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Home Runs or Daily Goals?
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Home Runs or Daily Goals?

  #11 (permalink)
Elite Member
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In his book Trading Risk, Kenneth Grant claims that pretty much all effective systems break down into 5 small losses, 4 small wins and one big win which is the one the profits come from (similar to the idea suggested above).

I am most comfortable with the more statistical approach to trading (i.e. you can't predict the outcome of a single trade but you can "predict" the overall outcome of a hundred or a thousand trades). I accept that within those "100" trades there will be strings of losers but over the hundred trades I will come out ahead.

I find the concept of daily goals conflicts with this approach. If I hit a loosing streak then I won't hit my daily goal but that does not mean the system is broken.

My job is to put a certain amount of money, which I accept I may loose, at risk using a system that has a reasonable chance of success and trade that system for the hundred trades (or thousand trades or whatever) it will take to realize the potential of that system.

If my back testing was faulty or the markets I am trading change significantly then I loose my money. If not and I place my trades like a machine then I win.

I would like to be able to have daily goals. I was brainwashed into wanting a regularly salaried job too. But in trading I don't think it can be so.

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  #12 (permalink)
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svuhmed View Post
In his book Trading Risk, Kenneth Grant claims that pretty much all effective systems break down into 5 small losses, 4 small wins and one big win which is the one the profits come from (similar to the idea suggested above).

Interesting. I need to go back and look at this to verify. Seems ok.


svuhmed View Post
I would like to be able to have daily goals. I was brainwashed into wanting a regularly salaried job too. But in trading I don't think it can be so.

Maybe that's why I am inherently to the daily goal idea, so I can get paid a fixed amount of money like at work. It just seemed like an easier achievement.

Maybe the goals could be simple. Don't get stopped out. Make money. Trading is so easy.

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  #13 (permalink)
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IMHO, one should have a slightly longer period range for goals; like weekly goals.

This allows for those days that simply do not do well with one's trading style. Not being constrained to a daily goal then allows one to just close the trading computer, and wait for another day. Can a whole week be unconducive? Sure, but it is less likely than one day being unconducive to the trading style.

For example, in day trading the /es, I am a counter trend trader, so I come out well on choppy days, finding natural pivots, waiting for the test of the pivot, then taking trades. That means quick, short trades, for small profits, and hopefully no losses. On the other hand, on trend days, I end up taking profits too quickly and may miss the big move, and end up riding it too late with only a small position size because my stop is so much larger.

By tackling a weekly goal, I can sometimes take the rest of the week off after 2 good days. And I am much quicker to quit when the day seems to be going bad, as I just tell myself: "Heck, maybe tomorrow might work better. Let me keep some powder dry."



Dragon View Post
I was reading Hondo's stuff on More Contracts = More Control = Less Risk Exposure and I was playing around with the numbers. Everyone talks about this but I was hoping maybe someone could dumb it down a little here.

I am trading the 6E and I enter with 3 contracts, one of which targets +10 and the other two are sent as runners from somewhere in break-even land. The idea in my mind is have double the position on runners because that is where the money is made...right?

I realize that I am really oversimplifying here but for the sake of argument... If 6E is trending 20% of the time that's 4 days out of 20 in every month. So...because I am so awesome I average $300 on the 16 non-trending days and $1200 on the 4 trending days. Thats 4800 + 4800 = 9600 a month on average or $480 a day.. Thus, all I need to do is hit the $480 daily goal and quit. One way I can do this is enter with 3 contracts, target one contract at +10 and then send the other two contracts to target another 5 ticks after that, giving me $500 a day if my math is right.

Doing it this way seems so much easier than hanging out and taking 750 one day, then 200 the next day, then 500 another day, then 100 the day after that because I am always positioning myself to send the runners and take as much or as little as the market will give. As long as I follow my rules I take what I can get... It seems for emotional well-being and improved quality of life that setting a daily goal and quitting is best. We have all heard this.

You are welcome to state your case for the Daily Goal as well. I would like to hear a better argument for hitting the home run 20% of the time. Is the Black Swan worth all the effort in the end?


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  #14 (permalink)
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Koganam,

What do you mean by "natural pivots" previous day HLC ?

Krgds,
Andrew


koganam View Post
IMHO, one should have a slightly longer period range for goals; like weekly goals.

This allows for those days that simply do not do well with one's trading style. Not being constrained to a daily goal then allows one to just close the trading computer, and wait for another day. Can a whole week be unconducive? Sure, but it is less likely than one day being unconducive to the trading style.

For example, in day trading the /es, I am a counter trend trader, so I come out well on choppy days, finding natural pivots, waiting for the test of the pivot, then taking trades. That means quick, short trades, for small profits, and hopefully no losses. On the other hand, on trend days, I end up taking profits too quickly and may miss the big move, and end up riding it too late with only a small position size because my stop is so much larger.

By tackling a weekly goal, I can sometimes take the rest of the week off after 2 good days. And I am much quicker to quit when the day seems to be going bad, as I just tell myself: "Heck, maybe tomorrow might work better. Let me keep some powder dry."


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  #15 (permalink)
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The natural pivots in the /es, and most futures 24hr markets for that matter are:
  • Yesterday's high
  • Yesterday's low
  • Overnight high
  • Overnight low.
In my observations, it would seem to me that yesterday's close is only a pivot in the case of gaps.

One also needs to be aware of some kind of pivots: floor, Person's, Woodies, etc, and how the market reacts to them. That allows one to filter trades if the signal is close to them.



Andrew View Post
Koganam,

What do you mean by "natural pivots" previous day HLC ?

Krgds,
Andrew


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  #16 (permalink)
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Koganam,

Agree, good info.
I also watch following (but just for reference)
yesterday RTH HLC/3, Overnight hours HLC/3 as well as both that pivots divided by 2
Let me know if it looks interesting to you too.

