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Andrew Aziz

Why having a daily profit target is important?

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Hi traders, I like to discuss in this forum why having a daily profit target is important. Why I am walking away after I made some decent money, and stop trading.

Why? I do not honesty 100% know what is the secret in it, but I found myself losing statistically significant after made my daily goal. What is the reason? I read about having a daily goal, but I never learned why.

Can you discuss this here? I love to hear your stories and ideas? You might discuss anything you think it is relevant. like:

1 .You do not believe it is true, and since each trade is independent of others in probability it should not have any effect.

2. Psychology plays a role, you look at your P&L more than focus on good trading.

3. Time of the day? As time goes by, market gets choppier.

4. ......

Help me in this discussion as I like to have it my next book on psephology!

THANK YOU for being with BearBullTraders! 

 

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While you need a stock that's moving, hence a volatile stock, that isn't the only criteria.  Some stocks are heavily manipulated and some aren't.  But the first hour and a half of the trading day are more consumer oriented and can be swayed somewhat.  But the rest of the day is driven by institutions running computers with algorithms that have specific programmed agendas that you can't know.  And if several of them work on a single stock it's choppy and unpredictable.  The most predictable time of the day is an hour to an hour and a half after the bell.  

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I am sure than more than half of the days you keep trading after hitting your goal, you end up under your goal.

So, that alone is why you shouldn't do it

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Hello Fellow Traders,

I completely agree with Andrew's philosophy of shutting down after reaching profit goal. I, just like many others have kept on trading after meeting my goal and ended up losing money. I think it's human nature to continue doing something that you are doing good at. This stands for many things like a game, or solving a problem, you just want to keep doing it.

It's not always your mind that is driving you to keep going, it's the adrenaline, the thought of making more money and exceeding your goal, and that is all at your fingertips. This is why I feel Andrew is on the leading edge teaching. This career is one that requires calmness and clear thinking, not inspirational decisions based on emotion. Only those who can stay in a calm state of mind and base their decisions on data and what they can have reason for will be successful at this career (you should treat it as one in order to be serious about it). 

I could be the poster child for this subject. I had lost a lot of money making inspirational decisions. Not proud of it but I lost over $22k on IQ, it's why I call it the DEVIL.  I was a stubborn one and couldn't believe that it took me so long to learn my lesson, to shut down after I met my goal. 

Since I have put the practice into action, my trading has been so much better and I have recouped my $22k little by little. I know some lessons have to be experienced to believe. Don't do that with this one. Just think if we all did what we were told without experimenting and finding out on our own. We, or at least, I would be so much better off.  

 

Cheers,

Gary Scicluna

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Personally, I have trouble stopping at times because I've had success making significantly more than my goal.  So the thinking then is if I stop when I've "only made $500" then how am I going to make that $2,000 that I made the other day.  I'm giving up a lot of upside by stopping at my goal...or so the thinking goes.

The counter to that is one day I kept trading because I had a very good read on a particular stock and racked up +$3,000 after fees.  Because I was trading so well, I continued and went on to give all of that back and end the day down $2,000.  So did I really "make $3k"?  No, I lost $2k because I didn't stop trading.  

I'm still in the middle of developing a strategy to deal with this sort of thing but what I'm leaning towards a two pronged approach.  First, while individual daily PnL are important, I'm beginning to focus more on the week.  I'd like to make $500+ per day so roughly $2,500 per week.  This week, I made roughly that amount on Monday and Tuesday so my goal is to not jeopardize that for the rest of the week.  If I hit my goal for that day I have to stop.  I can't afford to turn a win into a loss because I'm looking at the week, not just the day.  The second thing I'm working on is once I meet my goal for the day if I chose to continue trading then I have to cut back my sizes so as to not jeopardize profits already made.  If I'm still trading well I'm still making money but if I revert to the mean I'm losing less than I otherwise would.  

I've been trading live for less than two months and have had good stretches (+7k over 10 straight green days) and really really bad stretches (-12k over three days in one week to give back all my gains and then some).  Right now I'm pretty much right at break-even from when I started and I'm tweaking my trading rules every few days as I learn more about how I'm trading and where my problem areas are.  Trying to limit the max losses, etc.  Ultimately it will be the psychology and my ability to formulate and follow rules that mitigate negative psychological tendencies that will determine how successful I am in the long run.  

