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James Marsden Hurst 1924—2005

Chapter 5.1 — You've Made Money…

Profit management and exits (Hurst, Ch. 5)

Chapter 5 in one entry: logical cut-loss, trailing on confirmed lows, take-profit via the valid uptrend line, non-real-time envelopes and shorting — the complete signal armoury.

On this page

Who this entry is for — Chapter 4 buys; this chapter does everything else: protects against error, trails the profit, banks it on a signal, and opens the short side. By its end the armoury is complete: wait, buy, hold, sell, protect-loss, sell-short, cover.

Source: J. M. Hurst, The Profit Magic of Stock Transaction Timing, Prentice-Hall, 1970 — Chapter 5, You've Made Some Money — How to Keep It (pp. 86–96).

Prerequisites

Graphic buy timing — you start from a position opened with Chapter 4's methods.

The chapter's idea

In plain words — You bought with the odds on your side, but a small chance of error remains. Protection cannot be "by feel": every exit — at a loss or a gain — must be a predetermined signal, grounded in the model as firmly as the entry was.

The through-line is Chapter 4's, applied to the exit: decide beforehand, execute when price says so. With a psychological addition the book makes explicit: an arbitrary level gets betrayed; a level that descends from the model gets honoured, because the reasons to exit are exactly as good as the reasons to enter. The four entries:

Tool What it does Entry
Logical cut-loss The initial stop from the shortest channel: on Gruen ~9% risk against +55% Cyclic cut-loss
Trailing + take-profit Levels on confirmed lows; valid uptrend line to bank it (Gruen: 12⅜, then down to 9) Trailing sell and take-profit
Non-real-time envelope Time taken out of the picture: the turn seen ~1 week earlier Non-real-time envelope
Short and cover Reverse analogs, on stocks whose undercurrent points down; the Averages as compass Short selling
Original Fig. V-1 — trailing loss levels on Gruen
The original 1970 plate: Fig. V-1, the trailing loss levels on the Gruen rise — the chapter's thread.

The full sequence on Gruen

The chapter closes the story Chapter 4 opened, and it is worth seeing in one run:

  1. Edge-band purchase at 7½ (VTL break inside the predicted zone).
  2. Initial stop at 7⅛ — ~9% risk, "about twice commission costs".
  3. Trailing on the 4-week cycle's confirmed lows (TLL 1→4, one in-between level licensed by the pull-away).
  4. In week eight, a triangle → state table → upside imminent but limited: guard up.
  5. The NRT envelope confirms without needing the triangle: low "I" bends the channel; conservative estimates 12¾ and 11.
  6. Take-profit on the valid uptrend line break at 12⅜.
  7. Validation: Gruen slides to 9 in five weeks. And for the freed capital, the hunt resumes — long or short, per the Averages' compass.

Warning — In the whole chapter there is not a single "in my opinion": every decision is a level or a line drawn beforehand, triggered by price. It is the method's signature — and why it holds up psychologically too.

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