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Monthly Profit Targets
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Monthly Profit Targets

  #1 (permalink)
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dgresens's Avatar
 
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Monthly Profit Targets

I'm considering adding monthly profit targets to my trading plan and wanted to hear the pros and cons of such an idea. What is wrong with trading to a number (either profit or loss) on a monthly basis. Yes, I have daily profit and loss targets and stop trading after that, but why not set a number to reach for a month and call it quits?

I work full time, but do have the ability to monitor the markets throughout the day. This is not my primary form of income. I trade fully automated on a VPS trading the Euro only. My strategy has about a 53% win rate, taking one trade per trading day with a max historical drawdown of 8%.

If I make a couple grand a month, I'm happy - why push it?

I'd love to hear your thoughts on both sides of the idea.

Thanks

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  #3 (permalink)
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You shouldn't have such targets, you should try to extract as much from the markets as possible.

The one metric that is important, is how much one risks -- especially the ratio of return:risk. This will help streamline the position sizing process.

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I agree with Lornz.

My experience is it's great to have a monthly loss limit. But it's counterproductive to have a profit target, since if you fail to reach it you will overtrade and become sloppy.

All you can do is make sure you trade well, and the markets will give what they give.

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I would agree with the comments above. Without knowing how you manage trades and so forth it's hard to give specific advice but, maybe you could use some kind of trailing stop to get some more out of your trades. Just a thought.

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There are times a few months can make your entire year. What if you cut those months short?

To trade you really need to deal with statistical probabilities or you will lose. Question is what does your stats say and how would such a setup affect your overall probabilities? If you don't know the answers to those questions then don't change anything until you do.

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This one's a no-brainer.

When you trading well, and the market is trading well, you press, in terms of both size and frequency.

Conversely, when you are not trading well , and the market is choppy, you scale back, or lay off completely.

There's no debate here, imo.

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tigertrader View Post
This one's a no-brainer.

When you trading well, and the market is trading well, you press, in terms of both size and frequency.

Conversely, when you are not trading well , and the market is choppy, you scale back, or lay off completely.

There's no debate here, imo.

I like the idea of using a simple moving average on your daily pnl. If you are 'trading above' your pnl SMA line, then you keep your normal size. If you are 'trading below' your pnl SMA line, then you reduce size.

What are your thoughts?

Mike

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  #9 (permalink)
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dgresens View Post
If I make a couple grand a month, I'm happy - why push it?

To make millions? Not worry about having/needing money again?

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  #10 (permalink)
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Firstly I will say that I agree with everyone here who's posted that controlling risk and not using a profit target is the right way to think about trading and that pressing when you have the advantage is important.

However, I have heard of a trader who has a yearly profit target and trades as intensely as possible from the beginning of the year until that target is made and then takes the rest of the year off. The trader has decided that lifestyle and time are more important to him than money and so once he figured out how much he needs to live for one year he just makes that amount and quits so he can have 7-9 months off a year.

... just another way to look at this business.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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