Why having a daily profit target is important?

[Aiman 86]

Hello Andrew! I'm still on sim, but I've thought about that a lot, my answer might not be as important as other live members opinions, but I'm still willing to give it.

I treat sim as close as it's to live as possible, therefore, my daily goal is 200/300$. However, I'm not always sticking to that goal, sometimes it's more than that, like x2 or x3, sometimes it's just half of my daily goal. Let me explain how I treat my daily goal target and what I'm doing after that.

First of all, if the day was easy, and I hit my daily goal with a few trades, and I see a lot of opportunities, I won't quit the day, I've a rule I set for myself," If I hit my daily goal, I allow myself for 1 extra trade, if it's a loss, I quit with 260(my max loss per trade is 40$), if I win that extra 1 trade and I see opportunities, I give myself another extra trade, if I get stopped out I quit, if not I continue) and so on.

Secondly, if I started red, the market is choppy, and eventually I got out of that red status to green, or close to daily goal, I just quit before hitting my daily goal. I think a lot of people might agree that starting out bad and getting out of a red whole messes up the psycology, and one should be greateful he got out, so just quit the day there.

Finally, If the day is choppy, but I'm doing fine, and it's hard to trade, I'd trade until I either hit the goal, or until I start feeling that I'm starting to make stupid trades or broaking the rules and get out with less than the daily goal

Hopefully that's helpful! And I'll add more if I remember something!

[Art M 1]

Having and adhering to a daily profit target is one more way to practice and incorporate discipline into one's day trading activities.  Discipline helps to temper emotion.  As Bear Bull traders, we've been well schooled on how emotion can cause loss of focus and lead to bad decisions.  Ending one's trading day upon reaching a daily profit target fosters focus, control and effort needed to execute at your best knowing also that the reward of being finished for the day will be respected.

[Serge 0]

I believe there are two questions in this topic:

1. Why Andrew shouldn't trade after he reaches his daily goal

2. Why you shouldn't or should (and a lot) 

1) IMHO Andrew has taken a bigger role than to be a successful trader all day long. I wouldn't be here if not for his books, chat room, videos and this forum and it takes time!

2) I compare Andrew's style to a 5K run, it's fast its at high intensity whereas trading mid day is a half-marathon and requires different training style and lots of practice if you want to be good. If you're here from 9am to 11am and not looking at price movement all day then you're training for 5K. 

My limiting factor is time, I only have few hours a day therefore I can only hope to get good at maximizing my performance with ORBs, Engulfing and occasional ABCD and forget about reversals and MA trading.

if you're in SIM trade as much as time and energy allows, you will get better! Good luck!

[nassarsyed 82]

Again today, example, made $76 on first trade which is 1.5% my account, thought of walking away, traded, well...ended -$120.... 'nuff said

[Adam 4]

Hi traders,

I'm also i stop trading if i got my daily goal. Because i think if you feel stronger  than the market in 80% of times you lose most of your win. But sometimes if i have very green day i take some trades but with small size. 

I think it's human nature, greed is so dangerous.

" He who wants everything every time. will lose everything any time"

[Ville 8]

I have now experimented in SIM how profit targets affects my trading. And the conclusion was, a lot. 

1. When my daily goal is too far away(measured by how much i need profit per share or trade) i tend to overtrade a lot or stretch profit taking so that stock can turn against me. If i trade good setups with ok profits, but P/L is still far away i continue to trade so i would get to the goal and many times it leads to giving profits back, which destroys my psychology and P/L

2. If my goal is too small. I never learn to take bigger gains as i stop out early. The pressure is smaller, but so are the gains. I it will not prepare you to trading that will be profitable. Also if the gains are too small, greed kicks in and after that my decision are bad. 

