74% of losers were never savable. Take-profits only cut the big wins
Adding a Take Profit (TP) target to a trend-following system often feels like a logical way to protect gains, but my latest analysis of the tc_fx…
Adding a Take Profit (TP) target to a trend-following system often feels like a logical way to protect gains, but my latest analysis of the tc_fx strategy suggests it is a trap. By looking at the MFE (Maximum Favorable Excursion), which is the highest paper profit a trade reaches before it closes, I found that forcing a TP actually hurts performance.
The tc_fx strategy (Breakout Long on four Yen cross pairs) currently runs without a TP. Over the 2015 to 2026 period, this setup yielded a total return of +30%, a monthly return of +0.201%, a PF (Profit Factor) of 1.29, and a maximum DD (Drawdown) of -7.8%.
The reality of stopped-out trades
To understand if a TP could save these losing trades, I analyzed the 677 stop-loss (SL) events.
| Metric | Losing Trades (SL) | Winning Trades |
|---|---|---|
| MFE Median | 0.22R | 2.39R |
| MFE Average | 0.37R | 2.39R |
| The data shows that 73.9% of these losing trades never even reached a +0.5R profit before being stopped out. In other words, most of these trades were never “winners” to begin with; they simply failed to gain momentum. Only 6.9% of them reached +1R, and a mere 1.6% reached +2R. There is almost no “trapped profit” to salvage here. |
Why a Take Profit hurts
When I simulated adding a TP to the system, the results consistently worsened:
- No TP (Current): PF 1.29 / Monthly return +0.201%
- 1 ATR TP: PF drops / Monthly return -0.009%
- 2 ATR TP: Monthly return +0.114%
- 8 ATR TP: Monthly return +0.182% While adding a low TP target increases the win rate to 75.3%, it causes the PF and monthly returns to decline. Even at an 8 ATR setting, the system fails to match the performance of having no TP at all. This happens because of a classic win-rate trap. By capping the trade, I am essentially “clipping the wings” of the big winners. Since the winning trades have a median MFE of 2.39R, a fixed TP forces me to exit those high-performing trades far too early. While a high TP (8 ATR) offers a slight improvement in DD (-7.3% compared to -7.8%), it functions purely as a defensive measure rather than a profit booster.
Verdict
I have decided against adding a TP to this system. The analysis confirms that the potential to “save” losing trades is negligible, as most losers never show significant profit. Conversely, a TP actively harvests the large-tail winners that drive the strategy’s profitability. Moving forward, I will focus my research on risk and capital scaling rather than tinkering with the exit rules, as the exit logic is already performing at its limit.
How this connects
This verification builds on earlier ones (what failed before and what I tried this time, comparisons between approaches).