This was a good trade. I shorted it on a good technical signal with a fundamental story behind it, and held it until there was a good reason to sell (chart rolling over). I didn’t sell at the local minimum, but I got out before a rebound that would have been painful. The cross on the chart shows my exit level, and the upper line shows my entry.
Every time you climb to one summit in trading, you find there is another behind it. As I get more confident in certain rules for entering positions, exiting them becomes the pressing problem. In particular, which of the following methods will work out best in the long run?
- Exit trades when they move stronly in your favour (in this case, on Mar 1). This will generally mean that you exit earlier, but you could make a bigger profit.
- Exit trades when they look to be in danger of reversing, but don’t try to catch the top/bottom. This is what I did here. Doing this keeps you in a trend for longer.
- Exit only when the fundamental story has played out. I wanted to be short GBP because of the general election and the end of QE. These stories were still playing out when I exited, and the GBP could still make a move lower — like cocoa in the chart below, which I shorted around 3400 and closed out around 3050 (chart from timingcharts.com).