Do you have a monthly target?
- Thread starter angelnish
- Start date
I am sure you mean in absolute dollars.
Because I move money in and out of trading accounts, I am focused on annualized rate of returns of each trade which takes into account time in trades, too. I also have RUNNING average rates of return that average rates of return cumulatively from all closed trades. The latter is necessary for me as a PAIR TRADER because I must keep sizeable chunks of cash in reserve to be applied as additional layers to existing trades when called for. Because that cash is idle in reserves until it is used in layers, I want to keep track of the efficiency of ALL my cash, currently being utilized and that which is sitting in reserves in order to see how efficiently my cash is doing. My goal at the end of the year is average in a window of 40% to 60% running annualized rate of return.
Now all these annualized rates of return are calculated on cash used in the trade. I do keep track of trade results in that manner and those figures are always archived. But at the end of each month, I dumb down those rates of return by recalculating not only money used in the trade, but cash sitting on the sidelines. It is not very exacting because cash sitting in reserves is dynamic. But I track cash sitting in reserves daily and have a proprietary way of infusing those figures into the trades' annualized rates of returns and the all important running annualized rates of returns. It is really not as difficult as it sounds.
Now aren't you sorry you started this thread ?
Because I move money in and out of trading accounts, I am focused on annualized rate of returns of each trade which takes into account time in trades, too. I also have RUNNING average rates of return that average rates of return cumulatively from all closed trades. The latter is necessary for me as a PAIR TRADER because I must keep sizeable chunks of cash in reserve to be applied as additional layers to existing trades when called for. Because that cash is idle in reserves until it is used in layers, I want to keep track of the efficiency of ALL my cash, currently being utilized and that which is sitting in reserves in order to see how efficiently my cash is doing. My goal at the end of the year is average in a window of 40% to 60% running annualized rate of return.
Now all these annualized rates of return are calculated on cash used in the trade. I do keep track of trade results in that manner and those figures are always archived. But at the end of each month, I dumb down those rates of return by recalculating not only money used in the trade, but cash sitting on the sidelines. It is not very exacting because cash sitting in reserves is dynamic. But I track cash sitting in reserves daily and have a proprietary way of infusing those figures into the trades' annualized rates of returns and the all important running annualized rates of returns. It is really not as difficult as it sounds.
Now aren't you sorry you started this thread ?
I have a philosophical problem with the concept.
It could mean I am expecting more than is available, or I take less than is available.
For the detail of every trade I prefer to measure against Maximum Favourable Excursion. You could aggregate this for an overall assessment.
In swing trading from a basket of stocks that is a significant part of an index, measuring against the index is useful.
Periodic reviews against the best performers in the index also keeps you grounded. For example I was once pretty pleased with a close to 40% return. Then I checked what the top 5 performers in my basket would have returned and saw a simple buy and hold would have tripled my money. Humbling and an incentive to improve my trade selection.
It could mean I am expecting more than is available, or I take less than is available.
For the detail of every trade I prefer to measure against Maximum Favourable Excursion. You could aggregate this for an overall assessment.
In swing trading from a basket of stocks that is a significant part of an index, measuring against the index is useful.
Periodic reviews against the best performers in the index also keeps you grounded. For example I was once pretty pleased with a close to 40% return. Then I checked what the top 5 performers in my basket would have returned and saw a simple buy and hold would have tripled my money. Humbling and an incentive to improve my trade selection.
yeah, you know you are kind of getting there when you measure your success in time rather than dollars
I know I can make dollars, it's just a matter of how much time it takes to make those dollars
too much time and I'd be better off somewhere else
otherwise, yes, I have a target. Average trade is 8 days. If I hit it in 8 days, it's a decent living. If I hit it in 8 hours, I feel like a big shot trader. But some of them can drag on for weeks.
I know I can make dollars, it's just a matter of how much time it takes to make those dollars
too much time and I'd be better off somewhere else
otherwise, yes, I have a target. Average trade is 8 days. If I hit it in 8 days, it's a decent living. If I hit it in 8 hours, I feel like a big shot trader. But some of them can drag on for weeks.
Trading is probabilistic.
You should have a rough idea of what your monthly expectation is.
eg.
50% probability of making at least a 10% return per month.
99% probability of making between -10% and +30% per month.
75% of months will be profitable.
I trade what is offered and then some.Sometimes i miss a couple,doing other stuff.But life is great,ya know!
IMHO there is one probem with daily...monthly...yearly targets:
They just don't work.
In the markets, one can seize opportunities, but sometimes there are simply none, at least not in the markets one trades or not exploitable by the methods used.
(Yes, AFTERWARDS one will always see opportunities everywhere. However, this is irrelevant as long as one cannot place after-the-fact-orders, and last time I checked no broker offered this order type.
...oh, things would be so much simpler then. )
So setting targets will only result in those two things:
1) Not seizing opportunities, because one has already reached the target for a set period - thus, leaving money on the table.
2) Seeing opportunities when there are none, because one is behind and wants to reach the target until the end of day/month/year - thus, making stupid trades which usually result in losing money.
Add to this that even a profitable traders usually has only a quite small edge in the market to begin with, setting targets is a surefire way to lose money in the long run.
They just don't work.
In the markets, one can seize opportunities, but sometimes there are simply none, at least not in the markets one trades or not exploitable by the methods used.
(Yes, AFTERWARDS one will always see opportunities everywhere. However, this is irrelevant as long as one cannot place after-the-fact-orders, and last time I checked no broker offered this order type.
...oh, things would be so much simpler then. )So setting targets will only result in those two things:
1) Not seizing opportunities, because one has already reached the target for a set period - thus, leaving money on the table.
2) Seeing opportunities when there are none, because one is behind and wants to reach the target until the end of day/month/year - thus, making stupid trades which usually result in losing money.
Add to this that even a profitable traders usually has only a quite small edge in the market to begin with, setting targets is a surefire way to lose money in the long run.
No, does not make sense for a swing trader as the distribution of wining and losing trades are uneven, Sometime you are in a losing period or winning period which skews short term results. I do have a annual goal of 50% return on the account, and even on the 12 month period sometimes I overshoot and undershoot that target due to the fluctuations of W/L distribution.
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Usually,;because trends go more than one would think;
sometimes i may tighten up stops, with wisdom.....
Just comparing return vs. buy and hold is not really valid, you have to take into account market exposure levels and both absolute and averaged time period drawdowns. Of secondary importance is market correlation.
Monthly targets are useless in my view, these are just arbitrary periods and don't have significant meaning in time series (unless trading instruments for which calendars play a significant role such as options).
During volatile times you might have a 20% month and a -20% month consecutively, setting a monthly target of 10% wouldn't work.
A monthly loss limit in theory makes more sense, yet I've found the most violent curve reversals come from deep drawdowns (adverse volatility followed by favorable volatility). Having a drawdown followed by a flat curve is of great concern, a possible warning the system is not performing/edge fading.