EM FX: The siren song of 'just a little more'

It's easy to get caught up in the narrative, particularly in EM FX where the story often feels so compelling. I remember back in early 2018, there was significant talk about the Turkish Lira and its vulnerability. The domestic political landscape was certainly a mess, and monetary policy was increasingly viewed as compromised. I had a short position in $TRYUSD, decent size, and it was working. The initial leg down was swift, confirming the bias. That's when I made the classic mistake of letting conviction turn into hubris.

Instead of taking profits at a logical support level and re-evaluating, I saw a minor bounce as a gift, an opportunity to add more. The narrative was still strong in my head: this thing has to go lower. And it did, eventually, but not before a brutal consolidation period that ate into my P&L through carry costs and made me question the trade entirely. I ended up cutting the second tranche for a loss and the first for a much smaller profit than it deserved. The lesson was clear: don't confuse being right on the direction with being right on the timing and the entry. Adding to a winner isn't always smart, especially when the initial thesis has played out significantly. Profit taking and resetting is often the better path, letting the market confirm new opportunities rather than doubling down on old ones.