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I think having a profit target is important for a number of reasons. For myself these are: 

1. As with all strategies, there must be an entry or exit criteria. You can adjust these up or down as you gain experience to better gauge how to best efficiently utilize entry/exit but once defined, these must be stuck to. It's just simple business principles and instills operational excellence. 

2. A series of consecutive wins may instill subconscious overconfidence. This happens to me where I sometimes feel like I cannot make a mistake during that day...that is until I do. And then when that happens, I want to earn back what I lost because "it's mine." This type of thinking is what turns a profitable day into a loser. It happened to me before and sometimes still do but with experience, I catch myself earlier so when it happens now, I stop myself and walk away. 

3. DECISION FATIGUE. I think this is probably the number one reason for myself. I feel like I am at my best in the early morning. Every decision can be made sharp and decisive. I am able to look at and process numerous variables. Over a dozen or more of these decisions under high stress conditions of trading, your brain fatigues. Then you start being lazier on a subconscious level. This is when you make critical mistakes. For example, a few days ago I took a reversal on a strong bullish stock and made a rookie mistake of not checking 5-minute for engulfing (what the heck was I thinking? on a strong bullish stock?). 

4. Opportunities are limitless (in theory) but there is no need to take all of them. One should take the highest probability ones with greatest returns. If one keeps trading, the number of top AAA opportunities dwindle and trades that you enter begin to drop in grade, setting up for a bad trade. 

 

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10 Best Reasons to Quit While Ahead

The discussions is whether it is best to stop trading, even very early in the day, if you have made “your money” (whatever that is for you).  For me, a relative newbie (just went live 2 weeks ago after 8 months in Sim) the answer is YES - better to stop.  Here are my reasons why:

  1. Part of Risk Management - right there with setting stops (hard or mental) and putting controls on your account.
  1. Don’t let “trading” become an “addiction.”  Keep it in moderation in your overall lifestyle.

      8.  The mathematical laws of probability - even though every trade is independent, odds favor a neutral outcome over a lot of events.

  1. Even if the mathematical odds mentioned in 8 are not activated, the psychological knowledge of this likelihood may play on you in the background of your mind.
  1. Time of Day - If you have made some money, some time has passed, and the longer you stay in, the more conditions change.  So, whatever type of trade you like best will wane as time goes on and you will need to be thinking about a different strategy, which can be challenging and add to likelihood of diminishing returns.

      5.  If you do stay…. - It is very natural to want to have another good trade, and there is nothing wrong with staying, but if you do, make a change to your rules.  For example, only take the very best setups, or for experimenting switch to simulator, or do NOT let yourself give back more than X percent of your gains (I suggest 10%).  Then you can still walk away proud and yet have tried to improve on the already good situation.

  1. Helps you stay with A+ trades - If you adopt the suggestions in #5, then you only allow yourself to take A+ trades if you do stay because Who wants to give back money?  This general concept of cautious selection of trades will spread naturally into the times before you “make your money” - not just after you do it.

     3.  Minimize self-loathing - If you have not felt this after giving back what you worked so hard to earn, then you are not yet trading - even in Sim.  It is universal.  But, it does not have to continue to happen.  This mistake does not have to be repeated.  Try waling away a couple of times with some good early profits and notice how good it feels for the rest of the day.

  1. More time to learn - If you love trading, you probably also love reading about trading, watching videos about trading, thinking about trading strategies, etc.  So, just because you have stopped trading for the day, does not mean you can not be engaged in other exciting trading activities.  Have time and better energy for your journal and other trader improvement activities.

AND, the number 1 reason to stop trading after making money is:

  1. RESPECT and PROTECT your account and live to trade many more days.

Now, if I can only listen to myself…..

Regards,

Emily

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All good points and thanks for the post Andrew!  I think trading is at least 90/10 psychology to knowledge possibly more.  So like the book Trading in the Zone says the mental structure necessary to do well in this business usually comes as a result of several painful losses of equity.  So stopping at a profit target for the day would definitely be a key component of that.

