α: On using Time-based trading horizons.
A lot of people rely solely on Price-based entries and exits, and underestimate using Time (on its own, or coupled with price) as an entry/exit condition for a trade.
News trading, for example, makes the most use of Time-based horizons.
A lot of people rely solely on Price-based entries and exits, and underestimate using Time (on its own, or coupled with price) as an entry/exit condition for a trade.
News trading, for example, makes the most use of Time-based horizons.
Main reason event-driven trading is so profitable is because of asymmetry in R/R using time-based horizons.
When you get the news that Tesla sold 75% of its $BTC, you short and let the market react. If it does not, you can close the position right after for B/E or a small loss.
When you get the news that Tesla sold 75% of its $BTC, you short and let the market react. If it does not, you can close the position right after for B/E or a small loss.
The Time component here is giving the market time to react: on a big news that is forwarded by every main outlet, you can know within minutes to half-hour most active participants will have received the info in some way.
Most of semi-passive retail will have it within the day.
Most of semi-passive retail will have it within the day.
To maximize profit and minimize drawdown, you then use both Price and Time targets:
-"Given current context and previous news of the kind, this one should move at least 10%"
-"This piece of news is huge and relayed by DB, should have started moving within 5 minutes"
-"Given current context and previous news of the kind, this one should move at least 10%"
-"This piece of news is huge and relayed by DB, should have started moving within 5 minutes"
Using both lets you:
-take early profits on things that move too much, too fast compared to your estimates
-cut early losses on things you thought were more bullish than they really are in the current context
-let the others run while sitting cozily in profits
-take early profits on things that move too much, too fast compared to your estimates
-cut early losses on things you thought were more bullish than they really are in the current context
-let the others run while sitting cozily in profits
It is partly thanks to event-based/news trading and using Price and Time targets that I am currently sitting ~10-15% from ATH, and a 60x multiple since January 2021, while a good chunk of the market is down more than 80% and trying to revenge trade to recoup.
While this was mostly focused on News trading, using Time as a factor to exit trades works for all traders.
The more conviction you have, the longer you should let the trade run. If it is a low-conviction position that already moved a lot, don't feel bad for taking early profits.
The more conviction you have, the longer you should let the trade run. If it is a low-conviction position that already moved a lot, don't feel bad for taking early profits.
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