Should you keep trading after making target?

Discussion in 'Strategy Development' started by magicdust, May 20, 2005.

  1. Is it better to have a profit target for a certain time period, and to have a break from trading once the target has been reached, rather than risking going backwards from that point?

    I have a monthly profit target. The last two months I have achieved it quickly, only to lose some of my profits and fall short of my target in the end. I am not certain whether this is because I trade differently when my target is reached (psychological issue) or whether it was just due to the way my system interracted with the market over the period. A little of both I suspect.

    It would be nice to (when occasion offers) lock in profits part way through the month, then take a break. Yet at the same time, I am aware that this is not mathematically optimal - i.e. if your strategy has a positive expectation, then you should trade it as much as possible for maximum profits. Not to do so runs the risk of cutting your winnings short.

    On the other hand, one of the best traders I know had a career lasting only one year. He achieved his target (paying off his house) then just stopped. Why continue to risk if you are happy with what you have.

    Thoughts?
     
  2. I don't think you should have a target. Trading is about adaptation and improvisation not about hard work and getting paid proportionately to the amount of work done. Setting a monthly target in trading is like going into a boxing match and deciding to punch your opponent a predefined number of times per round. That's not the goal. Rather if you want to have something predefined, it has to be the amount of risks you are willing to take because that's the only thing you can actually control in the trading environment. You may have some expectation about what you can achieve in the long run given the risks you are taking but if your expectations were wrong then you will simply have to adjust them. However if you feel like taking a rest after some nice gains then you have to get some, that's OK - you must approach trading with a clear mind :cool:
     
  3. Very often, a computer doesn't need any rest. :confused:
     

  4. ================
    Magidust;

    If you are achieving monthly goal ''quickly '';
    may pay
    to experiment with position pize.

    And even though reaching a goal or exceeding a goal can produce overconfidence or pride/bananna peel;
    dont like the idea of quitting.

    Trade smaller after losses or more research ,yes;
    quit-no.

    Good goal paying off home;
    hope he isnt retired from work force, because most retired people die shortly afterwards or have inactive health problems?????
     
  5. I learned the hard way that goalsetting in terms of numbers really does nothing for you, and can actually be harmful depending on how seriously you take your "achievements". Anything that causes you to trade in a manner inconsistent with what you "normally" would do should be removed asap.

    Ask yourself, does your account level have anything to do with your next trade, and if it does, should it?
     
  6. Dude, it's a loaded question.

    You're actually giving two scenarios.

    1. The trader somehow manages to hit his TP - then sits back in the awe of it. Re-enters and gets wiped.

    This trader should exito because he's destined to blow his account.


    2. A trader who wins all the time. If he gets flat, sure, stay flat, no prob. Take a break - he earned it.

    If he goes back in he doesn't get wiped. He can trade consistently well.

    He's used to hitting TPs because he hits them all time, it's no big deal.

    Sounds like you're comparing an amateur to an advanced trader.

    sKaLpZ
     
  7. The good trader has only one goal....

    To be WAAYYYY ahead when he quits trading for good.
     
  8. effkay

    effkay

    My thoughts on targets is that you cannot set one and keep winning. Let's take an example where a trader wants to make $500 a week,

    on monday he makes $200, what a bonus day!!
    on tuesday he make $100, right on target!!
    on wednesday, he makes nothing, no problems, still on target
    on thursday, he makes $50
    on friday he loses $100

    That would make him a very good trader, he only lost on day out of five, however, he sorely missed his target, and only made $250, half of what he wanted to make. The point here is that on the good days, if he stopped trading when he made $100, he would have made $100 on monday, $100 on tuesday, $50 on thursday and lost $100 on friday, and ended the week at $150, and missing his longer term target by a long margin.

    I think the way with trading is 'to make hay while the sun shines'!.

    Just my thoughts.
     
  9. Well said.