Fixed Profit-Targets (Revisited)

N

NihabaAshi

I wanted to revisit an old topic here at EliteTrader about fixed profit-targets because a lot of Emini Futures traders use them.

I don't and the link posted below expresses clearly how I feel about using fixed profit-targets.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=7773&perpage=1&pagenumber=21

Therefore, if you use fixed profit-targets...successfully...

1. Is it the most important aspect of your exit strategy?

2. As a trader using fixed profit-targets...how did you determine that particular number is a good one size fits all profit-target for so many different Emini Futures price patterns?

Note: I don't expect a lot of replies to my above two questions.

NihabaAshi
 
For me, at least, the key point is that there is no one-target-fits-all. It all depends on what the price action looks like. I'll be more aggressive with PT if I'm trying for a reversal, than if I'm trying for a trend continuation, for instance.

Interestingly, my swing systems all do significantly worse if I use profit targets than if I simply trail. So for those I just let it run.
 
1. Fixed points exit is necessary if you absolutely daytrade only.

It is in contrast to most whose view is that you have to let the profit run. Remember time is against you if you are daytrading.
So a good profit taking target will help a lot.

2. How to determine fixed profit target.

Try to review your trades on historical charts (a lot of work if you are a discretionary trader) to see if you can determine a fixed % points of one of the following to optimize your exits,

1. N days average daily range
2. % of the entry price

also review your time of entry vs the % required.

With fixed % - your target becomes flexible enough overtime, while clear enough for day-in day-out trading.

This technique works well for many mechanical systems.

Lawrence


Quote from NihabaAshi:

1. Is it the most important aspect of your exit strategy?

2. As a trader using fixed profit-targets...how did you determine that particular number is a good one size fits all profit-target for so many different Emini Futures price patterns?

Note: I don't expect a lot of replies to my above two questions.

NihabaAshi [/B]
More...
 
Quote from Lawrence Chan:

1. Fixed points exit is necessary if you absolutely daytrade only.

It is in contrast to most whose view is that you have to let the profit run. Remember time is against you if you are daytrading.
So a good profit taking target will help a lot.

2. How to determine fixed profit target.

Try to review your trades on historical charts (a lot of work if you are a discretionary trader) to see if you can determine a fixed % points of one of the following to optimize your exits,

1. N days average daily range
2. % of the entry price

also review your time of entry vs the % required.

With fixed % - your target becomes flexible enough overtime, while clear enough for day-in day-out trading.

This technique works well for many mechanical systems.

Lawrence
More...

Lawrence,

Thanks for the comments.

Since your successfully using fixed profit-targets in daytrading mechanical systems...

do you use it in any discretionary trading if/when you trade via discretionary trading methods?

vikana

I've heard similar from a trading pal that's a swing trader.

In fact, he had a lot of problems with his exit strategy until he switched from fixed profit-targets (one size fits all) to different profit-targets based on the price pattern.

NihabaAshi
 
I used to trade discretionary when I 1st started trading :cool:
Not sure what I used during that time, more like sit on my pants style ...

The more classical techniques requires NOT using profit target because they last more than 1 day.

In short, time is trend trading's friend :)

When hybrid daytrading, you will notice it is more how you feel, not what the account balance is telling you.

It just feels good holding a position and ride it all the way. But the consequence is likely more huge losses too. On balance, your account will grow.

It feels bad when you leave money on the table all the time. The consistency is just not exciting but makes money for your
living.

So in either case, as long as you can consistently carry out the same plan over time and if your plan works, it should make money.
 
ARRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRGH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


I know my weakness and I name thee: Greed.

I left so much money on the table trading the spoos today. I SHOULD HAVE been up 6 points. But no. I lost 6 points. GAWD DAMNIT. I kept waiting and waiting for it to keep on going up, greedy me, and it was only able to push the highs once. FUCK ME.

This is why *I* need to start developing some sort of targeted profit taking. I swear, at *least* a quarter of my losing trades have been because I was simply too greedy and didn't protect my paper profits by closing out my position. I can read the S/R pretty well, but I get too damn greedy and don't pull out when the rally starts to weaken.

*SCREAM*

I have a sticky on my monitor that says "NEVER LET A GAIN TURN INTO A LOSS." More discipline, more discipline...
 
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