What's in a Goal?

[jonbig04 10]

I, like many others have a weekly goal in my trading. Mine is based of points of the NQ. My question is this: Why do we have point goals? Is a point goal something you want to have after 5 days of trading? Or is it simply a number you want to reach? If its the latter than it make sense to stop trading when you reach your goal, even if its Tuesday morning. But then whats the difference in continuing trading the following day (after meeting your goal) and trading the next Monday? What if you find you are meeting and exceeding your goal during the week, but giving a lot of it back before the end of the week? Does it make sense to STOP trading until next week, protecting your profits so to speak? Notice I used weekly goals as an example, but the same could questions could be asked of daily, monthly, or even yearly goals. So, what the heck is a goal?

[jasont 10]

This is actually something I am working on right now Jonbig04 as I realized my plan was made back to front.

 

I have only just realized the importance of building a plan around what you want out of the market. What you want out of the market forms goals, not just monetary but lifestyle as well as anything else you can think of. Take for example someone who wanted to make $1,000 per week to live which would equate to $200 per day. On the ES that would represent making 4 points per day, on the NQ it would represent making 10 points per day and on the YM it would represent making 40 points per day.

 

Now the same person may want to trade because it gives them more time to spend with their family (after the long hours taken to learn trading in the first place). Therefore if this person makes their $200 for the day, they might go and spend some time with the kids or whatever else their goals suggest they are trading for. If they manage to make the $1000 in the first few days of the week then they might take the week off to do something with the family.

 

If traders are concerned about giving their profits back by the end of the week, if they choose to continue trading past their goals, it is a better idea for them to scale back their position size as opposed to stopping trading. Instead of trading 4 contracts after reaching their weekly goal of $1000, they may trade 2 contracts for the rest of the week and if they experience a drawdown of $300 they will stop trading for the week. That way they can reduce the drawdown by reducing size and set themselves a limit to stop for the week whilst they are still in front.

[Hlm 10]

Different strokes for different folks, but this is how I look at it. First of all, one should have a proven strategy with a known average risk/reward and percentage of success. If you don't have the discipline and management to know these details about your "edge" than the rest will be difficult and prone to failure. This is the building block of your hopefully successful career (measured positive expectancy) and you should be constantly keeping track of this number. The next step is to figure out how you want your day/week to look. Do you trade only in the mornings? Do you only trade Wednesday through Thursday? This could be based off of your strategy or just your personal life. In other words, based off of your style what is your expected number of trades per day/week (i.e. expected gain)? At this point it's simple math to figure out how much you need to be trading to realistically hit your expected goal on an average basis. The key word here is AVERAGE. Yes, some weeks you will not hit your goal. However, some weeks you will go well over your goal. It's all about the law or large numbers. If your focus is on hitting a hard defined number each and every time, the probability of problems and failure increases. For many this is a gateway to many of the psychological issues traders face (e.g. Revenge Trading). This theory can be used on any time frame. I and other traders I know have found this helpful with only taking what the market has to offer which naturally creates less stress on those so called goals. This technique also gives you a much better view as to how your "edge" is holding up over a designated period. Hopefully this helps.

[Head2k 10]

Hey Jon. I am a newbie myself and I think you are quite ahead of me in your learning curve, but assembling my plan it seems logical to me to manage your earnings/losses just as you manage a single trade. You might have an initial hard stop for a week to limit your maximum loss, you might have a trailing stop to limit your drawdown, and you might have a fixed profit target to fulfill your needs or expectations. You might even scale out, which would mean reducing your size after the first profit target is reached. I guess choosing a particular MM strategy should depend on your psychology the most.

During my paper trading I found out I will probably have to have a daily and weekly hard stop and trailing stop, as I am prone to revenge trading. What I want to say is that you should observe yourself and find patterns in your behavior and then build an appropriate daily, weekly and mothly golas/MM strategy.

[Hlm 10]

Hey Jon. I am a newbie myself and I think you are quite ahead of me in your learning curve, but assembling my plan it seems logical to me to manage your earnings/losses just as you manage a single trade. You might have an initial hard stop for a week to limit your maximum loss, you might have a trailing stop to limit your drawdown, and you might have a fixed profit target to fulfill your needs or expectations. You might even scale out, which would mean reducing your size after the first profit target is reached. I guess choosing a particular MM strategy should depend on your psychology the most.

During my paper trading I found out I will probably have to have a daily and weekly hard stop and trailing stop, as I am prone to revenge trading. What I want to say is that you should observe yourself and find patterns in your behavior and then build an appropriate daily, weekly and mothly golas/MM strategy.

Great technique. A previous discussion about daily stops can be found in THIS(link) thread. My response was similar to yours and can be found within that thread HERE(link).

[jonbig04 10]

Thanks for all the responses. Its been something thats been playing with my mind for a while. Its nice to see other's take on it. I have decided to modify my goal. Instead of saying I want X points per week, i want x points out of 5 days of trading. I was giving away my profit and that was my motivation. Instead of trying to hide from the problem, I need to find out why my profit is going away and FIX IT. But as it was said, to each his own. Its interesting to hear different perspectives, and its obviously a very subjective issuel

[bootstrap 47]

When we talk about goals outside of trading they tend to be concrete.

 

For example, " By Dec 2009, I want to buy a new Mercedes "CL550". and then you list the color and specs you want, and you work towards that goal.

 

...Which by the way is a smoking ride......

 

But within trading, a hard goal will limit the amount you make. But when you are first starting out, you need to learn to trade. you need to learn to enter and exit the market consistently and in a disciplined manner. And using a profit target will do this.

 

trading is an income generating activity. as everyone has said, your goal is not being right, but to make money. your goal should not be to hit it out of the park each and every time. there is nothing wrong with hitting a slew of singles.

 

once you can make "X" on a consistent basis and in a discplined manner, increasing "X" is just a matter of adding size. but be wary of the market that you trade. you do not want to be trading a size that will not easuly be absorbed by the market. when you want in, you want in. when you want out, you want out. and you want it quickly.

 

when i first started out, (well after losing $30k trying) my goal was $300 a day. when i hit my $300, i exited. did i leave money on the table, yep. but i also got out of some trades with a profit that would have been losers if i followed the " let the profit run " and used a trailing stop to get out.

 

and to this day, once the market trades within my target range i ask myself the question " would i get in now? " and if the answer is "No", its give me my money time.

[stockmarcus 10]

Probably looking at trading goals in the same way businesses view their goals is helpful.

 

- Keeps you focused (im the worst for going down information tangents, keeping a point to time in mind cuts this down a bit)

 

- Allows you to measure your progress, to see if you're actually getting anywhere

 

- If you're not meeting your goals (or the timeframes you set to meet them) gives you the point of reference of where you want to be. You can then assess where you are now and whats the gap between the goal and your current state, and adapt what you're doing, or the goal. (to make a better and more realistic goal, this is a valid option because we're motivated to better our trading).

 

A good point that once you reach a goal, you don't stop, whats the next goal? Limiting yourself by stopping what you're done doesn't sound healthy.

 

I'm in the learning phase, and setting goals for my dimensions of activity (for each daily time in the market or in research) is invaluable for keeping focused and also fully appreciating whats gained out of time spent with the markets.

 

Goals should be in relation to what you're trying to achieve. e.g. 'explore 2 indicators a week', or in another dimension 'develop a strategy that returns x points a week'. Mine are currently in a number of dimensions

 

- Market experience (im looking at short time frame trading)

- Indicator research/strategy development

- Software infrastructure