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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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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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.
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.
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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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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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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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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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.