Trading Performance Targets

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One of the main mistakes that novice traders make is not setting daily or medium-term goals. Novice traders come to the market with a brand new trading account, in which they have deposited their funds; they begin to speculate on all trading opportunities, generally without money management and without a trading plan). These traders win or lose very quickly. Whatever. With no performance objective, they simply move on to the next trade, without taking any notice of what their strategies’ performance requirements are.

WORSE! Without a performance objective, traders retain only one thing: the maximum balance of their trading account at a given moment. And they only have one objective: to reach that balance again or to reach an even higher balance. These traders practically blame themselves for not having cut everything off when their account balance was at its maximum. If you think about it, you know that you can't buy at the lowest, if you sell at the highest. Only thinking about the highest balance reached in your trading account, is really a bad thing. Having objectives solves this problem.

Yo-yoing a trading account balance: ruin assured!



If a trader’s trading account balance is yo-yoing, i.e. moving from +20% to -10%, then from +40% to -20%, they are certainly heading towards razing their trading account...
Generally, it doesn't take very long. Even with a good strategy, if a trader has not set targets, he is most likely using far too much leverage.

Set realistic and achievable goals without taking too much risk



There are 20 trading days per month and it is estimated that the best traders (those who survive for the long term) account for about 10% of total monthly performance. This implies that their strategy, money management, trading plan and objectives are to achieve +0.5% performance per day on average. Including days of loss, the best traders therefore seek to achieve more than 0.7% performance per day.

It is important to set monthly and daily performance targets that are achievable. Indeed, a trader cannot set himself a target of 5% daily performance without the risk of razing his trading account one day or another. Reminder: 5% daily implies that the trader estimates being able to make 100% per month. Who can estimate doubling their capital each month? Nobody.

A little exercise: Take the history of the transactions you made yesterday, then calculate the daily performance. +5% +10% +20% -10% -20% ? I am sure that 95% of traders who calculate their daily performance in the evening would give me a breath-taking figure. Do you have your daily performance? Perfect, now multiply this performance by 20 and you get an estimate of your monthly performance. Don't you think there's something wrong? Don't you feel you're asking a lot of your trading strategy? Some traders will understand why they have already had to replenish their trading account 10 times.

Setting performance targets also allows you to set maximum daily loss targets. If a trader has reached his maximum daily risk, he must then stop his trading day, and avoid getting caught up in loss reduction, (a dark day).

Should I stop trading if performance targets are met?



For maximum loss objectives? YES!
This is a bad day for you. It's better to leave it at that. Tomorrow will be another day.

For profit objectives? Yes and no.
Some believe that when daily goals are reached, they should stop. The day is done and it is a good day. Come back tomorrow for more of the same.
Others feel it is important to stay one step ahead of the next potentially negative day.
In reality, everything depends on your monthly performance. If it's the middle of the month and you've only had winning trading days for the last two weeks, you can allow yourself to go for more, even if it means risking reaching your maximum daily loss target and having to stop your trading day.

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