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A daily $ goal
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A daily $ goal

  #51 (permalink)
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Very good points Robert, indeed there is a certain conflict by taking a Combine which 'forces' you to trade more size than you're usually used to. This will bring up the thought of 'averaging down' the total profit objective of the Combine to a daily amount you NEED to make, instead of focusing on the total amount you have to accomplish at the END of the Combine.

IMO, this could lead to overtrading as well as quitting on a good and profitable day without any logical reason for doing so, just because you're anxious to give back a bit of the 'average profit' you just made on that particular day.

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  #52 (permalink)
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In general for things like trading I think it is best to have process goals and not achievement goals. I mean primarily for beginners and intermediate level traders. Did I follow my trading plan? I think early you need a rigorous stiff set of procedures that you follow.

However I also believe that it is good to have some predetermined check points. Where you take time to evaluate, take a break, and perhaps even close for the day. These might be after a big loss, after a big, or at some predetermined profit or loss level. I would not have a specific money goal. But I think it is useful to access what a reasonable daily expectation is.

Some people who criticize the daily money goal do so on the same basis that "quit winning" is criticized by gambling theorists like David Slansky. They argue that you should quit when conditions change and not because of some arbitrary win limit. They are almost correct. The truth is most of us are not so totally self aware to immediately recognize that we a little tired, or emotionally upset. And beginners and intermediates might not notice immediately that a trending market has flattened out a bit, or other market change, until it is to late. Personally I read charts with remarkable clarity after the fact. All those things can and will reduce your winning percentage.

So I might have a goal, but I would not slavishly adhere to it. But having some preset check yourself guidelines is not a bad idea. Finally I will say the goal can not be hard or inflexible because sometimes there really isn't a good trade.

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  #53 (permalink)
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There's two ways to get a reasonable estimate of your long term return: one is to do sufficient backtesting, the other is to trade over a period of a couple years and see what it averages out to. There's really no other way, because there are so many variables where even a slight change in one can have a big impact down the line. Certainly nobody should be in the game of trying guess what their return will look like if they have not made any effort to quantify their methods.

A previous poster said something about "process being more important than achievement goals" which is absolutely correct. Your process is what drives your results. Not arbitrary "$100/day" numbers you pick out of a hat. Unless you have backtested over a large sample, have modeled your strategy against a data set, or have actually day traded for two or three years, you are just guessing at the number.

Your goal should not be a monetary goal. Your goal should be to identify what drives prices and to develop a trading strategy based on that premise. A profit or loss target that does not have any correlation with the price driver is not going to work.

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  #54 (permalink)
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Its hard to put a number on it. But consistent performance shows if you trading is trending in the right direction. Sometimes its better to paper trade and back test your method but not everyone takes paper trading seriously bc of the psychology.

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  #55 (permalink)
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I was feeling like I was ready to go "full time" last year. And then decided to pursue a daily goal to see how it felt. Very bad decision in hindsight.

I took a break, came back with a new attitude, and even though I currently have the resources to trade a well-funded account, I don't right now. For a trader who has a few years experience and has done well but found themselves getting off track for some reason (not sure who that could be), one great way to sharpen risk management skills is to trade a very small account. It forces a different view of how to make it happen. A few bad decisions and it is over. So, no bad decisions.

I am having a lot of fun at it, no stress, better able to objectively review my trading, my personality, my reasons for trading. And my trading understanding I find is improving as a result. My tenacity has turned to other things than daily or weekly take, or even account growth. Like, where is my head while I am trading versus last week? How could I feel better about holding winners? How does my current view of the market limit my performance?

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  #56 (permalink)
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Awesome Post Private Banker. I'm totally on your 500 car wavelength. ...

"Taking out your entire week's profits during the account growth phase is misguided and will hurt you."

Can we still get drunk and eat tacos???? lol

Seriously love this post though, very good advice, most excellent!

Private Banker View Post
Like just about everyone on here has said, I believe having a daily profit target is naive. Reason being, that would mean you are trying to enforce your will on something that is beyond our control. There is no way to accurately know before hand what the market will do day in and day out. It is best to simply manage your risk day in and day out while measuring your performance against what the day provided. For example, if you're trading the ES and it only has a 5 point range on the day while your daily monetary target is $250 per contract, you may have a difficult time getting that based on however you trade the market. This also works against you on large range days. With that same monetary target of $250 per contract but the day's range ends up being 15 points, well, you left a lot of money on the table.

Trading is all about managing risk first and foremost. The trading profits should be looked at as an average return because you'll have good days and you'll have bad days. Its all about how it averages out.

If you're new(er) to trading and are break even or slightly profitable, you're still hurting yourself if you have to make a certain amount per month just to pay the bills. Its more of a psychological thing vs. the opportunity to make your goal. The opportunity is absolutely there but just the knowing of you have to make a certain amount makes a trader overly risk averse. This will hurt you. Its best to have a secondary/complimentary source of income in place until you get to the point that you have enough capital set aside to cover your expenses for a year or so thus eliminating the "need" to make a certain amount per month/week/day.

