Ask my subconscious self why I exited my position "early" today and he might tell you that it was due to fear.  Ask me why and I'll tell you that it was not fear but a necessity to boost my psyche.  Let me explain why.  

I measure my performance month to month.  I may have gained 7% in January and 10% in February but to me, March is a whole new month.  So when March 1st came, in my mind, I was at 0%.  I like measuring this way for two reasons.

1. If you had a bad month, it gives you a chance to reset and start over from 0.  Why carry over the loss and put that additional pressure on yourself to "get it back."  Technically, you are still down compared to the previous month but I think it just puts you in a better state of mind.  On the flip side, if you had a profitable month, why risk the chance of instilling overconfidence or invincibility.  Reset.
2. A month typically gives you enough time to come to that average win/loss percentage.  Measuring week to week is too short. What if you had only one trade.  This wouldn't accurately reflect your overall trading performance.  Measuring longer than month to month and you might miss the chance to assess your trading before it's too late.  End of month performance assessment can lead to important changes that may improve your trading.   

So why did I exit my position early this morning? I entered a long AUD/USD position yesterday with the intention of holding until I obtained at least a 200 pip target but the pair shot up nicely this morning and I was quickly up 100 pips.  I exited here for one reason, to kick the month off on a positive note.  This was important for my confidence going forward this month.  Exiting a forex position is also a good idea if you're stuck in a losing streak.  Why risk the chance of losing the profit and losing even more confidence? Take the profit and put an end to the losing streak. 

Check out these other forex blog posts.

1. Forex Trading Profit Up 9.6% In February
2. How Many Times Have You Exited a Position Early?
3. Forex Trading in the Black
4. The True Test
5. Six Percent Loss This Week

Read or add comments about this item.

No. 1 :

It's turned out to be a wise decision.

Another tactic you could also employ is to close half of your position at say 100 points profit and let the other half run, moving your stop loss to your initial entry so it's effectively a free trade.

Submitted by James Woolley • 2008-03-04 05:48:45

No. 2 :

I think that is a better alternative to move you stop loss up as the currency is trending up.

Submitted by Carl • 2008-03-04 09:43:27

No. 3 :

Carl, yes, another good option.

Submitted by Rich • 2008-03-04 10:04:15

No. 4 : well

Nice site. just found it.

But...it was fear ;) Below you are explaining your fear
--> not being able to kick off on a positive note
--> not being able to get confidence up
--> afraid of loosing streak to continue

"I exited here for one reason, to kick the month off on a positive note. This was important for my confidence going forward this month. Exiting a forex position is also a good idea if you're stuck in a losing streak. Why risk the chance of losing the profit and losing even more confidence? Take the profit and put an end to the losing streak. "

Sorry for being picky, just that I used to be very good in fooling myself, I still am...so my hobby is to get myself nailed.

Good luck with your project and greetings from Finland

Submitted by firmania • 2008-03-12 14:03:48

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