My take?  Stopping trading once your target is his(for me its 1%), is as intelligent as stopping once the max loss is hit for the day (also 1%).  Do I follow this? Not always. Fear/greed are two emotions that still affect me.

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I think having a daily profit goal is incredibly important, not only for the obvious reasons of income to live on and invest further, but psychologically, it sets up a framework that minimizes risk and  maximizes the chances of success. Assuming you have been successful at historically hitting your target profit, having one serves to set an attainable goal and ultimately, a daily "reward". Conversely, consider the concept of "more", in our little monkey/reptile brains, "more" acts like a short circuit that can lead to illogical and impulsive actions.  More is almost always perceived as better, at least on the surface, but it has a vague and nebulous value, more is always more, when you get more, you want what? MORE OF IT ! In trading, this is a recipe for disaster as the amount of risk is infinite and entails almost no chance of success, this of course is what we traders seek to reduce, not enhance. I'm no psychologist so please pardon my rather primitive explanations below and also, the following is ONLY my opinion and personal perspective on the topic. 

We humans are reward vs threat based creatures who despite different ways of going about it, are simply looking to have our needs met with as little exposure to risk as possible. Setting a daily goal accomplishes this through first off, setting a benchmark at which (X) amount of daily profit meets whatever daily needs we require. You hit your goal, you get the dopamine reward, you've accomplished what you set out to do, life is good right? So why push it further which simply invites risk and loss? Not only that, how many solid trades can you find in a day? To some extent, its a numbers game with the opportunity limited by our capacity to find the good ones. Also, in our heads, taking a loss after meeting a goal can feel far more devastating than simply having a loss/random difficult day, while this pain/anxiety is good in the sense that it is how we learn what NOT to do, how many times do you need to go through this to learn that it was NOT the right path to take. Again, setting up a rule that says, when I hit (x) dollars for the day, I walk away, creates the framework in which this risk of highly minimized.

Now, let's consider one possible scenario of what MIGHT go through the mind of a trader who does not set a daily goal. He starts the day with the concept of some nebulous dollar figure in his head that has no upper limit, it's something unattainable, he has no goal other than "MORE", what is more? More is always more and you always want more of it because it is scarce and hard to come by. It's a bit like the idea of doing something you need to do, but saying, you will do it tomorrow, tomorrow often never comes, just like more is never enough, more is always more, it ultimately becomes greed, carelessness, and drastically clouds sound judgement. Setting a profit goal allows us to attain a finite, acceptable, and definite value of what "more", is. I mean it is more than you started with right? I think most of us have noticed that, and I have for sure recognized, that the more you trade, the more chances there are of a loss, and possibly a big loss, and worst feeling of all? unnecessarily losing a previously attained "reward" , which is something we all strive to avoid, so why do it? Psychologically, we are always scanning the horizon for the thing that will meet our needs, we scan endless candlestick patterns, our scanners, etc. left unchecked, these "needs" become exaggerated, endless, and grow into expectations we will never meet, and hence, create disappointment and end in failure. 

So lets break this down into the base psychological components, (Reward): Rewards drive us to do the things we do, ((rewards being the serotonin, dopamine, oxytocin, etc. released in our brains when we do something positive towards our survival), these chemical responses are incredibly short lived, which drives us to continue to seek them and hence, repeat previously successful behavior in order to get yet another "reward/winning trade". Over time, we come to expect these rewards and along the way, we learn how to best attain them. Creating these behaviors takes time as the brain adjusts to it, positive change is always difficult, a bit painful, and never comes fast enough as it MUST be repeatable over time, however, it is a critical component to our survival/trading success, we need to do it over, and over again for it to become a learned and natural response that we can then do without expending much effort. Applied to day trading, setting a daily goal sets a baseline that at the fundamental level, accomplishes 2 things we all seek, meeting a need/reward/feeling good, that is repeatable as often as possible, and minimizing the threat/risk of loss. A daily profit target is a line in the sand that says "this is a goal I can hit daily with the maximum amount of success while still meeting some external financial need with the minimal amount of financial risk of loss". Basically, a profit target is an optimal balance of practical need, reward, effort, and risk aversion.

