Taking profits through the trade timeline

Taking profits through the trade timeline

| Rich Clifford | Blog

Last week, we received a message from a subscriber asking about exiting positions early to take a profit. His question was:

"Should I take profits at any time through the trade timeline, or only at the time of trade alerts? I find there are better profits sometimes 1-3 days after the trade alert has come out. If I wait to close the trade until I receive the next trade alert, I've seen many times profits are gone."

The idea of setting a profit target or taking a profit before a pattern has matured seems like a good idea, in theory. But as we addressed in this article on profit targets, setting profit targets is based on an impossible scenario.

That said, the question brings up another thought. What if, instead of trying to take profits early, we simply doubled up on positions that offered better opportunities as the pattern developed? What if, instead of trying to get out of a position, we added to it and averaged down each entry when possible?   

We tested this with our historical performance (2007-2022) for the S&P, but in all scenarios:

  • Taking better prices 24 hours after our scheduled entry;
  • Taking better prices 48 hours after our scheduled entry;
  • Taking better prices 24 hours before the scheduled entry;
results dropped with 35%, 41% and 38% and weren't compensated by the higher exposure of the doubling up on trades. 

As it turns out, the times and dates we enter are rather important.They may not always be the best entry visually and they are certainly never going to be highs and lows. But to a couple of mathematical theories, an enormous amount of data and some pattern recognition software, our entries and exits make perfect sense. And most importantly, our programs see something we simply cannot. Fractals.