Why It Pays Not To Be Too Greedy In FX

Why it pays to have patience in trading:

– When planning to enter a trade, it’s best to wait to be sure that a trend is in place.

– And when exiting the trade, don’t try to squeeze the last pip out of it.

– Just be happy with the profit you’ve made.

Check out the IG Client Sentiment data to help you trade profitably.

And for a longer-term outlook take a look at our Q2 forecasts.

An example of patience in trading

On April 26 this year, I wrote an Analyst’s Pick suggesting selling GBPUSD, which was trading then at 1.3936. To be honest, I wondered whether I had missed the boat given that the pair had already fallen steeply.

GBPUSD Price Chart, Hourly Timeframe (April 16 – May 17, 2018)

Chart by IG

As a rule of thumb, I reckon missing the first 10% of a trend to be sure it is really in place is a good idea, and in this case I’d missed much more than 10%. However, GBPUSD still seemed likely to fall further, which is why I recommended selling it.

By May 1, happy with the fall down to 1.3629, I recommended taking half the very substantial profits made – not because I thought the decline was over but because locking in a decent profit is always a good idea. Here’s where the pair was trading at the time:

GBPUSD Price Chart, Hourly Timeframe (April 16 – May 17, 2018)

Chart by IG

I then recommended closing the trade on May 15, with GBPUSD at 1.3454. I still reckoned it could fall further but with the pair more than 480 pips lower than it was less than three weeks earlier it seemed best not to be too greedy. Today, it is changing hands at close to 1.35 and I still think it could drop even more.

However, greed is not good and patience in trading is a virtue. Missing the last 10% if it does indeed continue to decline will be nothing to be upset about.

You can find all the details of the Analyst’s Pick here:

UPDATE 2: Close Short GBPUSD Position to Lock in Profit

Resources to help you trade the forex markets

Whether you are a new or an experienced trader, at DailyFX we have many resources to help you: analytical and educational webinars hosted several times per day, trading guides to help you improve your trading performance, and one specifically for those who are new to forex. You can learn how to trade like an expert by reading our guide to the Traits of Successful Traders.

— Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex