Hi all! Welcome to this thread!
First i want to say that English is not my language so if you have problems understanding what i write that is probably the reason. Just ask if there is something confusing in my post and i will try make it clear.
In my opinion good successful trading is made of 3 equal important parts. The first part is the trader himself with the talent, knowledge and experience. The 2nd part is the system/method/strategy. And the third part is money management (MM) maybe also combined with trade management (TM). Some traders look at MM and TM as one and the same thing. Others say it is two very different things. Personally when i talk about MM i am often including TM as if it is more or less the same thing. I am not saying that is the right way to look at it but i am just telling so people know what i am talking about when i say MM. In this thread i hope we do not talk to much about the trader and the trading system but mainly about MM and things that are related to it.
I am mainly starting this thread first of all to hear other traders view on setting daily goals/targets (or weekly/monthly or whatever period..) so in a way i guess you can say it is about MM then right? I am first of all talking about day trading/intraday trading and maybe scalping here but I guess the idea can also work for other types of trading like maybe even swing trading. I was trying to find a thread where this subject was already going on. I found many but non of them was really spot on so i decided to make a new thread.
Personally i have not used goals much in my trading so that is the reason i like to hear from traders that have experience using it. Is it good or bad? Is it useful or not? People that do not have personal experience using it is also welcome to post here of course. The goals/targets i have been using is most for single trades. Like using Stop loss (SL) and target points (TP) but not much for daily targets.
Some traders also use risk/reward (R/R) for daily goals/targets. Just to make a example of what i am talking about lets say you are scalping and your system gives maybe around 10 trades pr day on average. You may or may not have a pips R/R set in stone like example 5 pips SL and 15 pips TP. Or you may not have your R/R in pips but in % of the acc. Or Dollar. Example 5% risk and 15% profit target (PT). Very high risk i know but just to make the math simple and easy in our heads for this example. So in this example the R/R is 1:3. Pips, % or Dollar.
What i just talked about is sort of a simple MM. Then some traders add one more "layer" of MM. That may be done in many different and advanced ways and i guess it is possible to write a big book about it but just to make it short and simple here for the example lets say they set a similar R/R for the day (or week or...). That may be to stop trading after 15 pips loss (or maybe 15 pips draw down (DD)) for the day. And the same for the winning side. Stop trading after example 45 pips profit that day. So the R/R in this example is the same as for one trade. R/R 1:3. It may be any number or may or may not be the same R/R for the single trades as for the day. Some may also use pips targets for single trades but % targets for the day or the other way around. Or they may use the same number for both single trades and for the day. Pips, Dollar or %. The different variations are endless. Some may not even care about pips and/or % for the daily goal but only go for a certain number of trades. Maybe stop trading for the day after 3 winners or 3 looser no matter what amount of pips, Dollars or % they win or loose that day.
Anyway for the scalper in my example that have a 5 pips SL and a 15 pips TP for the trade and a max risk pr day of 15 pips and a PT for the day of 45 pips, he/she will some days stop trading after only 3 trades even if the system have a average of 10 trades pr day because the goal/target for the day can some times be reached after only 3 trades. Profit or loss. But it is also possible that it will take more trades to reach the profit target or the max risk or DD for the day. Some days the profit or loss targets may not be reached at all. Then they may trade the whole day, or some traders may also have a limit on max trades pr day. The scalper in the example maybe stop after lets say 6 trades pr day even if targets are not reached. Some others may "reset" the targets every day but some may even continue trying to reach the target the next day. Example if they had 30 pips profit previous day (target was 45) they may go for only 15 the next day to reach a total of 45 even if it now is two days instead of one. Or the other way around. If they had only 30 pips the previous day they may go for 60 pips next day to try to reach a average PT of 45 pips pr day. And so on.... There are endless ways of doing it..
Like I say earlier some may stop trading for the day if they have a certain DD. That is not always the same as loss. Example you have 30 pips profit early in the day and then you have some losers and you are down 15 pips from the high that day. Then you still have 15 profit for the day but your rule is to stop at 15 pips DD. Another way is to continue trading until the first loss (or maybe until the first time you have 2 or maybe 3 losers in a row) for the day. Then stop. So if the first (or two first or...) trade for the day is a loss then no more trading that day. If you have no losers then trade the whole day. That may give a very nice R/R some days/weeks or what? Maybe also have a max number of trades pr day. If we go back to the scalper. He stop trading at the first loser for the day. The system gives on average 10 trades pr day but he/she knows that it is very rear that it is 6 winning trades in a row so maybe he have a rule of max 7 (or 8 or 9 or...) winners in a row and then stop trading for the day. So during a week he may have one day when he start with a loss and no more trading. Then a couple of days he have around 2-3 winners then loss. Then maybe a couple of days he have 7 winners, no loss and stop trading. Even if his single trades have R/R of "only" 1:1 it will still be very nice R/R for the week right? And if his single trades have R/R 1:3 the R/R for the week is just amazing if he use this model from the same example. Remember this is only examples. I am not saying it is normal to end a week like that. There are probably thousands of different variations of how this can be done and if some of you have personal experience and success (or even total failure) with something like this, or maybe even something totally different, i would love to hear about it and I am sure others out there like to hear also.
Non of the ideas and examples here in this post are my own. Different variations like this have been around long before i start trading and probably even before i was borne.. lol. So i am sure there are many traders out there that have tested this type (and/or similar) of MM with goals/targets in and out, up and down. Lets know about it. Good or bad.. Useful or not..
