what does lock in profits mean 
locking in profits refers to the realization of previously unrealized gains accrued in a security by closing all or a portion of the holdings when an investor holds an open position they may accrue unrealized or paper gains or losses that aren t realized until the position is closed an example is when an investor that s long on a security can lock in profits by selling their stake for a gain by doing this they are no longer subject to changes in the underlying also known as realization or taking money off the table understanding lock in profitstraders and investors may lock in profits for many different reasons but often times it s to reduce risk long term investors may lock in profits to maintain their portfolio balance for example an investor may have started with a portfolio divided equally among five funds if one fund outperforms its portfolio allocation might grow from 20 to 30 which exposes the investor to added risk the investor may lock in the profits for a portion of the outperforming fund and redistribute the proceeds among the other four funds to maintain an ideal portfolio allocation that minimizes risk and maximizes profits short term traders often lock in profits to generate income and reduce risk for example a trader may open a long position after a bullish earnings announcement with a series of price targets after the stock reaches the first price target the trader may lock in profits for one third of the position and continue to hold the other two thirds of the position until a higher price target is reached this way the trader is taking some money off the table and reducing their risk if the stock were to suddenly turn lower traders set price targets to lock in profits using various forms of technical analysis such as technical indicators or chart patterns whereas long term investors may lock in profits based on asset allocations or risk tolerance example of locking in profitssuppose that you purchase 100 shares of acme co for 12 and the price went up to 36 two days later all potential profits are unrealized because the position isn t partially or fully closed if the stock moves lower your profits will dwindle and vice versa if it goes higher you may decide to lock in the profits by selling 50 shares because 50 x 36 1 800 even if the stock ends up dropping to 1 you will have still made a profit in other words locking in profits made it possible to play with house money in the investment investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 