I often had great ideas on logicfx where macro, GDP and COTA are perfectly aligned along with technical chart. Trade starts and then within a week or two the macro and COTA will change towards the other direction. Does that mean caution and get out of the trade within two weeks.
Or those metrics ( GDP, COTA & Macro) are meant to be starting point and once you are in trade then we don't need to monitor the fundamental metrics anymore. A great example is NZDJPY. Trade went perfectly well but at starting the metrics were so aligned. Now its COTA is in negative and macro numbers don't support the trade anymore. yet trade is still in massive profit and I am holding on to it. Please advise
Thanks for the wonderful explanation. This discussion board is so helpful. I am glad this question got attention of so many professional traders and I loved your LinkedIn post as well regarding this topic. Thanks for your help and wonderful explanation
Sup Obaid!
Very good question. And there is no 'correct answer' but here's what I'd do in your position running a profitable NZDJPY position:
Decision 1 Check macro scores, and see if a clear strength for NZD still exists in comparison to JPY. Just at a glance, both are showing weaker MCSM scores, so there isn't really much fundamental fuel to keep this trade running for a long-time. Ideally, I'd like to see NZD increasing >0 with JPY decreasing <0 --- then if this was the case do further research with relative factors. But as that is not the case, and both are decreasing, there is no need to look into further relative analysis at the moment.
Decision 2
Considering the lack of fundamental strength, I would scale out of the position. To what degree is a personal preference.
If you're risk-averse close it all, cash in.
If you're risk-seeking, close a portion >50%.
Now if in the next few weeks, price drops, you've made your money, and you can still scale in if fundamentals push in favour of the long again.
Hope that helps. When it comes to profitable trades there is a lot of subjectivity. My general rules are fundamentals determines roughly how long I can hold a position, and if they start to disagree with a current position, it generally means profits are short-lived.
However, if the fundamentals are confirming an existing trade, these are the ideal scenarios to scale in, rather than scale-out.
In fact, what do you think you should do? Here's an anonymous pole for any readers:
What would you do to a profitable trade where fundamentals start to disagree with your initial idea?
0%Scale-out slowly
0%Close the trade
0%Scale-in slowly
0%Double-up (YOLO BBY)
So keen to here the comment and advice from senior members....