I dont think you should have a daily $ goal but you should have a goal to trade your edge and trade your plan. If you are getting signals, you should be taking trades. I ve seen plenty of days when mondays were dull, hardly any money to be made and tuesday picks up a little and big wednesday and thursday and slow grind after morning on friday. Same thing with great action Monday or tuesday and then nothing for rest of week. Same goes for weekly action -great action -great in Nov dec and hardly anything in Jan/ feb beginning then last week of feb great action.
How can you differentiate and put a $$ on you trading day to day when market conditions change month to month ? Are you still going to be happy if you get the volatility of 2007 2008 back and you still make $ from 2011 grinding days ? I personally think your trading plan should have an answer for that.
Some days and weeks in every year always stand out-the home runs as I call em. They are the ones that really count when you are paying taxes. Looking for $$ each and every week is putting extreme pressure on a beginner esp. Once you get out of that mentality and trade in flow, the daily $ is not a problem. Its kind of like looking for a 5 minute long signal when weekly is a H$S pattern-sure you can make the .10 but miss the $5 move.
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I started this thread because I read an email by a vendor that was asking this very question. I put it in the psychology section because it does seem to be psychological in nature. The vendors position was to not have a daily goal. The reason being is as others have said it puts you in the mind set of focusing on results (money) and not the process of trading. The vendor called it decision making. Traders get paid to make decisions based on ones edge. Having a daily goal can put pressure on you to try and reach that goal even on a slow, choppy day. The best "decision" for that day may be to not trade. Conversely, if the market is behaving in a way that makes ones process provide very good opportunity well beyond some other day, it makes sense to make those trades based on ones edge, decisions and process, not focusing on outcome. If one wants to limit themselves in some way it may be best to have your process/plan say, "I only trade 2 hours in the morning, or 1 hour in the morning and 1 hour near the close, or 2 and 2. Those limits would be process based and not results based. I think line anything psychology related in trading this may be easier said than done.
By the way, I used a daily limit as the topic because that was what the vendor used in his email in terms of day trading, but I believe having results oriented goals for any time period (daily, weekly etc.) puts the focus in the wrong place.
Good discussion and I have been struggling with these issues myself lately.
I don't like the idea of a hard daily profit target but am toying with the idea of a trailing stop that would stop me from eating up too much of my profits after a strong start to the day. The reason for this in my case is psychological: I am a discretionary trader, not a purely mechanical trader, and once I watch my profits start to disappear it seems to impact my decision-making. I take lower-quality trades in an attempt to make up the loss.
Still haven't figured out what method would work best for me. Anyone else here use any kind of daily equity trailing stop method? Like for instance, Once you surpass $200 on the day, you stop trading once you drop down below 50% of the high water mark on the day?
I don't like the idea of daily, weekly, monthly, or annual targets. I believe them to be unrealistic for me and causes me to focus on the wrong things. I've been trading CL for several years and have found that trading all day on CL doesn't work for me. The normal day if there is such a thing sees the activity that I like to see between the hours of 8-11 central time. That can mean some days won't have a trade. Really what I'm looking for more than anything is 2-3 trades during those hours and then I eat lunch and go the barn to ride and do chores.
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I think that whatever you decide it may be best not to make it based on a dollar amount or a % of a dollar amount.
There has been some discussion on exits. I know @bigmike has said too many traders focus on entry and ignore exits. It seems that if one has the necessary criteria for their method to enter a trade, one also needs to have a target in mind, or criteria to exit. The exit can be based on R:R, it can be based on a fixed target, or any number of thins such ad the next logical area of support or resistance. Maybe you scale out. I don't know what's best, but I think having reasons other than results for exits are beneficial. Get the mind off of results (money) and keep it on your process and decisions based on the process. Easier said than done, I know.
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I do not have a daily +$ goal. I know my average/max winning day (I actually watch how it changes over time). I stop trading when I feel I'm not up to it anymore (catch myself overtrading, mentally exhausted,....)
What I do have is a daily -$ goal, e.g. whatever happens I will not loose more than my daily loss limit. As far my trading is concerned this is the most important.
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The reality is if you are a full time trader and reliant on trading income to pay the bills then you must have annual and monthly or quarterly targets.
If you are unable to generate enough income through trading to meet your minimum expenses then it's perhaps time to find another job. This is no different to the concept of a normal job. You look for a job that pays enough to cover your expenses and then some. So to suggest that some type of profit goal doesn't matter is unrealistic in the real world. I agree that daily targets don't make any sense at all.
For example, if you need to earn say $60,000 of pre-tax income to survive then this amounts to $5,000 a month. So as an absolute minimum you need to earn $5k a month and the trader should use this as a minimum target. If you don't monitor this monthly then it's easy to get behind meaning you have to take much more risk later in the year to ensure sufficient income is generated.
The problem is it can put traders with small account balances in a precarious position as they may need to take big risks, say 5% of the account balance per trade to generate the required income. If this is the case then it's probably best to stay in a full time job and save more money so the risk per trade as a % of the bank balance reduces.
What I do is set a minimum target based on required expenses. I then set two stretch targets. The first stretch target could be 20% over the minimum and then the second stretch target is a higher amount again. These stretch targets are based on how many contracts I'm allowed to trade. As contract numbers increase so do the stretch targets. This system is part of an overall portfolio management strategy so is a little more involved than this as I set other targets based on composite benchmark returns plus stretch targets.
At the end of the month I then compare performance v budget. The primary goal is to achieve the minimum target per month. Any variances (positive or negative) are analyzed to find out where and why performance differed. To operate this type of system you need sound risk management skills and also a fairly long trade history so you can get a feel of how an average month will look.
Last edited by djkiwi; March 12th, 2013 at 02:40 AM.
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I'm not so sure that meeting the targets you mention is that necessary. What's more important is cash flow. Manage your cash flow and as long as you are making enough to pay all the bills which includes your salary then it doesn't matter that your trading didn't meet some arbitrary target for a month or 2. I had a computer consulting business for several years and that's exactly what I did. There are some months where the business just isn't there but I didn't panic because I put something back during the good months to cover the low performing periods. So, the key in any business is to manage based on cash flow.
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