Using Time Instead of Targets

Mar. 10, 2021

Buying-and-holding is the most popular trading strategy.

Even though research shows it’s not the most effective.

Not by a long shot.

The problem lies in the name itself. Buy-and-hold until…when?

If the answer is forever, then you might be Warren Buffett. Even though Buffett doesn’t hold forever.

There is no end date to buy-and-hold, so profits are given back and accounts are ruined.

Nothing has ruined more accounts than holding on.

So, what do we do?

The first answer is to put a target on it.

Putting a target on instruments works.

It makes money when things don’t go straight up and, many times, makes more money than holding something that goes on a big run.

But, sometimes, targets don’t have to be targets.

Sometimes, targets can be the passage of time.

The problem with numerical targets is that there’s a limit to the upside. Trend followers will happily tell you this until your ears bleed.

To fix that problem, we can use timed exits. We just get out when time is up.

Trades almost always have a duration. Nothing lasts forever. So we can just end our trade after a certain amount of time.

If we do that, our upside has no limit while we keep our stop the same.

Interesting theory, yes?

Let’s see how it works.

Here’s a system we talked about last week using the Bollinger Bands™ with extreme settings (watch the video on this system HERE). It uses a 100 Length and a standard deviation of 3. Break-even at 60 pips and stop at 260.

This time, though, we don’t have a target and simply exit Long trades in 5 days and exit Short trades in 12 days.

Will it work?

On the GBPJPY 1-Hour chart, it did okay (trading 1 lot each time):

See it here also.

It made a nice amount of profit — and we didn’t do any optimizing. We just took the target off of a system we’ve already discussed.

Maybe there’s something to these timed exits.

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.