How Long to Hold?

Playing with time stops

Welcome back to Quant Wisdom Wednesday, where we dive into the nuances of trading with a quantitative edge. Today's topic? Hold time—something often overlooked by traders who focus solely on stop losses and profit targets. But what if there’s a more systematic way to determine when to exit a trade?

In this video, I discuss how setting a specific hold time—whether it's one week, two weeks, or longer—can impact the overall success of your trades. A well-timed exit could mean capturing higher win rates and, in some cases, better overall profitability.

The Importance of Hold Time

While many traders simply focus on price targets and stop losses, adding a fixed hold time can enhance trading discipline and results. One downside of fixed hold times is missing out on further gains if a trade runs. However, higher win rates and faster capital recycling can make up for this.

I also share data-backed insights from a pullback strategy I’ve been running in Stats Edge Pro. Testing the strategy over different hold times—one week, two weeks, and four weeks—shows how different exits can affect performance. Over a 20-year backtest, the strategy with a one-week exit outperforms longer hold times by capitalizing on the edge of quick pullbacks.

Using Discretion in Exits

Although the system is built for a one-week hold, I explain how you can add discretion by trailing stops or partial exits to maximize gains. For instance, I recently exited a winning position in Lunar early, locking in profits while keeping some shares to ride the momentum.

Key Takeaways:

• Fixed hold times can offer a higher win rate and quicker capital recovery.

• Testing different hold times can give insights into the optimal duration for your strategy.

• Discretionary exits can help extend gains beyond what the system dictates.

To learn more about how to incorporate these principles into your trading, be sure to check out StatsEdgeTrading.com and access my algorithms and trade setups in Stats Edge Pro.