Daily Goals: System or Dollars?

[brownsfan019 17]

 

O and......GO STEELERS (to all you Browns fans)

 

 

Just a matter of time I guess...

[walterw 10]

I want to add my two cents here... so far on the past years I had been trading daily targets and it works very well for me... I also teach that on my private system, because basicly one of the great dangers in trading is greed... having daily targets takes out all greed... also its relaxing and nothing better than EVERY DAY feeling like a champion when you make your day... it simply reinforces your state of mind... it doesnt matter wich method you use, if it has a good RRR in it, you should do ok... trading is a simple endeavor, its just mistified as complicated by does people who never made a dime with it... cheers Walter.

[Wes 10]

Daily profit goals are generally a bad idea. As has been said, the market doesn't care about your goals. If the market is flat for the day, or, even worse, you are out of sync and are losing, what are you going to do to meet your daily goal, start forcing things and make it worse?

 

And let's say you are doing well and are in sync today and hit your goal for the day after an hour. Now what are you going to do, be lazy and take the rest of the day off? And limiting your potential and never chance the possibility that you could make even more every day?

 

Or, something I hear from some people, is they stop so as to protect their profit. If they can't mentally handle a losing day, so be it, that shows they need to work on that, but to stop trading for the day simply because they have a profit and don't want to "risk" losing it is rather ridiculous.

 

There's a difference there, of course. Stopping, say, 30 minutes before normal because you've had a good day and feel good and want to make sure you continue to feel good, alrighty. That's a mental thing that is holding you back, but alrighty. But stopping early simply out of fear of losing is something else.

 

If you have an advantage, you put that advantage to work. If you don't have an advantage, then you're just gambling anyway. "Protecting your profit" by stopping trading implies you don't think you have an advantage.

 

Your daily goal should be to make good decisions.

[evolved trader 10]

SwingTradin Jay

 

I’m in a great place now mentally for trading. I’ve come to realize the monetary gains are not what defines my trading success.

 

ZDO

 

Havent, but I will read it. Thanks for ALL the suggestions! I just recently (last week) dropped focusing on the monetary goals. Wouldnt you know, I’m seeing the market in correlation with my system clearer than ever in real-time. Always love your posts. And of Course appreciate your help.

 

I love the idea behind having goals about moving us into optimal state and applying the full development and application of my edge. I’m realizing more and more the importance of the big picture, and not weekly, monthly money goals.

 

Minoo

 

Thanks for the inspiration and a great post reply. That let me to another question I have about focus and environments. I’ll post a new thread for that. Appreciate the break down.

 

Traderspsyches

 

Thanks for the reply. And I have to say, as I go deeper into my trading, the more simplistic properly trading my edge seems to be. At least on a conscious level.....

 

I have to agree with Browns Fan...I love the term “Psychological capital”

 

Wjrusnak

 

I’ve dropped the monetary goals with the exception of a yearly / quartly. Even at that I’ve stopped focusing on that and give my full attention to maximizing the performance of my edge. Thanks for the suggestions!

WalterW

Point taken.

 

Wes

 

Its funny, as I read your post I could relate on many levels. Like I’ve said, I only focusing on trading the edge now.....with proper application.

Thanks everyone for the thoughts and insights. Always appreciated!

[walterw 10]

Daily profit goals are generally a bad idea. As has been said, the market doesn't care about your goals. If the market is flat for the day, or, even worse, you are out of sync and are losing, what are you going to do to meet your daily goal, start forcing things and make it worse?

 

And let's say you are doing well and are in sync today and hit your goal for the day after an hour. Now what are you going to do, be lazy and take the rest of the day off? And limiting your potential and never chance the possibility that you could make even more every day?

 

Or, something I hear from some people, is they stop so as to protect their profit. If they can't mentally handle a losing day, so be it, that shows they need to work on that, but to stop trading for the day simply because they have a profit and don't want to "risk" losing it is rather ridiculous.

