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.
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.
The following user says Thank You to kbit for this post:
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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The following user says Thank You to liquidcci for this post:
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?
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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