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Do you have a daily profit target?

  #16 (permalink)

Chicago, Illinois
Trading Experience: Advanced
Platform: Ninjatrader, TT, InvestorRT
Broker/Data: Advantage Futures, Ninja/TT and InvestorRT/IQFeed.
Favorite Futures: Treasury futures
Posts: 302 since Nov 2010
Thanks: 193 given, 851 received

Yes, I trade with a monetary goal

I've written about this several times over the years on I was a floor trader in the Five Year Note pit at the CBOT and the turning point in my career was when I started trading with a very modest profit objective relative to the size I was trading. After three years of mixed success in the pits, the first month that I tried trading with a goal was the beginning of a 6 1/2 year run where I didn't have a losing month and where I went from being a 5 lot trader to being a 500-1000 lot trader.

I started trading this way because my results were sporadic, I needed to start making money consistently to stay in business, and most days I was up decent money early in the day but gave a lot of it back. My goal was 4 ticks ($15.62/tick) per unit of size. I attribute my success using this method to two basic things: 1) seeking such a modest goal allowed me to trade only the highest probability situations, and 2) I rarely experienced decision fatigue.

There are undoubtedly many, many days when I left a lot of money on the table. Sometimes I was done by 7:45 AM. Sometimes (rarely) I was still trading into the close. On average I probably traded 3-4 hours/day. One thing for sure was that I traded a lot less volume than guys making similar money.

My goal was not a set in stone goal. I wouldn't leave until I reached it, but I wouldn't close out a winning position just because I reached it. I'd let the market run if that's what it clearly wanted to do, but I got a lot more vigilant once I had reached the goal.

Is this for everyone? Absolutely not. If you're a pure algo trader with a winning edge who just lets the algos run and makes no decisions along the way other than what to have for lunch, you maximize your expected value by making a long string of small bets relative to your capital. But if you're a discretionary trader, it's well established in the science of psychology that the more decisions you make the less good you are at making them as the day progresses.

(Off-topic) By the way, the way I increased my size 100-200 fold over the years was to link it to my capital in a very disciplined manner. I will never understand why traders working in liquid markets limit their size as they get consistent. The key to making a fortune in this business it to get big. And I can tell you from painful personal experience that your edge may dry up eventually, so exploit that edge to the max. Which IMO does NOT mean you have to trade all day, but trade as big as the situation and your capitalization allow.

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