 

There's a difference there, of course. Stopping, say, 30 minutes before normal because you've had a good day and feel good and want to make sure you continue to feel good, alrighty. That's a mental thing that is holding you back, but alrighty. But stopping early simply out of fear of losing is something else.

 

If you have an advantage, you put that advantage to work. If you don't have an advantage, then you're just gambling anyway. "Protecting your profit" by stopping trading implies you don't think you have an advantage.

 

Your daily goal should be to make good decisions.

 

 

If your trading method its not clear, it may happen as you mention this "mood" for the day... where some days you are doing fine, and others you dont get one good trade... in that case its very dificult to manage a daily target... now, when you have a consistent method that does not depend much on your mood, I have proven on my experience it works ok...

 

Most traders have problems with "greed"... and once they did have good gains, then they start to over trade due to their excitement of making profits... here is when you most probably ( if you had a consistent method ) you will get out of your clear trading method and start depending on your "mood"... most of this traders are not able to have consistency in their trading results.. because some days may be spectacular and other days are very sad...

 

this produces an emotional rollercoster and eventually certain uncertanty about your technical trading performance... thats why, at least myself, having daily targets helps me to keep focused in my sound method and not enter in the never ending emotional unstable rollercoster that want let you you evolve serioulsly on your trading careers...

 

I met a lot of traders who some days will end the session and go eat caviar at a super restaurant... at the next day they are on the psichiatrist bench... when you have daily targets all that is history... sometimes it may become even boring.... but your acct will be happy... and thats what this bussiness its really all about, making money, and not necesary amusing yourself...

 

Offcourse thanks God we all traders do not agree in the same opinions, thats why markets exist, but certainly not all traders enjoy the same benefits of their thoughts... cheers Walter.

[traderpsyches 10]

What mostly everyone fails to realize is that unless you are a black box, you have waxing and waning mental and emotional energy. These swings in energy will have an impact on your perception, judgment and ability to execute. If you manage to them - i.e. Psychological Capital ... the rest will take care of itself.

 

On the flip side, the ultimate trading is taking what the market is giving at any particular time. If not giving, then get away, if giving, then get. The best way to optimize your ability to be there and capable when the market is giving is to manage to your psych cap.

 

Daily profit goals are fine but they are really just a tactic to manage one's mental state - their psych cap. The longer term goal should be to move away from them but use them in the meantime....

 

btw... great week in Chicago at CME and with Trader's Audio - CME video available in a few weeks.

[jasont 10]

I must say this discussion is an interesting one. I do truly wonder what the reasons are for people to choose not to have a daily/weekly/monthly/yearly profit target in their trading. Is it that they fear being disappointed on days they do not make their target? Or do they fear missing out on making more money should the market offer them opportunities after they have finished for the day?

 

I find it interesting that every business focuses deeply on the money side of things yet retail traders are told not to think about the money. I haven't traded in a proprietary firm however I dare suggest their traders are given monetary targets to attempt to hit each day.

 

Their was a video I saw from SMB Capital where the prop trader mentioned a daily target that he chases every day. That particular day the trader didn't meet his goal, so what.

 

Video can be found here: http://www.smbtraining.com/videos/day_on_street.WMV

 

Now getting back to every other business that focuses on the money. They set daily/weekly/monthly/yearly targets that they need to reach to pay expenses plus make X profit. In fact it is important that they make this estimate and work to achieve it otherwise they could find themselves out of business very quickly. It is also the way they set outside goals to achieve, i.e x number of sales needed, marketing tools to be implemented to generate x sales, advertising costs that aim to generate x revenue and the list goes on.

 

Now if every other business takes on a role of using profit targets to generate goals and I will assume prop firms also do such a thing, why is it retail traders are so afraid to do the same?

 

I will admit I trade using a daily/weekly/monthly/yearly profit target as this is a business. If I was trading on the weekends because it was a hobby then maybe I wouldn't. However this is a business and to survive I need to know what I need to make on a daily/weekly/monthly/yearly basis to pay the bills.