Krgds,
Andrew


koganam View Post
The natural pivots in the /es, and most futures 24hr markets for that matter are:
  • Yesterday's high
  • Yesterday's low
  • Overnight high
  • Overnight low.
In my observations, it would seem to me that yesterday's close is only a pivot in the case of gaps.

One also needs to be aware of some kind of pivots: floor, Person's, Woodies, etc, and how the market reacts to them. That allows one to filter trades if the signal is close to them.


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  #17 (permalink)
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svuhmed View Post
I find the concept of daily goals conflicts with this approach. If I hit a loosing streak then I won't hit my daily goal but that does not mean the system is broken.

I think this is a very important point and why I also agree its a bad idea to have a daily goal.
While of course trading requires a great amount of skill there is also a highly random element to it that a sound system will exerpience drawdowns occasionally from nothing other than a random losing streak, and on the flip sound a faulty system will experience random winning streaks.
With a daily goal in mind, it is pyschologically incredibly easy to deviate from a winning strategy when it is going into nothing more than a random losing streak.

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  #18 (permalink)
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darthtrader3.6 View Post
With a daily goal in mind, it is pyschologically incredibly easy to deviate from a winning strategy


I have never thought of it this way, that you could be hurting yourself mentally by quitting on a awesome strategy.

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  #19 (permalink)
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I am struggling with something similar....do i a scalp or position myself for a bigger move. A look at popular traders / educators shows a mixed picture. Most of the time, i think it depends on the persons psychology.

I have poor self-esteem (:-)) and need constant approval. So i scalp. I take the money, when i see the move is running out of steam...this could be in the form of trailing my scalp chart candles or sometimes my anchor candles. When i trail my anchor candles i make double my intended scalp target.

Another thing i struggle with is having a daily goal vs. trading all day. In my trading experience i have made 20 - 30 ticks in a couple of trades and then give it all back once i hit a chop area. Then again i scalp and scalp and make it all back. But most times i go into the red after a nice win...and then deeper into the red. Then i feel bad and lose confidence and this is where i am now. I am scared to trade live even though i have a decent system with a 4 tick risk for 8 + ticks reward potential etc.

Currently i have a goal of making 200 net on the 6E using 1 contract. Now do i scalp for 4 ticks a couple of times, or do i scalp for 8 ticks or do hold for 16 ticks.

The beauty of trending instruments like the 6E is that if it starts trending, it usually gives a few small pullbacks in the trend and you could get a nice 10+ ticks without heat. If i don't trade during the chop/and any period that is not looking like a trend, i could potentially make my daily goal in that one trend and be done.

I guess as long i trade i will be guessing myself..especially if i see someone is making 10 points etc on a trade while i make 20 trades to make the 10 points.


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  #20 (permalink)
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Dragon View Post
I was reading Hondo's stuff on More Contracts = More Control = Less Risk Exposure and I was playing around with the numbers. Everyone talks about this but I was hoping maybe someone could dumb it down a little here.

I am trading the 6E and I enter with 3 contracts, one of which targets +10 and the other two are sent as runners from somewhere in break-even land. The idea in my mind is have double the position on runners because that is where the money is made...right?

I realize that I am really oversimplifying here but for the sake of argument... If 6E is trending 20% of the time that's 4 days out of 20 in every month. So...because I am so awesome I average $300 on the 16 non-trending days and $1200 on the 4 trending days. Thats 4800 + 4800 = 9600 a month on average or $480 a day.. Thus, all I need to do is hit the $480 daily goal and quit. One way I can do this is enter with 3 contracts, target one contract at +10 and then send the other two contracts to target another 5 ticks after that, giving me $500 a day if my math is right.

Doing it this way seems so much easier than hanging out and taking 750 one day, then 200 the next day, then 500 another day, then 100 the day after that because I am always positioning myself to send the runners and take as much or as little as the market will give. As long as I follow my rules I take what I can get... It seems for emotional well-being and improved quality of life that setting a daily goal and quitting is best. We have all heard this.

You are welcome to state your case for the Daily Goal as well. I would like to hear a better argument for hitting the home run 20% of the time. Is the Black Swan worth all the effort in the end?

In my opinion, it makes absolutely no sense whatsoever to have a daily profit target and then quit after that. If you do that, then what you are really doing is "dictating" to the market how much money you would like it to give you on a daily basis. If you study the markets long enough, you will realize that 80% of your profits can come from 20% of the time you spend trading.

The best way to trade is to adapt to the market, not to try to force the market to adapt to your predefined notion of what you think you should be making. Some days the market will give you a lot, some days it will give you very little. Learn to recognize the easy times and take advantage of them when they happen. If you quit early on those days just because you have reached some artificial daily goal, then you will be seriously reducing your overall profits, and ironically increasing your risk of losing money as a trader. You need those big days to really maximize your results and make up for some other times when you might lose money.

If you think about it, setting a daily goal and then walking away is a serious sign of uncertainty and fear in you as a trader. Why would you walk away if the market is doing what it should be doing and giving you money? Because you have already made a profit and are now afraid to lose it? If that is the case, then your confidence in your skills and market understanding is lacking, and you need more practice. If you psychologically feel the need to stick to daily goals because you are afraid of giving back profits, then you are engaging in "fear-based" trading, and you will never become a great trader until you overcome that.

The best traders know how to press their advantage when the odds and market conditions are in their favor, and pull back when the odds are not. Therefore, do not try to "dictate" to the market what it should be giving you - instead, train yourself to adapt to what it is doing and ride the good times while they last. Stay with the wave as long as it is running, and when it is no longer so easy to trade, only then should you stop.

I am reminded of a quote from Charles Darwin:

"It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change. "

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