I wanted to show you how to read and interpret the Closed Trades so you can see how the Targets work, and understand the Closed Trades table (track record).
Notice the maxprice column compared to the target column.
The way it works is this – the maxprice column shows how high the stock ran (the maximum price) before the trade got closed, so if the maxprice is greater than the target – the trade “hit the target”.
The Target is where you take profits.
There are a couple different ways to use the targets, but our baseline strategy is to take 1/2 the position off at the target and let the other 1/2 ride using the Trailing stop (tstop). Many of the stocks you will see cycle through the system will move substantially higher than the target over time.
You can see that on the image above.
Also notice that on several of the stocks, the tstop (Trailing Stop) was ratcheted-up beyond the Target price, so in those cases you would be able to squeeze extra profit out of the trade, rather than just selling it all at the target. On the trades that get really good follow-through, we see the trailing stop eventually surpass the target.
There are also cases where the stock hits the Target but then pulls back and hits the trailing stop at a level below the Trigger. Under those circumstances you would see a loss in the Min column – because a trade only gets closed when it hits the tstop (not the Target). So in real-life trading you could have potentially sold a position at the target, but the Closed Trades “Min” column shows it as a loss. (That’s another reason you want to lock-in partial gains at the target.)
Two of the stocks above, FB and CVI got closed ahead of their earnings release.
This is the one exception to only closing trades when they eventually hit the tstop.
One important strategy we use with our system is that we close Open Trades ahead of the company’s earnings release. We do that for a number of reasons, but primarily because holding over earnings is a “crap-shoot”. We all see the wild gap ups and downs and see the crazy price action that happens when a company releases earnings and from a risk-management perspective it just doesn’t make sense to hold over earnings. There’s just no “edge”.
Reading the Closed Trades table
The first 4 columns in the Closed Trades table are self-explanatory – symbol, company name, entry date and closed date.
The Trigger price may not be what you are used to – because we wait for a daily close over the Trigger to get in. That’s our buy signal. You can take an entry the following morning as long as the stock is trading over the Trigger price – or you can set a limit order to get filled at the Trigger price. Generally speaking we don’t sweat the nickels and dimes as far as getting in a little over the Trigger.
You can adjust the Target to compensate if you buy in over the Trigger. So say a stock closes over the trigger today, then tomorrow morning when you’re ready to get in, it’s fifty-cents over the Trigger. Simply add fifty-cents to the Target – set your Limit Order to sell – and you’re good to go. You can see above how that would have worked out just fine.
The tstop column (trailing stop) is what you will monitor closely on a daily basis. When a trade is on the Open Trades table, the tstop can adjust on a daily basis – it ratchets up continuously. There are only 2 ways a trade gets closed (sold) – the day before earnings or when it hits the tstop. Outside of earnings season all trades get closed when they hit the trailing stop (not when they hit the Target).
The min column shows the distance the price moved (in percentage terms) from the trigger to the tstop. This is the minimum gain you would achieve if you bought at the trigger and sold at the trailing stop. It does not account for profits locked-in at the target (or parabolic stops).
The maxprice is the highest price a stock reached while it was an open trade. We obviously don’t expect to be able to sell at the exact high and that’s not what we set out to do anyway. The maxprice basically measures the follow-through and comes into play when we are locking-in profits at the pstop (Parabolic Stop) which shows up when a trade is still open.
The max column is the maximum percentage the stock moved over the trigger price. The closer the tstop is to the max, the more of the gain we were able to bank before the momentum faded and the stock pulled back to hit the trailing stop.
As I mentioned above, there’s another important level that gets calculated, the pstop. Basically the pstop kicks in when a stock has a substantial run-up and can be used to protect profits much closer to the maxprice.
The back-end system that drives everything uses technical analysis, math, computations and programmed logic – however “trading along with our system” is very flexible. That’s what makes it so great. You have a “trade plan” and all the details are “quanted out”, but you have flexibility when it comes to taking the trades and deciding how to take profits in real-life.
You can choose your own level of “aggressiveness” depending on your personal situation and how much time you have to manage your trades and how closely you want to monitor them.