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Automated trading with fixed profit target?


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Automated trading with fixed profit target?

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  #1 (permalink)
Germany
 
 
Posts: 1 since Jul 2020
Thanks: 3 given, 0 received

Hey guys,

first of all, thank you for all the valuable information in this forum.

I have recently stumbled upon some automated trading systems on YouTube. Some of the algos used traded until they hit a fixed profit target. When aiming for a specific profit target it is easy to adjust the parameters of the trading system to create a nice steady equity curve for the day - when showing the results after the markets have closed...

I wonder if profit targets are used by other traders with automated trading systems as well? I mean, if you have found a correlation between the occurrence of a specific pattern and the market direction/reaction, then why stop trading if you have your target hit? Of course, you need to evaluate when your trading system has the least drawdown and therefore e.g. only trade the high volume sessions during the trading day or find other ways to protect the algo from overtrading. But is a profit target a good choice to do so?

Thanks in advance!

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  #2 (permalink)
Park Ridge IL
 
Experience: Intermediate
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1. "fixed profit target" is not quite correct rather thinking of profit target to deploy an automated trading-session is correlated to RISK factor as an example the target is 1000 with a stop of -300;

2. "overtrading" perhaps should be protecting the automated trading-session from placing too many orders with an insignificant result [cost of trading becomes a burden]

As a solvency and for influence [see #AHR123] I was just looking at Exponential growth [see link bellow] to monitor the PNL and trigger a change in a robot behavior/mechanism in that an opportunity and its pair the recipe are not adequate for such market.
https://en.wikipedia.org/wiki/Exponential_growth

Concluding that even a robot should quit if his libraries/abilities do not work on certain market-conditions. Backtesting most likely will show a good ratio if such robot stops and wait for another day-session.


Oh, forgot to address the “why stop trading” there are many “moving parts” and the said profit target can be override by “Stay There” one example is in this chart [here] that a good-short doesn’t even touch the MA-line.

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  #3 (permalink)
London
 
Experience: Intermediate
Platform: MultiCharts, MetaTrader
Trading: DAX
 
Posts: 8 since Jul 2020
Thanks: 6 given, 12 received


I use fixed targets for profits and stops in every algorithm I run. As a rule of thumb, both my stop losses and profit targets are usually the same, for example allow for 2% movement in either direction. This rigidity keeps me sane when running more than 10 algorithms and it still brings in profits, as long as my win rate is above 50%.

Cheers

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