Do you have a daily profit target? | Traders Hideout


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Do you have a daily profit target?

  #14 (permalink)

charlotte nc
 
Trading Experience: Master
Platform: ninjatrader
Broker/Data: NinjaTrader
Favorite Futures: Emini (ES, YM, NQ, ect.)
 
Posts: 391 since Jan 2015
Thanks: 71 given, 969 received

No Because of Fluctuation in number of Trades

In my case this is going to be a no. I use a small scale HFT type system and depending on the day, I may get to take as little as 5-10 trades or as many as 100 + trades. Going into each day I have no idea if the market will give me the volatility to hit closer to the high end or low end of this. Any kind of daily profit targets or stop losses would be bad to apply since this would be taking some sort of middle average and cutting out the higher end of the statistics.

I won't give too much away, but my system relies on probabilities and over time the law of averages comes into play and my statistics always normalize. For example if I have two or three really high days where my winning percentage is off the chart and for the month my average trade value is 10%-20% over my typical expectancy, I know that the next N number of days it will correct down. Conversely if I have a few bad days and I am down, I know that in the near term it will correct up. I typically average a range of $4.00 - $7.00 per trade profit and anything way under or way over this will eventually normalize back to this range. It is inescapable because of the nature of the system.

Even though I am 100% an algorythm guy, I will offer this advice from my experience. No matter what the system is, you will always have statistical anomalies in your results both good and bad in the short term. Often times people either double down when the statistical outliers are good, or they will shut down when the outliers are bad. Obviously you can't eat too huge of a draw down, but small losses within reason should not warrant a loss of faith in the system. I believe that if you have tested a system well, and proved that it is good statistically and you know the upper end of the draw downs are under your margin limit, then you should turn the system on and trade every hour the market is open without any restrictions. Statistical anomalies are unavoidable, but they always normalize over time.

Happy Trading

Ian

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