Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Stocks

Do Profit Targets Add Value to a Strategy?

by May 26, 2023
May 26, 2023
Do Profit Targets Add Value to a Strategy?

My research suggests that profit targets improve results for trend-momentum strategies that trade ETFs. Note that performance improvements may differ for other strategies. This article will first show a trend-momentum setup on the chart. I will then provide some performance metrics for a basic strategy with and without a profit target. TrendInvestorPro (here) introduced a similar strategy this month and the final part will be posted next week.

Trend-momentum strategies require two components: an indicator to identify the trend and an indicator to rank performance. I am using the Trend Composite to identify the trend and Normalized-ROC to rank performance. The Trend Composite aggregates signals in five trend-following indicators. Normalized-ROC is the 200-day point change divided by 20-day ATR. You can read more about these indicators here. The chart shows the Technology SPDR (XLK) with a positive Trend Composite and a Normalized-ROC(200,20) of 6.63, which is one of the highest ranked ETFs in our universe.

Strategies that trade stocks also require a market timing mechanism. In bull markets, the idea is to buy the ETFs that are in uptrends and that have the highest rank. Buy the strongest. A sell signal triggers when a bear market starts or the Trend Composite turns negative.

In the absence of a sell signal, traders can also consider setting a profit target and exiting when hit. For example, sell when the ETF is up 10%. I put this idea to the test with a universe of 74 stock-based ETFs that have trading history back to 2007. The test ran from January 2007 until April 2023, which is 16+ years. The strategy without a profit target showed a Compound Annual Return of 8.36% and an Average Drawdown of 16.79%. The strategy with a 10% profit target generated a Compound Annual Return of 9.6% and an Average Drawdown of 14.42%. The Compound Annual Return was over 1% higher and the Average Drawdown was over 2% lower. A profit target improved performance for this strategy.

TrendInvestorPro introduced a similar strategy this month and the final part will be published next week. This strategy using a market timing mechanism, two trend indicators and a profit target to maximize performance. Click here for details and immediate access.

Normalized-ROC, the Trend Composite, ATR Trailing Stop and nine other indicators are part of the TrendInvestorPro Indicator Edge Plugin for StockCharts ACP. Click here to take your analysis process to the next level.

—————————————

0
FacebookTwitterGoogle +Pinterest
previous post
This is Milk hires fresh talent with 15 new jobs as growth continues
next post
RFK, Jr. says he ‘can’t wait’ to join Elon Musk on Twitter after offer that all candidates are ‘most welcome’

You may also like

DP Trading Room: Watershed Events in Gold &...

December 12, 2022

S&P 500 Equal Weight ETF Gains Strength

July 30, 2024

Markets Surge Post-Election: Is It Time to Go...

November 7, 2024

StyleButtons: The Key to an Optimized Charting Process!...

September 9, 2023

United Airlines Stock Soars: Watch For a Promising...

October 16, 2024

Seasonal Sector Investing in the Fall: Top Sectors...

July 16, 2024

Utilities’ Unique Seasonal Powers: The Best Months to...

January 19, 2024

Week Ahead: Festive & Truncated Week May See...

October 23, 2022

Top 5 ACP Features & Chart Enhancements in...

December 31, 2022

Coming Soon: A New Era of Options Trading...

October 5, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • MARK HALPERIN: Democrats try to construct a Frankenstein candidate while JD Vance gains momentum for 2028

      June 6, 2025
    • ‘Gone too far’: GOP lawmakers rally around Trump after Musk raises Epstein allegations

      June 6, 2025
    • Democrats begin to embrace Musk amid Trump spat after party railed against him as a ‘dictator’

      June 6, 2025
    • Trump administration defends US and Israeli sovereignty with new sanctions against four ICC judges

      June 5, 2025
    • Musk unleashes wild Epstein claim against Trump after being booted from DOGE

      June 5, 2025
    • Three Charts Showing Proper Moving Average Alignment

      June 5, 2025

    Categories

    • Business (8,149)
    • Investing (2,011)
    • Politics (15,543)
    • Stocks (3,129)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved