Link: Closer Look at Profit Targets

The IBD Index blog recently posted a wealth of data on system testing and permutations of percentage stop and percentage profit target in relation to the IBD 100 list, S&P 500, NASDAQ, in a recent post entitled “A Closer Look at Profit Targets.”

The blog also has a large collection of posts on other aspects of system testing and design and – as the title suggests – focuses most of the analysis on the Internet Business Daily top 100 stocks list.

Before you get excited and think you can view the IBD 100 for free, the author is not allowed to post the contents of the stock list to the blog, but he keeps track of the performance of the index and how investors might use the strategy for better profit.

In this post, he tests a variety of combinations on fixed stop-loss percentages (from 2% to 10%) and fixed percentage profit targets (from 4% to 40%).  This is a concept I have been examining as well, but have been focusing on fixed dollar and Average True Range functions for stops and targets.

He sorts results by:

Expectancy by Dollar Risked
Profit Factor
Efficient Expectancy Ratio

There are a few surprises in the data that you might not have otherwise been aware.

The author writes:

“…stops have a larger impact on a system than do entries and the manipulation of stop combinations is one of the most effective methods of tailoring a system to one’s needs.”

and…

“There is no magical combination of numbers, no “Holy Grail”.

Check out the entire post for full charts and detail.

(Credit to Rob Hanna’s post “System Discussion from Other Blogs” at Quantifiable Edges for providing the initial link to this post and others – and appreciation for linking to my post as well)