Wanted to get some ideas for profit-taking logic on a equity strategy. Basically, if i have an open position, what are some effective methods for taking profit and closing the position?
I would imagine this would also tie into my risk profile...examples would be appreciated.
Thanks!
Hello Adam,
I was hoping to see some answers to this. All I can suggest is using trailing stops to 'lock in' profit and a pre-defined Take Profit level set above/below the entry price of your long/short positions. I wonder if this is right for Take Profit on a long position?
entry = data[stock].close_price
order_target_percent(stock, 1.0)
order_target_percent(stock, -1.0, limit_price = entry * 1.1, stop_price = entry * 1.1)
P.
Adam - I think you probably need to provide a little more context for your question. It really depends on the mandate and profile of the portfolio strategy. Are you running intraday, daily or monthly rebalances? Is it driven by fundamental, valuation, momentum, technical or other indicators. Can you adjust your net and gross exposure or are you trying to keep those stable (i.e. replacing positions that have less attractive signals with positions with more attractive signals)?
This questions feels a little like "What are some ideas for profit-making on an equity strategy"? :) There's lots of ideas out there but it really depends on what you're trying to do...
Thanks for the responses! Very informative. .... @Anony: Basically i'm focused on a pairs arbitrage equity strategy that's based on daily data...not intraday. In my profit-taking scheme, i wanted to calculate the volatility and use that to determine dollar wise how the exit should be. with this in mind, what measure of volatility would be suitable to use? Could you provide an example of translating that into a dollar-wise exit? Also, could you expand upon implementing say a 2:1 reward/risk ratio? Does this tie into my ATR calcuation (which i am using as an exit signal)? Much appreciated!
Great question @adam and a great response @anony. It would be interesting to implement a weekly or monthly rule to withdraw 5% or 10% of the gains of that week or month as a salary and no payout when losses occur and see how it effects the performance of the strategy.
@Anony..excellent explanation! let's say i use a 2:1 reward to risk. Would that be based on the price at which the position was entered (for example bought at $20, risk down to $15, reward up to $30)....or would it be based on ATRs...i.e. as you previously mentioned Lose 1 ATR and win 2 ATRs?
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