A time stop is a pre-defined point at which you exit an idea because it has not developed as expected within a reasonable period. Unlike a price stop, it focuses on opportunity cost: capital and attention tied up in a trade that is going nowhere.
Define the thesis and the clock
Before entering, write down what should happen for the trade to remain valid: a break of a level, improving volume, a trend continuation, or a catalyst. Then set a review window. The window should reflect the trading timeframe; a short-term setup and a longer swing idea should not use the same clock.
Use time stops with price risk controls
- Keep a price stop for invalidation and a separate time stop for stagnation.
- At the review point, reassess the original thesis rather than adding reasons to stay.
- If the setup is unchanged but delayed, reduce exposure or close it according to the plan.
This article is for general information only and is not investment, legal, or financial advice.