The other side of the equation is (Threat, risk/anxiety/pain), the 2nd primary driver of our actions. Think back to a time when you ended a trading day with a large loss, think about how you felt then, and how it makes you feel now. Now do the same exercise and think back to a day when you had highly profitable trading day. Which experience do you recall with more intensity and emotion? If you are like most of us, the loss will trigger the stronger emotion as it has made a larger impact on your psyche and is more committed to memory. This makes sense because our ultimate goal is survival, and despite our technology, glitz, glamour, and advancement, our base brain, the limbic system (sort of like the little lizard part of our brain), is still driven by the same primary survival driven goals as our ancient ancestors, we subconsciously see a losing trade as a threat to our existence regardless of what your HUGE cerebral cortex says. In nature, rewards and acts of survival are continually necessary and short lived  and while you may not reach every reward you seek, you usually still live to fight another day. Threats however, one is enough to mean that no, you don't live to fight another day. A trading loss has this same psychological effect on us which is why they are so much more intense than the short lived pleasure responses we get from meeting a small goal. Given you only survive so many threats, if at all, the memory of such events creates a more intense response. Now bringing this back to trading and applying the same concepts, this is why listening to your gut is so important and why a daily profit is such a critical tool to ultimate success. A single bad loss has the intensity of five nice profits. We humans are the only creatures that can make a single mistake yet relive it over, and over, and over again, sometimes for our entire lives. As traders, we need to accurately assess risk vs reward with a clear head, allowing anxiety to cloud our judgment through experiencing excess and repeated losses is entirely detrimental to our success, confidence, decision making, and emotional well being, etc. So again, setting a daily profit that maximizes the probability of maximum repeated success over time with minimized risk is more than just financial protection, it is psychological protection. It creates a psychological environment where we make the most of positive reinforcement all the while learning the most we can from a minimized number of risks and losses. Now granted, a set profit target will be fluid over time, not static, and will increase as our skills grow, which is truly the beauty of the way the mind/brain works and why I find understanding these concepts is beneficial to advancing the very complex skill of day trading. While this explanation may seem rather tedious, which it can be, I truly believe that understanding these primary drivers as they apply to not only trading, but life in general, gives us control over outcomes and truly puts us in the drivers seat of our actions, emotions, and ultimate success. 

Now, aside from the goal of making money, which is why we do this to large extent, setting an attainable daily profit provides value beyond the simple matter of providing income to meet our need for resources. For me personally, the way my trading day ends sets the tone for the rest of the day for either good, or bad. For those of us on the West coast at least, day trading is the first thing we do on a weekday. When I have profitable mornings, I'm left with a feeling of accomplishment and financial security that colors how I perceive the rest of the day and in the best way possible. More than that, when the next trading day starts, I recall the previous days success, I start the morning trading with confidence, optimism, and a positive outlook, I'm better able to pick out good trades and execute them efficiently, success breeds more of the same, its a vicious cycle of achievement we all strive for.

Now, When I end the morning with a loss, its very easy to brood about it, ending with a loss sets a far less desirable tone for the day. Even more detrimental is that the next trading day can also be colored by the previous days loss. I may start the day with a feeling of anxiety, fear, and apprehension, which ultimately clouds my judgement and successful trading becomes inhibited, something no trader wants. 

So to put some perspective on this, on days that that started with hitting my profit goal, im not thinking for the remainder of the day, ""oh I COULD of made $750 instead of my daily $500 goal"", I'm thinking ""hey, I had a profitable trading day, and that's enough"". There will always be money left on the table to some extent and as psychologically healthy traders, we need to be ok with that and as Andrew always says, DONT CHASE IT 🙂 Ultimately, we are all seeking happiness, if setting and reaching a reasonable daily profit goal can provide this on a near daily basis, why would you NOT do it. 