 

To address some problems people have with using daily targets:

 

If you keep making your daily profit target and find yourself missing out on opportunities when you reach it, increase your target. But if you don't reach it on most days then you have no business trying to make more unless you reach a monetary capital level that increases size traded.

 

If you fail to make you daily profit target, chances are you are chasing targets too high to achieve at the current level of volatility/plan effectiveness/personal ability. If that is the case, drop the target so you can make it on most days.

 

If you find yourself taking trades to reach that target which aren't part of the plan, chances are you haven't defined your plan well enough. If you can't make 9 out of 10 of your trades for the same reasons then you do not have consistency in your trading. That is a problem most likely brought on because there is uncertainty in your trading. Often this is due to having to make too many decisions during the trading day.

 

If you are watching the market looking for a reason to trade without it being framed around a set of consistent guides, you are in for a bumpy ride on the emotional roller coaster. If you look for the same setups, trade the same entries, place stops according to the same guides/rules, manage the trade according to the same guides/rules and exit according to the same guides/rules you will not take unnecessary trades to reach the target. Having this removes the moments in the market when you do not know whether you should or should not be taking a trade.

 

To the adage of only taking what the market offers... the market offers much more than the daily range. The ES market may move in a 20 point range however there may be 40 points total movement that one could have capitalized upon. Does this mean everyone's plan could take 40 points out of a 20 point range day, definitely not.

 

However saying only take what the market offers isn't the right wording. Only take what your plan offers and if it doesn't offer enough, adjust your plan so it can take what you want out of the market. Trading the same setups on different time frames is often a simple way to do this.

 

Putting oneself at the mercy of what the market offers is like playing victim. Please Mr. Market can you pay me today? Instead find a way to pull what you want from the market on a consistent basis. If you find your plan can give you 3 points consistently per day, so be it. That is much more valuable than the guy who pulls out 20 points on a good day but cannot say what he consistently makes as the market determines that for him.

 

The 3 point guy can simply say "My regular maximum drawdown is 2 points per day but on 90% of days I end up reaching 3 points or more. Now I can adjust my size according to my expected drawdown per day and know that on 90% of days I am going to make money. I will also end my day if I reach a max drawdown double the amount of my regular drawdown."

 

The guy who doesn't have consistency in what he makes can't position size most effectively and struggles everyday making points. He also has anxiety because he doesn't know what to expect from his trading. The 3 point guy can load up on contracts in a reasonably safe fashion according to his trading, hit his target and then decide what to do from there.

 

Apologies for the long winded response but thought this topic was interesting.

Edited March 15, 2009 by jasont

[Wes 10]

If your trading method its not clear, it may happen as you mention this "mood" for the day... where some days you are doing fine, and others you dont get one good trade... in that case its very dificult to manage a daily target... now, when you have a consistent method that does not depend much on your mood, I have proven on my experience it works ok...

.

 

That wasn't really my point. Nearly any "consistent method" will in probability have days where it or the user just isn't in-sync with the market for that day. The market's too choppy, the market's too flat, the market's too trendy, the person is tired or has things on his mind, whatever. For the most part, some days always have more opportunities than other days, regardless of how consistent a method is.

 

So on low-opportunity days, or if non-method factors such as being tired or things on the mind come into play, what's the person with a set-target goal to do if they are behind? Do they push more to make their goal and risk not being as consistent and risk making more mistakes? On higher-opportunity days where they hit their target early, do they quit for the day at 10a.m.?

 

A person's trading method may be as clear as crystal, but stuff happens. Markets happen, bad news happens, being tired happens, the power goes out happens, a kid emergency happens, the cat jumping on your keyboard happens, having "just one of those days" happens.

 

Sure, someone could have low goals and hit them consistently every day. That's fine, I guess. "I will make $10 today, and anything above that is gravy." But what happens when they hit the goal? Do they quit for the day? If they do, they are limiting their potential not only monetarily, but also mentally and emotionally.

