Optimizing Exits and Scratching Trades

2021 is off to a good start. I don't want to get overconfident or anything as we're still early, but being stringent with my entry criteria has helped me reduce taking suboptimal trades.

Volatility remained relatively low in the first half of January as most of my trades flipped-flopped around the +/- 1R area. However, I did catch a nice move on GBPCAD. This is one of the two pairs that will be the highlight of this post.

For GBPCAD, there was a nice structural move and I timed my entry well. However, I think my exit could've been further optimized. Rather than holding the trade, I ended up closing it out fearing that it wouldn't hit my desired profit zone.

GBPCAD 1-Hour

Here's a close-up of my trade where the buy and sell arrows marked my entry and exit. I got out as soon as price slowed. In hindsight, this was definitely premature as price eventually did go to my desired zone.

Optimizing my exit is still something that I have to work on. After reviewing this trade, I think that my exit criteria can be outlined below. While I wouldn't necessarily say that this must be rule-based, there are a few key mental notes that I continuously have to continuously keep in mind when managing a trade.

Understanding the type of price weakness. If there are strong bullish bars followed by weaker bearish bars, this is an indication that some long positions are being closed out. However, the lack of selling pressure would indicate that price is still being held supported by fresh volume. It could also mean that there aren't any large offers resting.
Less aggressive selling is likely to occur if price is trading between major levels. If everybody is more or less plotting the same support and resistance zones, we shouldn't be too concerned about a mid-range direction change. It's definitely possible if there's an unexpected high-impact news event. Under normal circumstances, we can be reassured that concerns of a reversal tend to rest at key levels.
When looking to exit, we are essentially looking for signals indicating opposite strength. In this situation, I essentially should be looking for sell signals as if I were to enter a new trade entirely. Sell signals weren't apparent until price hit my profit target.

While the entry criteria is outside the scope of this post, I have attached a chart below regardless. Largely for my sanity as I may need to reference why I entered this trade in the first place.

GBPCAD 1-Hour

The second trade was selling into USDJPY. I took this trade on a rather minor level, which didn't end up holding.

USDJPY 1-Hour

Price went against me, but it did go in my favor very briefly. Rather than closing out this trade for a very small profit, I decided to try and ride it even though the bearish momentum was lacking. There's no other way to say it, but I got greedy.

My takeaway here is that scratching a trade is sometimes a necessity. I should be closing out a trade regardless of the open P&L when I sense that the signal has changed. If I can scratch it without a loss, that'll simply benefit me. I could always re-enter when the signal comes back, even if it does mean that the entry is at a less favorable price. In this situation, confirmation over uncertainty is worth it.