Call it a day after profit goal?

J

JoshDance

For those who trade professionally for a living, I have a question.

- Do you set a particular target return for a day/week/month/year period?

- If you hit that target, do you stop then, or keep going? Say for example that my goal was to increase my profit in the week by 2%. If I hit that by Tuesday morning, what are your thoughts, speaking from your own successful professional experience, about stopping there and not trading the rest of the week? Same for daily/monthly/yearly?
 
Quote from JoshDance:
----target return for a day/week/month/year period?
----If you hit that target, do you stop then, or keep going?
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1) Whether you are doing well or poorly, you always have to confront the market again. :)
2) Goals should have more to do with work ethic instead of arbitrary performance numbers that can be "set" too high or too low. :cool:
3) By focusing on an "average", you can exclude "above average" results. :(
 
Weekly/monthly profit goals make more sense than daily profit goals in my opinion. Setting a daily loss limit is better than a daily profit target if you are going to manage down to the daily level. You need to maximize your profits and stay in the market as long as possible on favorable days (kind of like staying at the poker table with toothpicks keeping your eye lids open when there is a sucker sitting across from you) and cut and run on bad days when conditions are less optimal.

If you choose to stop at a weekly or monthly target you can always reassess it and raise your goals during the next period if you find you are leaving money on the table. Good problems to have if you find yourself continually in this position!:)
 
Quote from brocklanders:

Weekly/monthly profit goals make more sense than daily profit goals in my opinion. Setting a daily loss limit is better than a daily profit target if you are going to manage down to the daily level. You need to maximize your profits and stay in the market as long as possible on favorable days (kind of like staying at the poker table with toothpicks keeping your eye lids open when there is a sucker sitting across from you) and cut and run on bad days when conditions are less optimal.
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Listen to what Brocklanders says. Listen to it well. Never forget it! Ignore advice like this at your peril.

Keep in mind the following advice from a trading legend...

"One common adage on this subject that is completely wrongheaded is: you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.” – William Eckhardt
 
I think the answer varies from person to person. Some folks get careless and/or overly aggressive when they are way up on the day. They start taking trades they wouldn't normally make. Their discipline breaks down. Same thing when you are down too much on the day. They get rattled and their discipline breaks down.
 
Quote from PropTraderMTL:

Listen to what Brocklanders says. Listen to it well. Never forget it! Ignore advice like this at your peril.
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Listen to what PropTrader says about listening to Brocklanders :D

I started out not exactly with a daily profit goal, but an expectation of making money or even trading on a daily basis.

I knew intellectually, that ideally, there would be days that I should stay out of the market due to lack of opportunity or problems on my end. However, having an expectation for daily performance made me push more than I should, leading to overtrading and low probability trades.

Now that I operate with a weekly profit goal (that is realistic), I find that I`m much more relaxed on a daily basis. Today, for instance, I did not trade at all. My profit goal for the week was reached yesterday and since I was not able to read the market correctly and had to stay away during the close, it made sense to sit on my hands.

I think a good trader would now when to push for profits, but for me, if I`m up, say 5 points on the ES on a single day, I would have to see a fantastic signal in order to take on much more risk that day.
 
As a trader you never know how much profit the market will offer you on any given day, the only thing you can control is how much it can take away. The problem with a profit target for the day is you limit your upside and skew the probabilities of your edge/system. When you start picking and choosing which signals to take once they are generated, you then alter the expected return of your system/edge.
 
"One common adage on this subject that is completely wrongheaded is: you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.” – William Eckhardt
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Thanks guys for all the helpful advice.

Regarding this specific quote, it brings up a question. Doesn't this view depend specifically on trading style? What if I'm a scalper or day trader who trades 50 times a day and by definition takes small profits? If my stops are small (2-3 ticks) then by definition I will run more likelihood of stopping out if I'm looking for larger profits (say, 15-20 ticks). If my stops are larger to allow for this much room to move, then I also increase my risk.

It's slightly frustrating because there are many ways that work--moving stop to BE on a 2 tick profit, for example, versus leaving a 15 tick stop in place and taking the heat. Both may be very valid, but may not suit all trading styles.
 
You must then take only entries which have the opportunity for a close stop, and hold them for a larger profit. I know...........I know.........., but that is the truth.
 
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