 

Instead of monetary goals for the day, have good-trade goals for the day. "I will make a trade if the setup is good." Or maybe, "If I make three bad trades, I will quit for the day and evaluate what I am doing." Neither of these have the person staring at their P/L all day. Yes, curiosity may get the best of them, but, again, that's an emotional behavior holding them back.

 

If a person needs a crutch of set goals to limit their bad mental/emotional behavior by limiting how much they can make in a day so they don't get greedy, so be it, but that band-aid is holding back their potential and always will.

 

If a person is just starting out and has little or no concept of what good or bad trading behavior entails, I would at least try setting them down the path of no daily monetary goals because that is where they ultimately would want to end up anyway -- not having a set goal holding back the real goal of simply making good decisions. Starting with a clean slate can be a huge blessing because there are no already-learned bad habits.

 

And if someone is making bad decisions or being greedy because their trading method is not clear, then the real problem is with their trading method. Sticking a band-aid of low, daily, monetary goals over an unclear trading method isn't doing them any favors because that's not the real problem.

 

As always, YMMV.

[Harlequin 10]

Your trading style and personality will have an influence on whether or not daily goals are suitable for you.

If you have a style that offers many signals a day then a daily goal can help to stop over trading and loss of focus or concentration.

If your style is to wait for the market to come to predefined levels then sometimes the market will not offer you an opportunity to trade and when it does the market will decide how much you make not the goal you set yourself.

[jasont 10]

Sure, someone could have low goals and hit them consistently every day. That's fine, I guess. "I will make $10 today, and anything above that is gravy." But what happens when they hit the goal? Do they quit for the day? If they do, they are limiting their potential not only monetarily, but also mentally and emotionally.

 

I am guessing my post was too long for you to read and that is understandable. In a nutshell, a) who realistically is going to set themselves a $10 target? and b) if one hits a reasonable target 90% of the time, they can increase their target.

 

Instead of monetary goals for the day, have good-trade goals for the day. "I will make a trade if the setup is good." Or maybe, "If I make three bad trades, I will quit for the day and evaluate what I am doing." Neither of these have the person staring at their P/L all day. Yes, curiosity may get the best of them, but, again, that's an emotional behavior holding them back.

 

I am sorry but goals according to "good" and "bad" are the most destructive goals one can have. How is one to know if a trade is "good" or "bad"? This is the pinnacle of problems with new traders as they seem to think a losing trade means they did something wrong. If they took a loss it means their entry was "bad". There are no fortune tellers in this business, only those who manage risk profitably and those who don't.

 

Goals are best when they are specifically orientated around achieving an objective/goal. The military have some of the most disciplined individuals you will ever come across. Everything they do is aimed at achieving a specific objective and that is broken down into smaller objectives. The specific objective in trading could be to make $500 in a day made up of smaller objectives which could be:

 

Setup - Identify support in a defined uptrend (defined according to one's plan).

 

Entry - Place a long stop entry order at high of reversal candle/range identified at the support. (however one's plan may determine that)

 

Stop Placement - Stop order placed 2 points from entry.

 

Profit Target - Placed at closest resistance in direction of trade.

 

Trade Management - Upon 1st Target taken, move stop to break even where it remains until remainder is closed out.

 

Exit - Exit remainder at break of trend.

 

The above are the smaller objectives made to achieve the specific objective of hitting that $500. Indeed the above is no where near as much as ones trading plan requires in regards to detail. Unless this is just a hobby, one's aim is to make money in this game. The sooner one becomes comfortable with making and losing money in the process of reaching their objective, the sooner one will become consistently profitable.

[Wes 10]

However saying only take what the market offers isn't the right wording. Only take what your plan offers and if it doesn't offer enough, adjust your plan so it can take what you want out of the market. Trading the same setups on different time frames is often a simple way to do this.

