Other important factors aside, and focusing only on time, at which point (in time) do you decide you need to take your profit or cut your loss? In other words, how do you INCORPORATE THE ELEMENT OF TIME into your trading? In my opinion time is a very important element that needs to be taken into account, and obviously it also depends on what time frame you’re using. What do you think?
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For instance, if your time frame is M1, and you’re thinking there is a setup you can take advantage of, so you enter the trade, but then after 15 minutes you’re still in a trading range, maybe that trade should be closed just because THE ELEMENT OF TIME dictates. Because you’re also losing TIME which I think is very important.
I’m trying to come up with a formula for different time frames, and how long one should wait before one closes the trade if the trade is not working. Any suggestions?
My own personal view is that duration is not, independent of price movement, a significant issue and cannot be incorporated into a formula.
I agree that duration will be related to one’s style of trading and expectations and which timeframe one is using. But I don’t see how you can define max duration since price movement ultimately determines whether there is a profit or a loss.
For example, a 1m scalper might expect to see a result within a few minutes whereas a 4-hour swing trader may wait from a few hours to a few days for the trade to play out. But I see no value in applying a specific time limit regardless of price itself. Similarly a longer-term trader using daily charts might wait days, weeks, even months - and may manage the trade as it progresses for as long as the charts stay positive in the direction of the target.
Another scenario: a day trader enters a position at the start of the US session. At the session close, the target has not quite been reached but is looking very positive. Should he close it because some “time” formula says it has been open for “6 hours” or leave it overnight, adding maybe another 10-15 hours or more to the duration to see it play out?
Personally, as a discretionary trader, I do see situations where a trade is not performing as anticipated and I close it. But that decision is based on an assessment of price movements, or lack of, over a number of candles/bars. It is not based purely on the clock ticking away.
I think there is enough challenge in reading price without trying to add another separate dimension from time. Afterall, following price evolvement incorporates, by definition, time.
But that is only my opinion, other may well see it differently 
I think you misunderstood what I was trying to say. Of course, if a trade is performing well, I also see no reason to close it just because the clock says so. My whole argument is about trades that are NOT performing well.
All I’m saying is, if you’re in a trade (let’s say your time frame is M1), and the price has been in a trading range for the last 15 or 20 minutes, maybe it’s better to close it and find a better setup in another currency pair or just wait for a better setup in the current currency pair.
And yes, as I stated in the original post, your time frame plays a crucial role in how to incorporate the element of time into your equation. In other words, if your time frame is D1, it would be weird to close a trade after 15 minutes, unless of course the price itself is doing something so crazy that warrants the closure.
Yes, of course! …and all I am saying is that you cannot quantify how long that should be before closing purely in terms of time! By definition, " if you’re in a trade (let’s say your time frame is M1), and the price has been in a trading range for the last 15 or 20 minutes," already includes the time element as the price is evolving. There is no preset duration according to which suddenly a trade is not performing. It is the price movement that is telling you that already - why try and make it unnecessarily complicated by overlaying what price is already telling you with yet another concept?
The only situation where this would be of value (IMHO only) is with an automated EA-type trading system. With any discretionary system, pure experience and visual price movement will provide the answer if the price direction is temporarily stagnant - how do you define “temporary”? I see neither reason nor method how you could benefit from trying to create some kind of time indicator for this…
Just out of interest (or maybe not) here is an example of a time analysis that I guess some people use for such purposes. It is a standard indicator on my platform that sets time divisions according to the fibonacci number sequence. This example is a 5 min chart on SP500.
So, in the same way that fibs are used in the vertical direction of price, this can be used in a horizontal direction of time.
As an aside, this chart also shows the distinct differences in price movement between the US and Far East sessions, which would also have to be incorporated in any formulation of duration.
I have never used it and don’t believe in it, but it is an example of how time can be used as an element in analysis:
Just one more comment and I’ll leave it to others for their comments
I think, if you are looking to quantify time then the approach would be to try and optimise the duration depending on the style of trading, sessions, etc.
In other words, you would need to collect data over time and analyse the success rate relative to time open. This would end up with an answer like, for example: Most trades succeed within the first “X” mins/hours/days. This would suggest that trades still open beyond that duration are worth closing since the risk of loss is greater.
However, historic data is never a guarantee of the future. But this kind of info could be useful in managing trades. Problem is that one would need to do this analysis for every kind of trade environment as well as every instrument that one is trading. But it could provide some kind of “footprint” - but does it really provide any extra value on top of the existing price analysis?
I’ll leave it here and hope you get some other input…
I agree, I think it’s more of a personal decision. It’s not something one should necessarily include in an actual formula. I guess I didn’t mean it literally when I mentioned creating an equation or a formula. But just to be aware that something called time DOES exist and it needs to be taken into account. That’s all.
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