Bottom line is this, money is simply a means to an end, there is never "enough" of it, even many Billionaires continually seek more of it yet, are they really any happier than the man who sets realistic expectations, has his basic needs met and experiences many small rewards over the course of the day vs. the billionaire who continually has to seek ever larger and even harder to attain rewards for the same chemical reward response in his brain? I believe the former has the more desirable life.  Almost no one is going to make so much money in a short period of trading that you can take the rest of your life off, so why NOT set a daily profit goal and then go on to enjoy rest of your day with a sense of accomplishment and well being vs. not having  a set goal and chasing that ever elusive and never ending psychological rabbit hole of "more"? As traders, we have a huge number of tools in our arsenals to achieve success and I believe a profit target is a critical factor in the pursuit of that goal.

Andrew, I hope this helps you, Scot   

Edited by Duane Scot
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As a new trader, it is a challenge to walk away once the goal is met, and I debated with myself what is the most effective way to learn the market, price behavior, and developing efficient and effective skills.  I asked myself, should I be more liberal with my trades, even if this means over-trading? By doing this, I can learn price behavior, recognizing and taking entries through "reps" (the more I trade the more experienced I will be)?  Athletes take this approach to fine tune their game.  On the other hand, I asked myself, should I be more conservative with my trades, ending my day with a profit goal/loss, even if this means decreasing the exposure I have to the market?  In the end I opted for the latter.  I believe being more conservative mimics the behavior of trading in a live account, and reduces the likelihood that I will develop bad habits and inconsistencies.  

I played video games competitively throughout my life, playing in tournaments and leagues for money.  I find that there are many similarities that day trading has with competitive gaming and sports.  One thing I try to really avoid during competitions and day-trading is stat checking because the more I check my stats, the worse off I am.  Mentally, I feel that when I lend my attention to my stats, my performance decreases because I take away attention from the game at hand.  Even behaviors such as celebrating and complimenting myself early can impact my performance (conditioning).  In the end, I minimize my account window and focus purely on trading as much as I can.  

As a researcher in psychology, I understand that there are many psychological theories that may explain this.  Research has demonstrates the effects of mental load and fatigue, inattentional blindness on performance (Boksem et al., 2005; Hyman et al., 2010).  As traders, we are required to process a significant amount information at once that will ultimately inform our decision.  We constantly monitor price action, Level 2, historical evidence, indicators, emotions, etc. Processing this much information requires a significant mental load, which our brains can withstand so much of.  After analyzing pre-market behavior and technicals, and taking our profits after analyzing opening action, we are mentally fatigued, despite our motivation to continue trading.  Once fatigued by our initial trades, we stop perceiving things as clearly. Mix mental fatigue with high emotions (prolonged sympathetic activation), we might be easy to lose sight of details and misinterpret information, resulting in potential drops in performance.

While I believe that trades are independent of each other, I don't think our perception and biases are independent. I believe there are carryover effects that leak from one trade to another.  We bring our biases from one successful trade, and might apply it to another trade, for better or worse.  For example, in one trade, we might have take a trade on a VWAP hold that proves successful.  In the next trade, we might see similar VWAP hold pattern, take the trade, and lose.  Maybe we didn't perceive the lack of volume in the second trade?  Whatever it may be, we may have been highly influenced by the first trade, which may have distorted our perception in the trades, ignoring details that might indicate otherwise.  

In the end, while I believe that there is a correlation between # of trades and performance, I don't think there is a single factor that contributes to decreases in performance, but, rather, all factors collectively contribute to losses from overtrading.  There are other things such as time-of-day, lack of volume, proportions of retail traders vs. institutional later in the day, etc, that may also have an effect. 

Maybe an internal study could be conducted on this. I'd be happy to volunteer

 

 

