TP90 & TP_year — Take-Profit Parameters
What are TP90 and TP_year?
DCMM provides multiple take-profit (TP) levels derived from different analytical perspectives. The two primary take-profit parameters are TP90 and TP_year, each representing a different horizon and confidence level for potential price recovery.
TP90 — 90th Percentile Take-Profit
TP90 is the 90th percentile maximum price reached across all Historical Twins within the next trading session (D+1). In other words, if you look at the maximum intraday/close price achieved in Day+1 across all historical cases where this stock was in the same drawdown cycle stage, TP90 represents the level that was exceeded only 10% of the time.
This makes TP90 a conservative, high-probability target:
- It represents a realistic next-session target that was reached in ~90% of historical twins
- It filters out extreme outlier moves that inflate the average
- It provides a level that can realistically be expected with high confidence
The TP90 Price column converts the TP90 percentage into an actual price level based on the current stock price.
TP_year — Annual Take-Profit Target
TP_year is the take-profit target derived from the full annual historical analysis of the stock’s drawdown recovery patterns. Unlike TP90 (which focuses on Day+1), TP_year represents the typical recovery target over a longer holding period (days to weeks).
TP_year is calculated based on the average maximum price appreciation seen in historical twins across the full recovery cycle, with an annualized context for consistency across different volatility regimes.
The TP year Setups column shows how many historical setups support the TP_year calculation — more setups mean higher confidence in the TP_year estimate.
TPm — Modified Take-Profit
TPm (modified TP) is a dynamically adjusted take-profit that accounts for current market regime and recent price action. It provides a slightly more conservative target than the raw TP_year, adjusted for current volatility conditions.
How to Use TP Levels in Practice
- TP90 — Use as the primary next-session exit target for day/swing traders. High confidence level (~90% of historical cases reached this level next day).
- TP_year — Use as the longer-term target for position traders holding 3–10 days. Based on full recovery cycle data.
- R/R Ratio — Always compare TP (either TP90 or TP_year) against the SL level to calculate the Reward/Risk ratio before entering.
TP and the R/R Ratio
The R/R Ratio in DCMM is calculated as TP_year / SLm (Smart Stop Loss), providing the reward-to-risk ratio for each setup. A minimum R/R of 0.3 is required to meet the DCMM entry criteria, with higher values being preferred. When R/R > 1.0, the potential reward exceeds the potential risk by more than 2:1 (since SL is typically small).