my trailing stop moves to just below 52,050.

This way, I'm not getting stopped out by normal market noise, but I'm also not holding through a genuine reversal. The market itself tells me when the trend is broken.

If the trade keeps running and blows past my original target? Great, the trailing stop keeps me in. Some of my biggest winners have come from trades where the initial target was 2% but the actual move was 4-5%. The trailing stop let me ride those without having to make a discretionary decision about when to exit.

Common Position Sizing Mistakes I See

Mistake 1: Adding to winners too aggressively. You're up on a trade and you think "this is working, let me add more." Now your average price is higher, your stop is tighter relative to your new position, and a normal pullback wipes out all your gains. Adding to winners can work, but it requires a completely different framework. Don't do it casually.

Mistake 2: No predefined exit plan. If you don't know where you're taking profits before you enter the trade, you'll make that decision emotionally when your P&L is flashing green. Emotion and exits don't mix.

Mistake 3: Moving stops in the wrong direction. Your trade is 200 points in profit, but you move your stop further away "to give it room." You just increased your risk on a trade that's already working. This makes zero logical sense but I see traders do it all the time.

Mistake 4: Same position size regardless of setup quality. Not all trades are equal. An A+ setup with confluence from multiple timeframes deserves more size than a C+ trade you're taking because you're bored. I vary my lot count between 2 and 6 depending on conviction. My best months have come from sizing up on the best setups, not from taking more trades.

Mistake 5: Ignoring context near major levels. If Bank Nifty is approaching a major resistance zone and you're sitting on open profits, reducing position size isn't optional, it's mandatory. The probability of a clean breakout vs. rejection at major levels doesn't favor holding full size. Take some off, let the rest play out, and re-enter if the breakout is confirmed.

The Boring Truth About Profitable Trading

Effective risk management isn't exciting. There's no adrenaline rush in closing half a position for a modest gain. Nobody posts "I reduced risk and locked in profits" screenshots on Twitter.

But here's what I've learned after years of trading futures. The traders who survive and compound aren't the ones with the biggest winners. They're the ones who rarely have catastrophic losers. Position management is how you achieve that.

The goal isn't to maximize every single trade. It's to stay in the game long enough for compounding to do the heavy lifting. Protect your capital, protect your gains, and let the math work in your favor over time.