 

So you need to look relative profits(%). This is why Andrew say's that the profits are not important at the beginning. If you make relatively great gains(%) you can gradually raise share size and make more absolute profit(€)

[Stevo 4]

Why having a daily profit target is important?
Currently, I personally do not trade with a daily profit goal in mind, so to answer the question specifically,  I do not find a daily profit target important or productive to my "trading happiness".  So I will not list a slew of reasons to support that premise.

As a relatively new trader, a daily profit target made me chase the goal, and at times miss opportunities staring me in the face.  Therefore, I now focus completely on being daily in a "Trading Zone", of which most I learned at BBT, which includes:
-Strict Risk management (thanks RobertH!), 
-Patience & Research (thanks BrianP!),
-Discipline (thanks Carlos!)
- and solid setups on a variety of strategies with at least 2-1 risk to reward that have multiple indicators pointing to going long or short, and developing "feel" (thanks Andrew). 
-  I also rely on my own research and feeling-knowing about a trade prospect and reading the psych story present in the charts, as best as I can. 

Trading Zone VS Profit Target:  
For me rather then a profit target, I strive daily to trade with focus and discipline with what the market presents to me on any given day.  It does not mean to me that I can't look at my P&L, but I can not give my P&L any say or power over getting me out of my trading zone.  For me, this is a psych muscle that I  must continue to build and support for it is not in my natural built-in nature.  Over trading, FOMO, revenge trading that results in losses are feedback that something is taking me out of my trading zone. It could be a profit target not met, could be I made way over my target and now I'm taking unwarranted undisciplined risks,  cuz I'm "getting high" on profits (lol).  To me the "trading zone" is the sweaty gym where all the hard work is done, and the P&L is the mirror I can occasionally look at to see the results of the hard disciplined work.  I don't want to let the mirror be in charge, the "P&L mirror" is the  results of my daily actions,  not the motivator.

Be True Yourself (harder then it sounds):
That being said, everyone has to be true to themselves and their unique trading style. There is no right or wrong answer to the question posed in my opinion. Having a daily profit target may work best for many people for many different reasons including one's life circumstances, risk tolerance, genetic makeup, current psychological tendencies, current trading skill level and trading style, an so on. It very well may be the most effective for most people, newbie's and pro's alike.

Style of Trading and Daily Profit Target:
I see that Andrew likes to trade for about an hour or two in the morning on ORB's or Engulfing Bearish Cracks in particular, and then he is done for the day. A daily profit target may work best for him because specifically of that style of trading. I can see where the tendency can creep in to over trade, or trade too quickly in that type of trading style. He is also performing transparently for himself and the community which adds another psychological dimension, ie. time and performance pressures. He is our beloved awesome "Sniper" trader in the mornings, as someone described him recently.  So it appears from his comments that a daily profit target works best for his current style and personal psychology. Whereas, I know others are looking for opportunities to trade during the entire span of the day, and perhaps a Trading Zone method without looking at P&L works best for them, or a combo of both at times is likely as well.  

The Bottom Line Target: we all want to be happy being a day trader. Happiness and survival in this game does not come from losing more than you are making. So if a daily profit target proves to keep one happy and a winner in the game, awesome. If flowing with what the market represents on a daily basis without a specific profit target works best, then great. Maybe a combination of both suits an individual. 

This is a fluid game.
I heavily lean toward a trading zone method as described, but that will likely change and evolve as my trading skill set and style evolves over time. The market is an ever changing river flow, we each will make adjustments and experiment over time. There is no stopping place in this synergy.

Journey Well BBT's. 

 

Edited January 27, 2019 by Stevo

[richardkoman 3]

I would guess that once you're made your daily goal, you are then trading without a goal. How do you measure when to take profits? You're just seeking a little bit more. You're now in the emotion of  your worthiness as a person/trader. If you don't know what you're shooting for you will keep going until you wind up giving it back. At least I had this exact experience in blackjack. Made a few hundred dollars, then thought, I could make more. Gave  back all my profit and then all my bankroll for the night. Gamblers don't have stop-losses or profit goals.