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?

  1. 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.
  2. 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.
  3. 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). 
At present I am using a combination of 2. and 3. I am inclined to keep holding if there is a story playing out, but I will exit if the market starts to mess about or the story is getting old. Generally this will make sense, but sometimes I will miss a big trend. If I get a good entry, should I take that as an argument to hold out for a major trend?
Another question, which is relevant today, is to what extent I should take profits on a portfolio basis. Sometimes there are a couple of trades with a little profit, and one with a decent amount, and your total equity starts to look quite good. Is that the time to close the whole lot? In other words, should I trade to a profit objective, or will I do better to follow exit rules trade-by-trade?
I am moving forward slowly with TradeStation. That will give me the ability to test some of these methods, although I do not yet know how flexible it will be.
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