# Daily profit targets - Good or Bad?



## ThingyMajiggy (25 September 2009)

Hey,

Interested in your thoughts on daily profit targets. I'm trying out a new method, I am trying it so I lock in profits at $200 for the day, stop moves to breakeven automatically after 3 ticks. 

Thing is, on quite a few occasions, plenty of profit is missed out on, this is the dilemma, enter my trade, moves in my favour, stop moves to B/E, get taken out at $200 profit, finished for the day. But alot of the times I'm finding the moves will continue on for quite a way, so I'm wondering whether having a daily profit target is a good idea or bad, good because it locks in profits, but bad because of potential profit missed, I can't decide. 

Does anyone have this sort of thing for themselves? Or do you just keep it open slather, profit wise?


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## Mr J (25 September 2009)

I'm a fan of moving stops up quickly early on in a trade, but not setting strict targets, whether it is for a trade or as a daily goal.



> But alot of the times I'm finding the moves will continue on for quite a way




My question to you is why would you get out of a trade that is moving your way? I need a reason to get out of a trade, and it has to be better than being happy with the current profit. 

In my experience, the most profitable trades come from riding trends hard, and the better trades also encounter little heat. This leads me to managing trades by moving stops up quickly initially (and often using a smaller stop than most would use), but giving the trade room to move the more it moves. This cuts losses short and allows for homerun potential, although it does mean getting stopped out a little more than normal. The homeruns could be worth a week, month or more of profit, so they're worth it.


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## ThingyMajiggy (25 September 2009)

Mr J said:


> My question to you is why would you get out of a trade that is moving your way? I need a reason to get out of a trade, and it has to be better than being happy with the current profit.





Interesting point, but if I just wanted $200 a day, also trading very short term(few minutes in a trade), you don't know its going to continue in your favour? you could have a wide push up or down back near your entry could you not?


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## prawn_86 (25 September 2009)

Why not run a trailing stop once you have reached your target so you can capture more of any big move?


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## tech/a (25 September 2009)

Its all about Return on Risk.
If your tried and proven trading method gives you 
a return of more than 1R trade after trade who cares if a trade goes to the sky.
If your losing doing this method then your not winning often enough for your Return on Risk.

That being the case you either.

(1) Decrease your Risk each trade
OR
(2) Increase your Trade frequency
OR
(3) Increase your Reward to Risk.
OR
All and or most of the above.
but *SAM*

If you dont know what is going on inside your method all your doing is forward testing a theory.
A very expensive way of systems testing.


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## Mr J (25 September 2009)

ThingyMajiggy said:


> Interesting point, but if I just wanted $200 a day, also trading very short term(few minutes in a trade), you don't know its going to continue in your favour? you could have a wide push up or down back near your entry could you not?




$200 average, or a consistent $200 a day? Anyway, why limit yourself to just $200 if you could achieve more?

Shorter timeframes might be less reliable than longer timeframes, but they're not simply noise. If you have no idea whether or not it will continue in your favour, then the trade should be closed, but then perhaps it shouldn't have been initiated in the first place. 

Why let it run? Price movement has a sort of inertial quality - it will want to keep moving in the same direction until force is applied on it. If momentum is favourable, there's no reason to close unless you think a large amount of force is about to be applied.



> ou could have a wide push up or down back near your entry could you not?




Yes, but this could happen at any time. It's less likely on a good entry and if aware of the timing of news releases. If I do get taken out at break-even when I could have locked in a small profit, so be it. The times I catch a profit worth 5x my risk amount will more than make up for the times when I could have locked in a profit worth a fraction of my risk amount.

Take one look at the GBP:USD over the last few days. Imagine the difference in results of someone who locks in small profits, and someone who lets the position ride. One made a few day's profit, the other may have made weeks or months of profit.


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## prawn_86 (25 September 2009)

Mr J are you trading live yet with actual cash or still paper trading?


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## Mr J (25 September 2009)

At no point have I ever said I paper traded. I've been trading with real cash for longer than I've been posting here.


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## prawn_86 (25 September 2009)

Mr J said:


> At no point have I ever said I paper traded. I've been trading with real cash for longer than I've been posting here.




I recall at one point you saying something along the lines of you were still working on a strategy or having had made very few live trades


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## ThingyMajiggy (25 September 2009)

tech/a said:


> Its all about Return on Risk.
> If your tried and proven trading method gives you
> a return of more than 1R trade after trade who cares if a trade goes to the sky.
> If your losing doing this method then your not winning often enough for your Return on Risk.
> ...




Thanks for the tips tech, I do know whats going on in my method, 70% win rate so far, bigger winners than losers, just inquiring about profit targets, whether anyone else used them 



Mr J said:


> $200 average, or a consistent $200 a day? Anyway, why limit yourself to just $200 if you could achieve more?




A consistent $200 a day, well thats what I'm saying, I have found that MOST times a $200 target is reached for each trade easily enough, but there are quite a few times where it does run, if I have the profit target, I can lock in the profit, but I also miss out on the bigger runs, but I make the most of the smaller runs too. Valid points though, thanks  



Mr J said:


> Shorter timeframes might be less reliable than longer timeframes, but they're not simply noise. If you have no idea whether or not it will continue in your favour, then the trade should be closed, but then perhaps it shouldn't have been initiated in the first place.




