Minimum Acceptable Return (MAR)

Discussion in 'Risk Management' started by dima777, Aug 15, 2008.

  1. dima777


    I have come into this term which should mean an absolute dollar return from a trade that you will accept before activating the profit target. I m not sure I understood this right. Can anyone please correct me here - If I am wrong.
  2. I think you're talking about a profit target. I could be wrong. A profit target is a hard exit on the other side from a hard stop, which can be either a limit exit (at or better than the desired profit point) or a market-if-touched exit (at or close to the desired profit point).

    If you are asking amount WHERE to set your profit target, that depends on your ratio of risk-reward, the market, and a dozen other factors. Mine are set in stone, so I can't help you with a general ratio. I have heard a 2:1 ratio, but also 1:1. Too many variables and your own style, not to mention the instrument, need to be considered to determine a ratio that would provide an answer to your question.

    My kind of trading does not introduce human hands after entry. This eliminates emotion having any effect after entry. Both profit and stop exits are in place when I make the entry, and the only automated change to my open trade is tightening up the stop or adding contracts. I know some traders sit there and literally try to influence a trade by power of will, but such is not my style, as it is neither sustainable nor profitable.

    Hope I answered your question.
  3. And a lot of research, including backtesting.
  4. dima777


    thank you....i think MAR is different from the Profit Target because it is not price-based... it is based on investor regards the reward/risk ratio is doesnt need to be 2 as long as the system accuracy is high....thanks!
  5. I would never place a profit target based on a dollar amount, I would only place it according to what the market was giving me at that time. It would be nice to look forward to certain dollar amount each day, but the market does not cooperate. Sometimes it gives alot, sometimes a little, sometimes it takes everything you put on the table!

    Whatever instrument you're trading, nail down the movements for that instrument and study it. Greatly simplified, I know, but it's a start. What training have you taken for trading?