 

Putting oneself at the mercy of what the market offers is like playing victim. Please Mr. Market can you pay me today? Instead find a way to pull what you want from the market on a consistent basis. If you find your plan can give you 3 points consistently per day, so be it. That is much more valuable than the guy who pulls out 20 points on a good day but cannot say what he consistently makes as the market determines that for him.

 

The 3 point guy can simply say "My regular maximum drawdown is 2 points per day but on 90% of days I end up reaching 3 points or more. Now I can adjust my size according to my expected drawdown per day and know that on 90% of days I am going to make money. I will also end my day if I reach a max drawdown double the amount of my regular drawdown."

 

The guy who doesn't have consistency in what he makes can't position size most effectively and struggles everyday making points. He also has anxiety because he doesn't know what to expect from his trading. The 3 point guy can load up on contracts in a reasonably safe fashion according to his trading, hit his target and then decide what to do from there.

 

Wouldn't you know it, I had a lot typed up, and then my computer crashed. Here's the quick and less-articulate version:

 

What you wrote is great, but I don't think your use of daily goals is the same definition used by many in this thread. You are writing daily goals as part of a bigger picture, a longer timeframe. As part of a monthly, quarterly, yearly, maybe even merely weekly goal.

 

That's a lot different imo than what some talk about with stopping for the day when you hit your daily goal. "I made x for the day, so now I will stop even though the market is great for me/my method today and I could probably easily double what I have already made." Or having a daily goal where if they fall behind they feel bad and then perhaps will feel the need to play catch up and risk making poor decisions.

 

Businesses do have daily goals, but they don't dwell on them. They are part of a bigger timeframe. I don't know about others, but I've been mainly talking about strict daily goals. A shop doesn't stop selling things if it makes its daily goal at 10a.m.. It doesn't put the "closed" sign on the door.

 

Retailers have daily goals, but their main outlook is yearly since they make most of their money during Christmas. For retailers, the market doesn't really fit their system/method nine months of the year, but those other three months it's perfect and that's when they pour it on and make sure they are open as many hours as they can be. Similar to what you said, they have a longer plan, and daily results are a guide but not the destination.

[Wes 10]

I am sorry but goals according to "good" and "bad" are the most destructive goals one can have. How is one to know if a trade is "good" or "bad"? This is the pinnacle of problems with new traders as they seem to think a losing trade means they did something wrong. If they took a loss it means their entry was "bad". There are no fortune tellers in this business, only those who manage risk profitably and those who don't.

 

That misses the point. A trade is good or bad depending on the decision process involved. A trade that makes money is still a bad trade if the reason for doing it was bad. "I'm going to take a shot here and see what happens." Or, "I'm going to risk way more than I should here because I feel lucky." Whether it makes money or not, it's a bad trade due to bad decisions.

 

"Good" and "bad" basically comes down to discipline. You are disciplined with your risk or not. You are disciplined with your patience or not. You are disciplined with your setups or not. The goal isn't necessarily to make winning trades. Winning trades are a by-product/result of having the discipline to make good decisions.

[brownsfan019 17]

Interesting discussion here.

 

My opinion is that you trade your system and disregard any monetary goals. Reason being that on days where you are just killing it, you need to kill it to the fullest extent. Now, that does not mean trading all day as your 'system' may say to trade a few hours and be done (which is what I do now). My system says to trade from 8am-Noon and that's it.

 

With that said, having reachable goals is not a terrible idea, esp in the beginning. If you go into the day wanting to make $xxx per day to start, then I could see a lot of merit in that initially. But as time progresses I think the more experienced trader can realize more gains by not capping.

 

The other side of the coin here is if you limit your upside do you also limit your downside? Is it $xxx either way? Now if someone were to say no cap on the downside, but a cap on the upside, I'd say you're crazy and just a matter of time before you blow up.

[traderpsyches 10]

The issue isn't monetary objectives (which is what they are)

 

... it is the timeframe. Monthly, quarterly and yearly are one thing - weekly and daily are a completely different psychological and market event.