I agree, but we have never have any idea whether it will continue do we? Hence why we use stops to limit our losses, everything is based off probabilities, higher highs and higher lows says its continuing in an uptrend....until it doesn't. 

Re GBP/USD, I think it depends on the method, I don't trade the currencies, nor do I hold overnight, but its like that with anything isn't it? I think doing both is best, having longer term positions that build and you can pyramid on, then trading intra-day, thats what interests me anyway.  Do you make this trade? I agree about if I get stopped out at B/E, then so be it, I think its a win in a way, minimizing losses is the cake, the icing is letting profits run  

Thanks for the tips guys.


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## adobee (25 September 2009)

I think this is a good system... but rather than choosing a $ amount choosing a % .... I find this limits me from being greeding and chasing bad trades as I choose only one per morning, I find that if I go looking for many I end up getting burnt and greedy.. I dont have knowledge like many of them on the forum but my daily strategy follows a similar rule. .. I like to find what i think is a good entry of something breaking out or running .. take 5-10% which is usually between $500 - $1000 jump out quickly and leave the profit in to run.. thus preserving my capital and build a small portfolio...


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## tech/a (25 September 2009)

adobee said:


> I think this is a good system... but rather than choosing a $ amount choosing a % .... I find this limits me from being greeding and chasing bad trades as I choose only one per morning, I find that if I go looking for many I end up getting burnt and greedy.. I dont have knowledge like many of them on the forum but my daily strategy follows a similar rule. .. I like to find what i think is a good entry of something breaking out or running .. take 5-10% which is usually between $500 - $1000 jump out quickly and leave the profit in to run.. thus preserving my capital and build a small portfolio...




Dont get it?

You pick up 5-10% and take out a grand then let the profits run?

What profits? You just cashed them in?
To do so you'd need to sell your total position.


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## Mr J (25 September 2009)

prawn_86 said:


> I recall at one point you saying something along the lines of you were still working on a strategy or having had made very few live trades




Someone kept insisting in a thread a while ago that I was only papertrading. This was during a heated topic where a number of people were having a go at me after I dared to suggest that trading was easy .



			
				ThingyMajiggy said:
			
		

> A consistent $200 a day, well thats what I'm saying, I have found that MOST times a $200 target is reached for each trade easily enough,




I don't think this is a good mindset to have while trading. Trading isn't about consistent profit (although profits may be consistent!), but about taking what we can get. Settling for $200 just means we leave money on the table, hurting our profit potential and possibly endangering our chances of longterm success.



> I agree, but we have never have any idea whether it will continue do we?




If we didn't, then we wouldn't be doing anything other than scalping. Most successful traders are not scalpers .



> Re GBP/USD, I think it depends on the method, I don't trade the currencies, nor do I hold overnight, but its like that with anything isn't it?




The situation regarding the GBP was that it tanked 6 cents in 24 hours. In forex, this is a huge move and some people would have made a crazy amount of money out of it. Someone who traded the hourly well could have even doubled their capital if they traded at 2% risk. Riding trends hard can be insanely profitable, and it's not a bad idea to leave the door open for it.

Also, don't forget that you can enter and exist gradually.


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## ThingyMajiggy (25 September 2009)

Mr J said:


> I don't think this is a good mindset to have while trading. Trading isn't about consistent profit (although profits may be consistent!), but about taking what we can get. Settling for $200 just means we leave money on the table, hurting our profit potential and possibly endangering our chances of longterm success.




Its the same vice versa though isn't it? NOT having a profit target and potentially letting our profits run might also mean that we lose potential profits we could have locked in, when it turns against us. Isn't "taking what we can get"...."consistent profits"? Settling for $200 also means we have $200. 



Mr J said:


> If we didn't, then we wouldn't be doing anything other than scalping. Most successful traders are not scalpers .




I don't understand you here, earlier you said that "If you don't have any idea if the trade will continue in your favour, it should be closed, or shouldn't have been opened in the first place". We wouldn't need stop losses if this was the case would we? Do you mean an idea as a probability? Because we are only basing our ideas on highest probabilities, we can't possibly be 100% sure if the market will continue in our favour, or even if the market will go in our favour when we open our position, hence why we have stop losses.



Mr J said:


> The situation regarding the GBP was that it tanked 6 cents in 24 hours. In forex, this is a huge move and some people would have made a crazy amount of money out of it. Someone who traded the hourly well could have even doubled their capital if they traded at 2% risk. Riding trends hard can be insanely profitable, and it's not a bad idea to leave the door open for it.
> 
> Also, don't forget that you can enter and exist gradually.




I agree, but I think averaging things over the long term is what is most important, I want consistent profits with minimal losses, so I don't want to be having loss after loss then happen to catch a big move in fx that doesn't always happen that brings me into profit, then wearing it off again with lots of little losses. I would prefer consistent profits building up smoothly over time. 

I will try some things out and see how I go.


