[B]AVOID THE SPLIT PERSONALITY[/B]
It is critical to know exactly what type of trader you are before establishing a position. If you commit to a shorter-term trading idea, then it needs to be a short-term trading idea with a defined exit strategy. If however you commit to a longer-term idea, then your stop-loss and take profit need to be appropriately adjusted. One of the biggest problems we see is traders that commit to a short-term trading idea, and refuse to exit once their mental stop-loss is hit. At that point, it becomes a longer-term trade that was never intended for at the start. How many times have we heard “I got in at X price and it is against me but I am not worried because this is a longer-term position.” If you find yourself saying this or if you hear this, you absolutely should WORRY. This is a classic sign of a trader that does not know how to walk away from a losing position, which ultimately will lead to their demise. One of our favorite trading sayings is [B]“All A Long-Term Trade Is……Is A Short-Term Trade Gone Bad.”[/B]
Similarly, those with longer-term ideas, should not be quick to book profits on a winning trade. This will skew trading results and produce an undesirable performance outcome. At the end of the day, the lesson is to avoid the split personality and stick to your initial plan of attack.
[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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