 

And in the end, your psyche is going to determine the figure in your account. Manage it and the rest takes care of itself.

 

Mark Douglas is a genius in many ways but the elements in his books where he encouraged humans to become like robots are misleading as to what really happens in man vs. market.

 

DKS

[brownsfan019 17]

I want to add my two cents here... so far on the past years I had been trading daily targets and it works very well for me... I also teach that on my private system, because basicly one of the great dangers in trading is greed... having daily targets takes out all greed... also its relaxing and nothing better than EVERY DAY feeling like a champion when you make your day... it simply reinforces your state of mind... it doesnt matter wich method you use, if it has a good RRR in it, you should do ok... trading is a simple endeavor, its just mistified as complicated by does people who never made a dime with it... cheers Walter.

 

Good to see ya Walter!

 

You should join us over in this thread and show us how the system is doing! I'm sure you'll put me to shame, but will give me something to shoot for!

[jasont 10]

It is good to see a number of points brought up which were not being discussed. Why are traders of the belief that once they achieve their target they must stop? There are many things one can do upon reaching a daily target depending on one's ultimate objective.

 

For those not wanting to spend their whole day trading or cannot concentrate for 6.5 hours per day, they may choose to end the day after reaching their target.

 

Someone else may wish to reach their daily target and then start the day again as though they hadn't made a dime and input their max drawdown size etc as if it was a fresh day.

 

Someone else may wish to cut size traded for the rest of the day, someone else may wish to increase size for the rest of the day.

 

What one does after they reach their target is completely up to them but it does not need to mean one stops trading which is the choice everyone seems to think is the only one.

 

Again I must re-iterate what one pulls out of the market isn't determined by the market itself. Why is it people think to make more money they need to make more points per contract?

[zdo 20]

Harlequin re “Your trading style and personality will have an influence on whether or not daily goals are suitable for you.

If you have a style that offers many signals a day then a daily goal can help to stop over trading and loss of focus or concentration.

If your style is to wait for the market to come to predefined levels then sometimes the market will not offer you an opportunity to trade and when it does the market will decide how much you make not the goal you set yourself.” I agree and here is some expansion about the type of system being important as to whether daily goals are advisable or not. If one is trading a trend following system, it is categorically imperative to stay for the outlier profits. Trend followers must go for absolute returns, not benchmarks! But, for example, a discretionary swing trader who must also more carefully manage / mangle his or her ‘sychological’ capital (see Denise’s posts), might be advised to at least consider daily $ targets during some parts of his own or his systems' development.

 

Basically, every type of trading has its axioms and platitudes. Unfortunately, beginners get slammed with all of them at once, instead of having them matched with the (usually unspoken) type of system the advisor is basing his suppositions on.

 

jasont re “Why is it people think to make more money they need to make more points per contract? ” One possible part of the answer is that most traders, especially those that post on forums, operate under sizing constraints. Single lots, which imo is the most difficult, inflexible way to trade, is what makes them think that way…

[aidaweb01 10]

When I started out trading I figured I needed targets. Initially I figured 5.9% per month would be a great target, because, when compounded, I would double my money year on year. I hit this target a couple of times and then I used to stop trading and do something else. The next month I wouldn't make the target and so I figured I needed to re-adjust the following months target in order to catch-up.

 

When I realized that setting these sorts of defined targets didn't work for me, I found a weight was lifted from my shoulders. I'm still working on it, but without targets, my trading is now much more consistent and it feels a lot easier.

 

Targets work for some, but for others it adds a pressure that they can do without.

[electroniclocal 10]

By setting daily targets you are trying to predict the volatility of the market. I set my working hours and take what the market gives, remembering of course, that every time I trade, I assume risk.

[traderpsyches 10]

Agree -it is a great disservice of many educators too teach defined goals in the way that they do. They leave out what the mkt is giving, the need for judgment and the fact that numerical goals r really a psychological mechanism to be used judiciously and consciously.

 

DKS