Could take-profit and stop-loss orders be cutting your profits?

Fixed take-profit and stop-loss orders feel intuitively safe. But we asked a question: could these orders be closing the position early and cutting profit? We kept the entry the same and changed only the exit method.

Result (out-of-sample)

• Classic TP/stop: Sharpe 1.31 · max drawdown −78%
• Catastrophe stop + time limit only (no TP/stop): Sharpe 2.07 · max drawdown −65%

So loosening TP/stop improved both the return and the risk-adjustment (drawdown even fell). And most importantly — it was consistent across all three years (2023: 2.00 · 2024: 1.75 · 2025: 1.17). Not a coincidence tied to a single period.

Honest limit: this test was run without leverage and with a fixed catastrophe stop; it needs to be re-validated in the leveraged live system. So it's not a "firm rule" yet — it's on our review list as a strong candidate, and we only decide whether to add it after leveraged validation.

We don't sell a finding the moment it looks attractive; until it's validated under all conditions, we call it a "candidate."