Abstract — This article operationalizes a timeless trading maxim. We turn “cut losses, let winners run” into auditable rules: pre-committed exits, volatility-scaled sizing, drawdown governors, and profit release that protects P&L while preserving trend exposure—conditioned by liquidity and macro regime.

TL;DR (actionable)

• Losses: exits are price-defined (level/MA break) or time-defined (no progress), not opinion-defined.
• Winners: trail stops mechanically and scale out only when momentum rolls or risk bands breach—not because gains “feel big.”
• Context: allow more patience in expanding liquidity; cut gross and shorten horizons in contraction.

1) Why most traders invert the maxim

Loss aversion and mean-reversion bias encourage adding to losers and taking profits early. The fix is pre-commitment: define exits and profit management before entry, and automate where possible.

2) Pre-trade: define exits and size

• Price stop: a clear level (MA/structure) that invalidates the thesis.
• Time stop: if price fails to progress within your horizon, reduce/exit—opportunity cost is risk.
• Volatility-scaled size: target risk parity across sleeves; shrink when realized vol rises.

3) Cutting losses: rules that actually fire

• Level/MA break: close beyond your invalidation level triggers exit—no second chances.
• Drawdown governor: automatic book/sleeve gross cuts when loss thresholds breach (e.g., −5% sleeve, −8% book).
• Funding-stress override: if plumbing deteriorates (spreads/basis/haircuts), de-gross regardless of P&L.

4) Letting winners run (without giving them back)

• Trailing logic: trail a stop (MA or structure) that only moves in the direction of profit.
• Scale-out on weakness, not strength: take partials only on momentum roll/MA break; keep a core otherwise.
• Profit bands by liquidity: loosen bands when liquidity expands and vol compresses; tighten in contraction.

5) Liquidity & regime as the governor

Liquidity compresses/expands risk premia and determines how long trends run. We cap or expand gross/net and adjust profit bands based on a three-channel composite (policy, bank credit, market plumbing).

6) Implementation by sleeve

• Equities: entries via momentum + breadth; exits on MA break; staged profit-taking on rolls.
• Rates: align with regime (reflation/disinflation); use curve levels for invalidation.
• Credit: stop on spread regime shifts; watch primary/flow for confirmation.
• FX & commodities: combine momentum with carry/term structure; calendar structures to manage roll risk.

7) Checklists

Before entry

• Price stop set? Time stop set?
• Vol-scaled size within sleeve risk budget?
• Liquidity composite allows planned gross/net?

While in the trade

• Has momentum rolled or MA broken? (exit/scale)
• Have drawdown governors or event guardrails triggered?
• Funding stress or correlation cap breached?

8) Where the maxim fails (and safeguards)

• Chop & whipsaw: use higher-timeframe filters; accept smaller size.
• “Cheap gets cheaper” traps: time stops prevent anchor bias; wait for price confirmation.
• Late-cycle blow-offs: liquidity dominance can extend trends; exits must be mechanical.

Conclusion

Edge compounds when losses are small and certain while wins are large and uncertain. Pre-commit exits, trail stops, scale winners on signal not feeling, and let liquidity govern patience. Discipline—not prediction—protects capital and lets the book run.

Compliance: For informational purposes only; not investment advice or a solicitation. Past performance is not indicative of future results.