Edited by Bryan K
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i believe a daily profit target is one of the most important things you can have on your side as a day trader. to me it is almost as important as your technicals and everything else. like everything there must be a goal or a limit you are trying to reach. in life we set goals for ourselves, like where do you want to be 1 year 5 years and 10 years from now, without goals we are just living life with no purpose. same as trading in my opinion, without a goal you are just trading, we do not trade to trade we trade for skill. as a day trader we should have daily goals as well as yearly goals and so forth. the reason we set goals is to see where we are and try to improve from there, there is always room for improvement. when i first began trading i would just trade not having any goals set in mind, i would trade just to see how much i can make looking at my P/L trying to out do my last trade.  but in reality i lost more then i actually gained because of over trading and revenge trading. daily goals and max losses go hand in hand. they are parameters or rules we should set within ourselves to keep us successful in day trading. greed is a motherfu#[email protected]%. one thing is for sure the market will giveth and the market will taketh lol meaning if you can find yourself profitable keep your profits because at any moment if you are not smart with your profits the market will take them. its always best to keep what you got then you lose what you could've had. time of day to me is all on personality of the trader, personally i like the morning because its fast pace and more profits can be made. some might like mid day because the risk is not as high because of it being much slower. you have to find your comfort zone, tell yourself how much you would like to gain and what your max loss would be. the important thing is being realistic with your account size. many people like going in with large share sizes because the profits are bigger but same goes with your losses. practicing set it and forget it rule or mentality is essential for a day trader. set a goal of what i would like to gain in a day and how much you would like to lose in a day. set it and forget it, remember the goals do not have to be perfect just close enough. 

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I believe the objective of all trading rules is to manage risk. As such, daily targets are important, but only insofar as it helps the trader manage their risk profile. I will state up front, however, that I very firmly believe that a daily targets should not be solely (nor primarily) profit based.

On any successful trade, I think we can all agree that you would never completely exit a trade just because you’ve made “too much” money. However, smart trade management tells you that you should scale out of a successful trade to lock in profits and manage downside risk. You should also move your stop-loss point, as appropriate, to avoid profit slippage on any shares you still carry. And eventually, you will exit the trade when the technical indicators dictate…and not(!) based on our achieved P&L.

Likewise, I think traders should set a daily target. Not to specifically tell you when to stop trading, but to set a risk parameter that will allow you to reduce downside risk.

Personally, here’s how I do it. Before each trading day I set my daily trading target along with my max loss target for the day and my max loss per trade. For illustration, let’s assume those values are as follows:

                              Daily profit target: $500

                              Max daily loss: $300

                              Max loss per trade: $100

                              Minimum per trade risk-to-reward ratio:  1:2 *

                             *(note that this value rarely changes)

 

This tells me that on this day, I cannot, at any point in time, have more than 3 more losing trades than I have winning trades or I will hit my max loss and have to stop trading. The daily max loss is unalterable once set. No exceptions. However, the daily profit target is a guideline only, and here’s the rules I use to manage my risk:

1.       Throughout the day (approximately hourly) I self-assess on how tired I am. If at any point I determine I am too tired to be effective, I will force myself to stop trading no matter the time of day or what profit level I am at. This, of course, is much easier said than done. But, through years of practice I have gotten very good at self-regulation and am able to put down my tools and stop trading.

2.       Equally, I will also assess how distracted I am. If at any point I determine I have become distracted from the markets for any reason (emails, family, the chatroom, YouTube(!), etc.) and am not “in the zone” for trading, I will take a forced break of a minimum of 10 minutes (up to 2 hours) depending on the situation and time of day. I will then re-assess whether I can, and am willing(!), to re-focus on the markets to make some successful trades. If not, my trading day is done. If I am good to go, I will look at my P&L. If I am over my daily target, then I will not re-enter the market. If I am red but not a max loss, I will stop trading. If I am green but below my target I will consider resuming trading. My reasoning for this is that if I allowed myself to get distracted once today, it’s more likely to happen again if I am over target and feeling comfortable than if I still need to hustle to hit my goal. If I am red and got distracted, then I am obviously not in the game and any continuation of my trading will very likely lead to me hitting max loss.

3.       If I am over my target, but not more than 1 loss over (i.e. between $500-600), then I will reduce my trade size by 50% until: a) I have achieved a profit of more than $600 where I can return to full trade size if I like, b) my profit dips below $500 and I must stop trading, or c) I remain between $500-600 through 2 more trades when I will also require myself to stop trading as my trades are obviously not achieving their individual risk-to-reward targets.

4.       If I am over my target of $500 but not yet at 2x my target (i.e. $1000 in this example), then I can continue to trade until either: a) I have 2 consecutive losses, or b) I come within 1 loss (i.e. $100) of my $500 initial target. In either case, I must stop trading immediately

5.       If I have had an exceptional day and am more than 2x my target, then I allow myself to risk any amount over $1000, if I feel like it. However, note that based on my fixed daily rules, I must still NEVER exceed my maximum loss (risk) per trade of $100. If I slide under $1100 (i.e less that 1 loss away from 2x target), then I must stop trading immediately.