With regards to account size, this needs to be looked at differently vs. the traditional money managers' returns. I would imagine a majority on here are intra-day futures traders. Futures trading involves substantial leverage. While you can lose big, you can also win real big. If you have an edge and manage your risk efficiently, you can accomplish what I call the first stage in trading which is account growth. Growing your trading account is similar to starting any other type of business. You need to increase your production and revenue while retaining earnings as much as possible while keeping your overhead low. As your account grows, you can increase the amount of "business" you're conducting while managing your risk and overhead. Once you're consistently starting to make more and more money, you can begin to pay yourself based on how everything is going. There will undoubtedly be setbacks and periods of rapid growth. But like any business, it needs to be approached tactically. Taking out your entire week's profits during the account growth phase is misguided and will hurt you.

Just like any small business start up, the growth phase is the most important part however, once you start to find success, you need to adjust accordingly while still looking for growth. This may mean changing the market in which you're trading. For example, let's say you've been trading Crude Oil and you've reached the point where you are looking to trade size. When attempting to do this, you begin to experience terrible slippage. This may be a sign that its time to move to a more liquid market such as the E-mini S&P or Bonds. At the end of the day, it isn't the market in which we're trading that matters, its all about the risk and liquidity in which the market provides. If you're looking to trade 500 cars on average, it doesn't matter the "sexiness" of the market, its all about market's ability to accept your business. This obviously applies to other businesses as well. If you're looking to build a massive amount of products but you've reached capacity in your factory, what do you do?

There will be a point where you find the "sweet spot" in your trading with regards to account size, risk, market(s) and somewhat predictable income. Until you reach that "sweet spot", you're in account growth mode. There is no advantage to starting trading with a $250k account vs. a $25k account. The overall results should be the same in context. Sure the $250k account can produce more income but it can also produce larger losses. I feel its almost better to start with a somewhat smaller stake. This teaches discipline and proper risk management. You only have so much but at the same time, the actual risk you're taking on is smaller. Believe me, I've seen "rich boys" blow out million dollar accounts multiple times. If anything, they were less disciplined because they had so much money and the business they were doing was reckless.

Bottom line, if you have a consistent edge coupled with sound risk management, you can find that sweet spot provided you approach it like a small business would. This means taking no or very little income at first. Having a secondary income during this period is crucial. Maybe you have a spouse that is willing to cover the expenses for the time being. Once you start to get some traction, you initiate a modest "salary" for yourself and go from there. Having a daily target amount will only stunt your growth. Trade the market for what it provides. Any other business doesn't set out to just make "this" amount of sales per day. They gauge it based on actual results of what the market will provide.

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  #57 (permalink)
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prisonbreaker82 View Post
I don't understand people who set daily profit targets.. do they don't want to make dollars?

If you see good setups that works for you, why stop?

I think the reason to use daily profit targets comes from the situation where the trader have a manner where he first is up lets say +5R(isk) and then at the end of the day hes down -5R. If this happens very often it may be a good practice to use daily targets for example stop trading after -3R drawdown (after being over +3R) or maybe a fixed profit target +3R. Just an example but something like this.

I dont see anything naive in this. Look through your past trades and see how your result (winning day%, drawdowns etc.) will do with different daily target settings (dd or fixed).

The past (history) is not a proof of future profits but may give you a clue of your trading habits and improve results.

.... juuuuust my humble opinion

Last edited by Scalpguy; May 22nd, 2013 at 03:14 PM.
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  #58 (permalink)
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prisonbreaker82 View Post
I don't understand people who set daily profit targets.. do they don't want to make dollars?

If you see good setups that works for you, why stop?

Because I have a tendency of over trading and giving back those "dollars" later in the day. I set an achievable $150 to $200/day on the ES with 8 ticks on 2 contracts. I scalp 4 ticks and then swing the other contract. Sometimes I get lucky and get that at 9am in the morning and then have the rest of the day off. Other days I will start with a loss and have to grind out the day.

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  #59 (permalink)
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weekly goal for me too

i have and do feel like a lot of others have said.

not having a daily goal allows you to take off days that are not prime.

i do have a daily cutoff of say 7 trades, over that i get sloppy and am over trading.

when i am up during the day i tighten up my stops as to not give back profits and without fail this causes me to get stopped out on little swings, then the market does exactly what i was expecting in the first place, instead of making all that i should have i have a small gain. happens every time. super frustrating and probably the biggest flaw in my trading.

i wish so much that i could over come this. it is like the flawed logic of taxi drivers that work until they make 300 bucks then call it a day and go home. so on good money making day they work an hour and bad slow days they work 15 hours. flawed logic. on profitable days you should work 15 hours and make a bunch of money and on slow days you should just go home.

alas my mental block of not being able to stop trailing my stops makes this a hard one for me to do, even though i know it is the right thing to do.

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  #60 (permalink)
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Speckleback View Post
Personally I prefer a weekly goal. However, my goal is a target! I found that if you focus too much on hitting your goal, your trading decisions tend to change as you approach that goal. Especially if you are falling a bit short near the end of the week.

Likewise - in some cases I've set a dollar amount of profit, which I once reached in hours, tho it usually takes days. My target more often is a stated return on my investment regardless of duration. Lately my target has been yield on cost on securities which might be held indefinitely.

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