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## Mr J (25 September 2009)

ThingyMajiggy said:
			
		

> Its the same vice versa though isn't it? NOT having a profit target and potentially letting our profits run might also mean that we lose potential profits we could have locked in




Maybe. I wouldn't set a profit target, but want to have an idea of the different ways it could play out.



> Do you mean an idea as a probability




Yes. Anytime we're in the market, we want the probabilities to be in our favour. If we don't think they are then we should close the position. If a trader has no idea what is going to happen next, they shouldn't be in the market.



> I want consistent profits with minimal losses




Some strategies can provide this. I feel trading faster timeframes is _reasonably_ consistent because in trading we deal with large edges, and faster timeframes have reasonable volume. I think daily consistency is too much to expect though.



> so I don't want to be having loss after loss then happen to catch a big move in fx that doesn't always happen that brings me into profit, then wearing it off again with lots of little losses




It depends on the strategy. Some behave like that, but mine for example will bring in mainly small wins and losses, with regular large wins. I'm not advocating going all out for huge wins, I'm just suggesting that allowing for it is a good idea. You can have your cake and eat it too .


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## joslad (25 September 2009)

Answering the original question...

When I first started trading I considered setting daily limits. In doing so I might have avoided a few losses, it also would have mean't missing out on a lot of profits too.

I now let each trade run on its merits and only exit when I think it's done!


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## adobee (27 September 2009)

tech/a said:


> Dont get it?
> 
> You pick up 5-10% and take out a grand then let the profits run?
> 
> ...




perhaps wrong terms ... 

I buy $10k of stock i think is breaking out or running..
I sell $10k once the stock has gone up 10%
I leave the $1k profit in the stock to do what it wants
This way I am happy to leave the 1k in the penny stocks and not be worried about ups and downs etc.


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## tech/a (28 September 2009)

adobee said:


> perhaps wrong terms ...
> 
> I buy $10k of stock i think is breaking out or running..
> I sell $10k once the stock has gone up 10%
> ...




Ok---


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## craigj (29 September 2009)

sam

in a couple of newby posts i suggested trying to make $200 in a day

i wouldnt suggest closing the trade every time if the momentum is strong and buy orders are outnumbering sell orders      allow the price to run further until sellers start coming in

if you run the $200 concept in conjunction with other trading and make 3 $200 profits a week it will have a serious boost to overall profit in the year


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## tech/a (29 September 2009)

craigj said:


> sam
> 
> in a couple of newby posts i suggested trying to make $200 in a day
> 
> ...




And the losing trades where do they fit in?


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## craigj (30 September 2009)

obviously the losers take out the winners so stop losses need to be tight on these short term trades


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## ThingyMajiggy (30 September 2009)

craigj said:


> sam
> 
> in a couple of newby posts i suggested trying to make $200 in a day
> 
> ...




yeah, I agree with tech on this one. have to think about the losers, I would rather concentrate on the losers than on the winners, having least amount of risk is number 1. 

thanks for the discussion everyone, its made certain things clearer, I'm not biased one way or another, as I said there are plusses to both sides I think. 


now. for something a bit off topic, rather than starting a new thread I thought I might as well post in here again. 

ATR. average true range, does anyone use this? I want to find out the average true range of stocks, say top 10, 20 etc but in percentages, not cents, so its relative to each stock and a more realistic indication of volatility. I don't want the indicator that plots on the chart, I want a table setup where I can run a scan and check the highest/lowest 10/20/50 stocks with the highest/lowest volatility, on average. 

does anyone know where I can get this? I found this http://www.istockanalyst.com/article/viewarticle/articleid/2440310

which is what I pretty much want, I have ninjatrader and Investor R/T here so I can code in both of those I think, does anyone know if that code will work in either of those apps? 

cheers big ears


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## howardbandy (1 October 2009)

Greetings all --

The comments and opinions are all over the map -- here is mine.

In my opinion, whether to use a profit target or not depends very much on the characteristics of the system and the trades it produces.  A system that trades frequently -- several times a week or more -- will probably benefit from using profit targets.  Design your trading system with the code for the profit target isolated so that it can be tested independently from the other exits.  To have statistical validity, the profit target should be the exit used by enough trades to allow testing whether use of the target improves the system or not.

Stops are another story.  I differentiate between a maximum loss stop and a trailing exit, such as the parabolic component of the SAR system or the chandelier exit.  The initial exit price is placed far enough below the entry price (for a long trade) so that the exit is not often hit due to normal fluctuation in the price.  Trailing exits work well with trades that last long enough for the trailing part to catch up to the trending price.  That can work intra-day using short time bars, or it can work on trades that hold a week or more using daily bars.  But trailing exits need several bars before they become effective -- otherwise they are simply maximum loss stops.

Systems should be designed so that maximum loss stops are there to (hopefully) prevent total loss of funds if there is a meltdown in price.  But if the maximum loss stop is hit regularly -- say more than 10 or 15% of trades -- testing will show that at any level it is set, maximum loss stops hurt the performance of systems.  It is much better to use an exit that is designed into the logic of the system as the primary exit.

Thanks for listening,
Howard


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