Over the past few weeks, we re-examined whether tighter take-profit (TP) levels or trailing stops could boost performance.
We’ve run this research before, but a string of near-miss TPs prompted a fresh, data-heavy look:
Back-testing shows that whenever we introduce early profit-taking, long-term results deteriorate.
Cutting winners short sacrifices the outsized moves that account for a disproportionate share of momentum profits.
Why is that?
Big moves drive most of the profits.
In momentum-driven crypto markets, missing just a handful of major breakouts can erase months of gains.
By introducing smaller TP levels or trailing stops, we miss these big gains, making drawdowns longer and profits smaller:
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However, there are indeed some market periods where this approach delivers suboptimal results.
Our advanced filtering systems filter out most such periods, but no filtering is perfect.
The only way to avoid all such periods is not to trade at all.
Here's what you should know:
We continuously refine our multi-factor filters and portfolio overlays to sidestep most adverse conditions.
Diversification across pairs further smooths equity curves, though it can’t replace the payoff from fully capturing big market moves.
We’ll keep iterating on filters and execution logic, but the data draws a clear line: beyond a point, tighter exits undercut the very edge momentum trading depends on.
Understanding and respecting that boundary is how we protect long-run alpha.
Hope you find this valuable.
Best,
The Algocrat AI Team
P.S. The best trades come without warning. Join us today so you don’t miss them — sign up now.
