Thank you Eganon for the thoughtful reply.
To clarify a few things:
1) My goal is to completely remove discretion. The entires/exits shown above are from an indicator I built. My idea was that buy and hold would be preferable, but I'd like to take some of the risk of major drawdowns off the table, and cut out the "in-between" time of the roller coaster.
2) The exits are not a percentage of the original position. They are a flat $15,000 chunk. The exit triggers typically correlate with overbought conditions and a break in an uptrend. Again, all done via indicators, not TA on my part.
So, walking through a typical trade, I enter with a $60,000 position when my indicator signals the start of a new uptrend. The stock typically moves up to overbought territory, when the short term uptrend is broken, a sell signal occurs. So I take $15,000 off the table, but the unrealized gains made on the trade and the other $45,000 are still in the position, riding out the move. This process is repeated for each red (sell signal). The more sell signals that are triggered, the more extended the stock is (typically). Which means I'm taking more of the basis off the table in case of a trend change.
Look at Apple from 2006 through 2007. During that run up, there were 7 profit taking signals. Each of these signals would have taken $15,000 out of the position, but the unrealized gains would still be riding the wave until enough $15,000 sell signals occured. But, instead of facing the huge downturn with my full $60,000 position, plus the unrealized gains it had made during the run up, my position at the 2008 drop would have been substantially smaller. Leaving me with a far smaller drawdown than if I'd just bought and held.
The reason for the profit taking is to lock in some gains in case of a drop. But remember, the unrealized gains from the up move are still left in play. I'm not trying to set records here, I just want 15% a year without any huge loses.
The point of the entries and exits are just to make buying and holding more efficient. These are companies I want to own for the mid-long term. But I don't want to wait two years for a 30% move (the result of ups and downs) when I can capture 15% moves every few months, then re-deploy that capital in another stock when a buy trigger is signaled.
3) I have no stops. In all former technical strategies I used a hard stop. However, these are companies I want to own long term. They're fundamentally fantastic, so I'm willing to wait for them to turn around if they dive a bit. But with my scaling out, the drawdowns are typically far smaller.
4) You mentioned "ideal exits to max profit and exit entirely". I can't play that game. This has to be a zero discretion system. I can't pick and choose which exits I think are better than others. It has to be all or nothing.
Hopefully that clears it up a little. Thanks again for your insight, I appreciate you taking the time.
To clarify a few things:
1) My goal is to completely remove discretion. The entires/exits shown above are from an indicator I built. My idea was that buy and hold would be preferable, but I'd like to take some of the risk of major drawdowns off the table, and cut out the "in-between" time of the roller coaster.
2) The exits are not a percentage of the original position. They are a flat $15,000 chunk. The exit triggers typically correlate with overbought conditions and a break in an uptrend. Again, all done via indicators, not TA on my part.
So, walking through a typical trade, I enter with a $60,000 position when my indicator signals the start of a new uptrend. The stock typically moves up to overbought territory, when the short term uptrend is broken, a sell signal occurs. So I take $15,000 off the table, but the unrealized gains made on the trade and the other $45,000 are still in the position, riding out the move. This process is repeated for each red (sell signal). The more sell signals that are triggered, the more extended the stock is (typically). Which means I'm taking more of the basis off the table in case of a trend change.
Look at Apple from 2006 through 2007. During that run up, there were 7 profit taking signals. Each of these signals would have taken $15,000 out of the position, but the unrealized gains would still be riding the wave until enough $15,000 sell signals occured. But, instead of facing the huge downturn with my full $60,000 position, plus the unrealized gains it had made during the run up, my position at the 2008 drop would have been substantially smaller. Leaving me with a far smaller drawdown than if I'd just bought and held.
The reason for the profit taking is to lock in some gains in case of a drop. But remember, the unrealized gains from the up move are still left in play. I'm not trying to set records here, I just want 15% a year without any huge loses.
The point of the entries and exits are just to make buying and holding more efficient. These are companies I want to own for the mid-long term. But I don't want to wait two years for a 30% move (the result of ups and downs) when I can capture 15% moves every few months, then re-deploy that capital in another stock when a buy trigger is signaled.
3) I have no stops. In all former technical strategies I used a hard stop. However, these are companies I want to own long term. They're fundamentally fantastic, so I'm willing to wait for them to turn around if they dive a bit. But with my scaling out, the drawdowns are typically far smaller.
4) You mentioned "ideal exits to max profit and exit entirely". I can't play that game. This has to be a zero discretion system. I can't pick and choose which exits I think are better than others. It has to be all or nothing.
Hopefully that clears it up a little. Thanks again for your insight, I appreciate you taking the time.
