Calling it a day after reaching a profit target?

L

Laissez Faire

Hello everyone,

I`m considering implementing a rule in my plan where I stop trading for the day after a certain profit target is reached. I know there are several people on this board who already trade like that.

The reason I`m considering this is that there have been very many days where I`ve been up everything between 2-5 ES points, only to piss it away with overtrading, on many occasions even ending the day in red.

The picture I posted in this thread is very real to me. It`s not a joke :)

http://www.elitetrader.com/vb/showthread.php?s=&threadid=218402

The root of the problem is probably psychological and due to a lack of discipline. After getting some, I tend to get greedy and want more out of the market. I lose objectivity, start chasing and rack up losses.

Now, an experienced and disciplined trader will be able to follow and trade the market for the whole session without overtrading, most of the time. A daily max profit target would limit his profit potential.

But it seems that for me, calling it a day after being up a certain amount of points will maximize my profit potential at this level of my development.

I could and would naturally continue following the market in the simulator, so that I would still learn price action, but without risking to give back my profits.

In time, I could perhaps increase my frequency and profit targets.

I would appreciate some input on this.

Best regards,

LF
 
How does the market know YOUR condition? Else you have an edge or you don't. You have to follow your plan and play through no matter what...You can learn the market and when it is not working for you and have an alternative strategy for those days. Time is money and learning the market and its characteristics is your job. Again, The market and YOUR condition have no relationship to one another.

I do not believe in a single edge that works in any market condition anymore...

I do not like trading on Fridays and getting stuck holding over the weekends. I do not like to trade one day before NFP day or on NFP day....

ES
 
I always thought that, assuming you have a true edge, you should just keep trading and not limit your potential profits for the day.

However, going over my reults recently, I would have been much better off over all if I had have stopped trading for the day if I had have stopped after hitting a certain profit (in my case, about 40 ticks)

That could just mean that I dont have a 'true' edge, but then, I dont think any retail daytraders do (not to say that its impossible to make money though)
 
Quote from Laissez Faire:

The root of the problem is probably psychological and due to a lack of discipline.
More...



Solve the above first. By quitting at a target you start skewing your probabilities. Say you win on 70% of your trades. Your first 4 trades are winners and you quit after reaching target. Now you don't take anymore signals. There is no way to know if the next 3 signals are profitable. Perhaps they were but since you are done you miss taking them. Now tomorrow comes and your first 3 trades are losers. There was your 7 out of 10 sample. Had you taken every trade you would more than likely be more profitable. What I am getting at is you want to limit your losses, not your profit opportunity. Overtrading is usually caused by boredom or revenge. You must continue to work on your patience and discipline to find the answer you seek.
 
I always find it amazing how many people gamble in the market. They even think of it as being a big casino.

The people who work in that casino certainly don't think of it as gambling, not as far as they're concerned anyway. To them it is work, and they go about it professionally. Translated that means they sit there and take the money people gamble into the market. That is their job, to take your money (if you're gambling with it).

Think of your own job. Do you start the day thinking you'll go to work and make some money, or do you think that, holy chit, I may actually lose a bunch of money working my ass off today? No, you are going to execute your job, make money and go home. There is no gamble about it, or you wouldn't do it.

So my advice to anyone who gambles in the morning and makes a score is to take his winnings and go home. If it's such a gamble that you're going to lose it all in the afternoon, stop gambling and go home. You can always come back tomorrow and start gambling all over again.

Use your afternoon to open an eBay account and find out how a real auction works. It's all right there for you, chase the buyers out on a high starting bid, or flush them in with a low one. Price a lot of merchandise too low and you'll drive the sellers out. If buyers there are paying top dollar the sellers will come out in droves and drive the price back down. Figure it out, because the market works the exact same way (see Market Profile).

When you figure the markets out, it's not a gamble anymore, it all becomes about execution. If you haven't figured it out, though, you're just gambling. Stop doing that.
 
Why not just put in a give back rule instead of a profit target? It seems ridiculous to say once you get up X you are going to quit. It makes more sense to say, once I'm down X I'll stop for the day.

Make a rule saying I won't give back x% of my closed P&L. This way you will keep pushing yourself to improve your trading.
 
Quote from Laissez Faire:

I`m considering implementing a rule in my plan where I stop trading for the day after a certain profit target is reached. I know there are several people on this board who already trade like that.

The reason I`m considering this is that there have been very many days where I`ve been up everything between 2-5 ES points, only to piss it away with overtrading, on many occasions even ending the day in red.

The root of the problem is probably psychological and due to a lack of discipline. After getting some, I tend to get greedy and want more out of the market. I lose objectivity, start chasing and rack up losses.

Now, an experienced and disciplined trader will be able to follow and trade the market for the whole session without overtrading, most of the time. A daily max profit target would limit his profit potential.
More...

This is a very good idea. When I was prone to all the psychological problems that plague traders (hesitating, jumping the gun, revenge trading, micromanaging trades, getting losses back to even and cutting winners short, etc.), I made a decision to trade mainly for 2-3 hours around the open, when I caught strong moves and made good profits for the most part.

Once you get to the point that you can stick with the plan of only trading the appearances of setups that provide your edge, regardless of what happened with previous trades of the day, then it's best to pocket your profits and perhaps sim trade, practicing discipline in following your plan until it becomes second nature to trade your plan on every trade no matter what your current P/L.
 
Quote from volente_00:

... Overtrading is usually caused by boredom or revenge. You must continue to work on your patience and discipline to find the answer you seek.
More...

Certainly true. And it is also possible that being well up on the day influences ones psychology to the point that the less disciplined among us get a little careless.
 
I would hide your pnl entirely. Just execute. Trade based solely on your methodology, if you remove the element of money and just focus on the trade - I'm sure when you glance at your pnl at the end of the day you will see better results. I believe psychologically most guys who are concious of being down or up money are more likely to gamble than just trade. Try it with small lots see how you do.
 
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