The Timing Method

Limiting losses that are moving against us is one thing, but imagine that we buy something and it flat lines for 10 years. Our capitol will be stuck there, doing nothing. If we don't hit our stop, and we don't make enough profit to sell it for a gain, what then?

Recently I have come across an idea to sell based on time. If nothing else prompts us to dump the position, then a set number of days could be the final hope to save us from a never-ending trade that is a loser because it can't keep up with inflation.

In 2008, the average inflation rate was 3.8% over the 12 month period. That number is very fluid, and changed quite frequently during that time, but 3.8% is a good place to start. Knowing that, any trade that does not make at least 3.8% in any given 12 month period is losing the difference of its net gain and 3.8%.

The group will be starting to experiment with this by adding a 1 month .31% time limit. Each trade has 1 month to make at least .31%. If any trade fails to do that, but also has not stopped out at a loss or been closed to take profits, then it will be closed because it is moving too slow. The money can do a better job somewhere else.

Note: Anyone who would like to change this number, or can see a reason why this is a bad idea should reply to this post.