Taking Profits from the Stock Market

Introduction

The stock market is a business; you cannot forget that. You are your own boss, yes, (really Mr. Market is your boss) so what exactly does that entail? Well, it means a few things, many of which make trading an attractive field. Tag this flexibility alongside the opportunity to make a decent living. This is exactly why being successful in the stock market is so desirable. Let’s take a look at what it looks like to be your own boss in the stock market:

Create your own schedule
Set your own rules
Identify your risk (and reward) for each trade
Autonomy
Payroll

Cue paying yourself as a day trader. How do you withdraw profits in the stock market? Is there a set way? Does this even matter? We will answer these questions and more shortly, but it’s important to keep in mind that as a business owner there is one question you need to ask yourself: are you going to pay yourself or reinvest? While there is a mix between the two, it’s important to understand why you need to bucket your profits in these two categories.

Profits are nice because you need money to live. Especially if day trading is your full-time gig. Even if you are a part-time trader, most traders don’t plan to hold on to positions for a lifetime; that strategy is mostly reserved for investors. As for reinvesting, you have to believe that more money in your account will provide you with more growth to an extent. That is a general rule and needs to be taken lightly with trading options, as you don’t need a lot of money to make decent gains, so take that statement with a grain of salt.

If you are trading full-time you should be in a place to where you make enough to live off of each month and then some. If you are not to this place, then I do not recommend at all trading full-time. As a disciplined trader, you need to be confident in your ability to extract gains from the stock market. With that said, taking money out of your account may be tough, and that is exactly what we are going to discuss: three different methods for withdrawing funds from your trading account. Although I have mentioned “full-time” trading a few times, these methods are applicable to part-time traders, as well.

Fixed Withdrawals

One straight forward method to taking profits from your trading account is by taking either a fixed dollar amount from your trading account or a fixed percentage on a regular recurring basis. While a fixed dollar amount withdrawal provides a “known income” that puts too much pressure on yourself to make a certain dollar figure each month to “meet your quota”. Trading is challenging enough and having a set goal in your head is one way to easily shift your mindset from good trading to PnL.

That brings us to a percentage withdrawal. While this does address the “profit goal” mindset, this brings us to another major problem – what happens if you make no money or lose money during your fixed withdrawal interval (i.e., weekly, monthly, annually, etc.). Are you going to withdrawal money and make your account smaller?

Where does that leave us? This is the first of many tough decisions a trader will have to make. While regular income does sound nice and is sometimes needed. That may actually lead to your downfall as a trader, because as mentioned above, it will be easier to shift your focus from good trading to strictly profits. This mindset is horrible for a trader to have as it’s a lose-lose.

Let’s say you see that you have a $1,000 gain on a trade and think “Wow! This is perfect for my monthly profit goal.” What could happen after? The trade could continue moving in your favor. You may kick yourself for bad execution, but what’s worse is you left a ton of profits on the table. Additionally, what if you there has been no reason to exit, but you peek at your PnL and see that you are down $300? You may think to yourself “Oh no! I don’t want to lose that much money.” What could happen next? There was never a reason for exit on the chart and that trade could very much have been a winner.

Yes, there is a chance that you exiting a trade early either when you are in the green or red could be to your advantage. However, you need to engrain in your head that profits are a far second place in trading. Good execution leads to good profits. Read that again. How do we know this? Simple – look at your edge. Your edge is based on good execution; it is not based on exiting a trade early (i.e., bad execution).

Account Goals

A slightly better approach to taking profits from your account is only withdrawing profits after you hit an account goal. Whether that account goal is fixed or percentage based is up to you. For example, let’s say you have a $25,000 account and will only take out money once you “make” $10,000 on your account. Then you withdraw the $10,000 and start over.

Now, let’s look at what withdrawing from a percentage standpoint looks like. Let’s say you have a $25,000 account, and will only take money out after your account grows 200%. Then, you will take out your profits and start over. While it may look like these two scenarios are one in the same – they are not. Having the mindset of fixed vs percentage is a large differentiator. Why? We will discuss that soon.

While this provides no regular schedule for taking profits from the stock market, it does take away the pressure of feeling like you have to make a certain amount of money within a fixed time frame. An account goal method has one major limitation – how do you know if you are becoming a better trader? This leads to a second question – will I make the same amount of money my entire trading career?

Account Goals Refined

To address the above concerns, we can move to a refined account goals approach, and this is where the mindset of fixed vs. percentage comes into play. In this method of withdrawing, your mindset needs to shift completely to percentages. You need to have a percentage goal from an account growth perspective, and a percentage withdrawal in mind. This allows you to not focus on profits and shift your mind to growth in your trading.

Looking at this method further, we will again start with a $25,000 account and an account goal of 200% growth. Once your account reaches this level of growth, you withdraw 50% of your account and continue the cycle. 200% account growth means the $25,000 account is now at $75,000, and 50% of $75,000 is $37,500. Now, a 200% account growth goal on a new starting account balance of $37,500 is $112,500; you get the idea.

What’s ideal about this approach is you can hit a “growth slump” in your trading career and still make more money. Further, you can push yourself to becoming a better trader by increasing your percentage account growth goal. While this does still hold the limitation of “guaranteed recurring income” that is part of trading in my opinion. You need to account for this and understand that is part of the risk of being involved in the stock market. Think of a realtor or a salesman – they don’t get paid unless they close a deal. The stock market works the same way – you don’t get paid unless you trade well.

Conclusion

There’s no universal rule for pulling money out of the stock market (and I am sure there are more approaches than what I have mentioned above) because everyone’s situation is different. Some people need steady withdrawals for income, while others prefer to continually reinvest. Your approach should match your goals, risk tolerance, and overall financial plan.

The key is to be intentional – whether you’re taking profits regularly, withdrawing when needed, or reinvesting for compounding growth. Markets change, and so do your priorities, so staying flexible is important. As long as you have a strategy that makes sense for you and keeps you financially secure, you’re on the right track.

Published on March 31, 2025