The above rules cover most scenarios. I hope this wasn’t too convoluted. It makes perfect sense to me and because I have been applying them for so long I am able to assess the above rules in seconds throughout the day, almost automatically. However, I know they might seem complex, especially when seeing them for the first time.

At the outset of this article, I mentioned that I believe targets should not solely be profit based. Embedded in the above rules are my personal ‘targets’ on effectiveness, focus, risk, and fun! Yes, fun! Rule 5 is completely fun based. I allow myself to play with any ‘extra’ money, if I so choose. If that day it feels more fun to keep the money than to trade it, I will. However, if it’ll be more fun to keep trading, I can…as long as I stick within my rules thus limiting my risk exposure.

Also note that rules 1 and 2 are done hourly throughout the day, irrespective of my P&L. They precede any consideration for how profitable I am on the day.

As a final note, I have the habit of not looking at my daily P&L unless absolutely necessary. I used to stare at it constantly and it led to some bad behaviours. So, now I keep it hidden so as not to distract me or affect my decision making on any given trade. (I do however, look at my P&L on any open trade). So, how do I know my P&L and apply my rules if I can’t see where I’m at? I’ve found that I generally have a pretty good feel for where I’m at. I know if I’ve had a good or a bad day. I’ll usually only check when I’ve either taken a distraction interrupt, if I believe I am near max loss (that one is usually easy), or if I’m not sure if I am just above or below break-even. If I’ve made it to lunch without those happening, then I’ll check before I get up for lunch and apply my rules as appropriate.

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I'm a new trader here and still in the sim. Please forgive me if my example is off in any way.

 

I recently explained the difference between day trading and gambling to a relative of mine. I talked mainly about risk/reward but the example also applies to daily max loss and profit target. Simple put, I explained that there are two basic outcomes: you either lose money or make money. But unlike gambling you have much greater control over those two outcomes. When making a trading or sitting down at your station, you accept these two scenarios: you will loss X amount of money or you will gain X amount of money. (of course you can breakeven, or fall anywhere in the between, but this explanation was for someone who had very little knowledge of trading, so I kept it simple.) These apply to both a single trade as well as the day. Setting a profit target takes away all the uncertainty, stress, and emotion, at least for me. The key is setting a realistic goal based on your skill level. Then all the other pieces such as share size, risk/reward, and strategy can be scaled relative to your goal. 

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I need to stop after hitting a certain "number" - I am not as yet mentally strong enough to overcome FOMO, revenge, boredom trading etc.

3 examples, I went live recently so relevant

  1. This week Day 1 - Made great money over $1000, ended at $700 but could have ended at 1000
  2. This week Day 2 - Was up 230 than down to 0 than up to 280 - lots of commissions, should have stopped  at net 200 vs the net 100 i made.....
  3. This week Day 3 (Today) - Up 120 decided to stop than figured was in wrong DAS instance and in Simulator not live - Revenge Trade it all back and some plus commissions....

So all 3 days,  I should have stopped, no need to get into details, this are live examples....

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I have started to trade live only this summer and i must say that i am not a consistent green trader  so from my perspective a target goal is sometimes to do more green trades than red trades rather than reach the targed sum of $.

Anyway if i am able to reach like +1% of my account i start to feel confident that "i did it" and try one more trade and if that fails i am done for the day. I think that to have some specific $ daily goal is a result of having done good trades to be able to walk away with the feelng that either you did something right or either you made some money at least.

If one day i set my daily target goal very specifically it will be probably a result of how i feel about what i did for the last few days. Meaning: I did 60% trades green in 10 days , look at the average outcome for the sum and set it around it. Then try to avoid the reds to bring that value up.

Beside that, everybody has a feeling of what is "enough" money. So if for someone $100 daily is enough, that person would not set a daily goal of $500 ever. If you say to your friend or wife that today you have earned $400 on daytrading they will think you are amazing. If you say it in the chatroom, the people understand it differently.

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