and when do we decide that we should get out and ready ourselves for another
trading opportunity?
As is the case with the end-of-event exit, the slow-trade exit also can be
based on some intermediate target in time or price. For example, if the trade has-
n’t moved into positive territory or reached a certain profit after one quarter or one
third of its expected life span, it could be cut. Had we kept it open, it might have
taken off eventually, but so can any other trade we can enter with the money from
this one. And while all other future and so far untaken trades haven’t proved them-
selves in any way, at least this one—the slow one we’re just about to exit—has
proved itself exactly that: a slow one. Consequently, you probably stand a better
chance entering into another market instead, or exiting and waiting for a new entry
signal in this market. In a short-term system, you could use the slow-trade exit the
same way as the end-of-event exit. If the event behind the move hasn’t proved itself
within the time frame during which it should have done so, then it’s time to exit no
matter the outcome.
This is also an important question to ask if you’re a more long-term trader
having trades lasting longer than a month. Many traders miss the fact that, when
they try to get as many profitable trades as possible, many times it is more impor-
tant to get as many profitable time periods, such as months or quarters, rather than
profitable trades. Staying in a trade that is going nowhere or is losing money at a
slow but steady rate without hitting the stop loss, might weigh down your results
for several months in a row. As in the case of a more short-term trade, it also keeps
you from using that money in another trade that might have been more profitable.
Another way to watch for slow trades is to monitor and analyze volume and
open interest (in the futures and options markets). Measuring the relative strength
between different stocks or markets also could be a good idea. Perhaps you sim-
ply are trading the wrong stock in a group of similar stocks? These alternative
methods could also be used for the end-of-event exit. For this book, however, I will
only look closer into a few time-based techniques.206 PART 3 Stops, Filters, and Exits