3.4 The Next Day, 24 Hours Later

During the night the tide turned against the Dollar. After starting off positive, our USD/JPY position has now turned negative.

USD/JPY - October 25, 2006 - 11:30 AM

There were several stretches of time when we could have broken even on our position. The horizontal red line is the point at which we opened our position, so whenever the candles cross the red line it is a point where our position would have broken even. Even though price seems to be moving sideways, there seems to be a new downtrend forming which would be bad news for our position. We had one last chance to close the position and break even 4 candles (or 2 hours) ago.

Now the pair shows a (-21) pip loss on our position. If your analysis seems to have faltered, it is time to re-evaluate a trade. Don't get fixated on a given position as you want to cut your losing trades and ride your winning trades. The mentality that "price will come back to the level at which I opened the position" is dangerous.

On the other hand our EUR/USD position is gaining traction. We should see what our goals were before opening this position and re-evaluate if this is a good place to close the position.

EUR/USD - October 25, 2006 - 12:00 PM

As mentioned before one should let their winning positions keep gaining. However as a short term goal, if +20 pips is what you were looking for then it may be time to close the position. If we are favoring the Euro in the near term future, we would keep holding the position.

We will hold both positions to show what happens next.