In the presentation last night, Ben presented the idea that you should
follow a systematic process when you acquire a position in a
And, he advocated that you be systematic about how you exit that position.
His example exit was stop-loss and take-profit which he diagrammed on
I like another exit strategy which I call "holding-period".
It is not any better or worse than Ben's strategy, it's just different.
It is similar to Ben's example strategy in the respect that it is not
tied to your sentiments or fears.
An example of the holding-period exit strategy is:
"After I acquire 100 shares of IBM, I will hold it for 20 trading
days. Then, 1 minute before market close on the 20th day, I will sell
those shares for the currently bid price."
Why do I like holding-period-exit-strategy?
- It disconnects my terror and greed from the exit decision
- It is easy to model and backtest
Remember what Ben said about backtesting?
Here is my opinion which is similar to Ben's.
Any trading you do should be backed by the confidence of testing
(using historical or suitably simulated price actions).
If you want to see some examples of backtests using the
I offer these URLs below: