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Portfolio123 » List all forums » Forum: Simulations and Portfolios » Thread: Profit Taking Rules |
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essam
Advanced Member
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Dear All, What are the best sell rules could be added to lock on gains & profit taking in sims/ports ? regards, isam |
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swheat
Advanced Member  UNITED STATES Joined: Jul 23, 2004 Posts: 32 Status: Offline |
I believe it is better to use a fixed timeframe for exits rather than stops/profit targets. In other words, sell after x days rather than at y% profit or loss. Backtesting I’ve done on many different systems repeatedly confirms this. For stops, you will get an occasional really big loser but on more occasions your losses will come back to close to breakeven. Don’t use profit targets. Let your profits run. Here are the order of exit rules I use: 1.) Rank - If a stock maintains a high rank and is performing then hold it. If it’s rank has fallen, sell. 2.) Hold Time – Give a stock a fair chance to perform after you buy it. I like 180 days but others will suggest timeframes that vary widely. 3.) Profit /Loss percent: If you must use profit targets / stop losses, your profit target should be about ten times your stop loss i.e. 300% profit, 30% stop loss. You should vary your hold time such that most of your trades are within your profit/loss parameters at the end of the holding period. |
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