So this is the sort of things i would like to hear other peoples view and/or experience on. Is it good or bad to stop trading for the day (or week or....) when/if your target is hit even if you know that on average you can still have a lot more trades before the day is over. We all know that the rest of the trades that day can be winners and then you are giving up potential profit right? But they may also be losers and then you are protecting the profit you already locked in that day, or if you stop after a certain loss you protect yourself from even more loss. But then you may miss potential winner that can erase your loss. So what is best? Personally i have to be honest and say i don't know. I have been thinking a lot about this but i have not really been studying it mathematically and i have not been testing it live or “on paper” enough to say i have experience using it.
And about mathematics, i think people that have knowledge about math have a big advantage when it comes to trading and even more so with developing and using MM in a clever way. Personally i do not have more than average skills (probably far less) when it comes to math so i hope maybe some traders that have math skills will join us here in this thread. Another thing that is very useful for a trader is to have some skills using excel. I think a trader that have knowledge about both trading and MM combined with both math and excel skills have a great advantage and good tools to be successful. Excel is far more useful than many traders realize before they learn it and use it for them self.
Other type of MM and ideas of how to make the most of targets/goals or MM in general is also welcome in this thread but please try to stay around the subject of goals and/or MM. It is probably confusing enough already so best not to make it even worst... Hehe..
Arctic4x
First i want to say that English is not my language so if you have problems understanding what i write that is probably the reason. Just ask if there is something confusing in my post and i will try make it clear.
In my opinion good successful trading is made of 3 equal important parts. The first part is the trader himself with the talent, knowledge and experience. The 2nd part is the system/method/strategy. And the third part is money management (MM) maybe also combined with trade management (TM). Some traders look at MM and TM as one and the same thing. Others say it is two very different things. Personally when i talk about MM i am often including TM as if it is more or less the same thing. I am not saying that is the right way to look at it but i am just telling so people know what i am talking about when i say MM. In this thread i hope we do not talk to much about the trader and the trading system but mainly about MM and things that are related to it.
I am mainly starting this thread first of all to hear other traders view on setting daily goals/targets (or weekly/monthly or whatever period..) so in a way i guess you can say it is about MM then right? I am first of all talking about day trading/intraday trading and maybe scalping here but I guess the idea can also work for other types of trading like maybe even swing trading. I was trying to find a thread where this subject was already going on. I found many but non of them was really spot on so i decided to make a new thread.
Personally i have not used goals much in my trading so that is the reason i like to hear from traders that have experience using it. Is it good or bad? Is it useful or not? People that do not have personal experience using it is also welcome to post here of course. The goals/targets i have been using is most for single trades. Like using Stop loss (SL) and target points (TP) but not much for daily targets.
Some traders also use risk/reward (R/R) for daily goals/targets. Just to make a example of what i am talking about lets say you are scalping and your system gives maybe around 10 trades pr day on average. You may or may not have a pips R/R set in stone like example 5 pips SL and 15 pips TP. Or you may not have your R/R in pips but in % of the acc. Or Dollar. Example 5% risk and 15% profit target (PT). Very high risk i know but just to make the math simple and easy in our heads for this example. So in this example the R/R is 1:3. Pips, % or Dollar.
What i just talked about is sort of a simple MM. Then some traders add one more "layer" of MM. That may be done in many different and advanced ways and i guess it is possible to write a big book about it but just to make it short and simple here for the example lets say they set a similar R/R for the day (or week or...). That may be to stop trading after 15 pips loss (or maybe 15 pips draw down (DD)) for the day. And the same for the winning side. Stop trading after example 45 pips profit that day. So the R/R in this example is the same as for one trade. R/R 1:3. It may be any number or may or may not be the same R/R for the single trades as for the day. Some may also use pips targets for single trades but % targets for the day or the other way around. Or they may use the same number for both single trades and for the day. Pips, Dollar or %. The different variations are endless. Some may not even care about pips and/or % for the daily goal but only go for a certain number of trades. Maybe stop trading for the day after 3 winners or 3 looser no matter what amount of pips, Dollars or % they win or loose that day.
Anyway for the scalper in my example that have a 5 pips SL and a 15 pips TP for the trade and a max risk pr day of 15 pips and a PT for the day of 45 pips, he/she will some days stop trading after only 3 trades even if the system have a average of 10 trades pr day because the goal/target for the day can some times be reached after only 3 trades. Profit or loss. But it is also possible that it will take more trades to reach the profit target or the max risk or DD for the day. Some days the profit or loss targets may not be reached at all. Then they may trade the whole day, or some traders may also have a limit on max trades pr day. The scalper in the example maybe stop after lets say 6 trades pr day even if targets are not reached. Some others may "reset" the targets every day but some may even continue trying to reach the target the next day. Example if they had 30 pips profit previous day (target was 45) they may go for only 15 the next day to reach a total of 45 even if it now is two days instead of one. Or the other way around. If they had only 30 pips the previous day they may go for 60 pips next day to try to reach a average PT of 45 pips pr day. And so on.... There are endless ways of doing it..
Like I say earlier some may stop trading for the day if they have a certain DD. That is not always the same as loss. Example you have 30 pips profit early in the day and then you have some losers and you are down 15 pips from the high that day. Then you still have 15 profit for the day but your rule is to stop at 15 pips DD. Another way is to continue trading until the first loss (or maybe until the first time you have 2 or maybe 3 losers in a row) for the day. Then stop. So if the first (or two first or...) trade for the day is a loss then no more trading that day. If you have no losers then trade the whole day. That may give a very nice R/R some days/weeks or what? Maybe also have a max number of trades pr day. If we go back to the scalper. He stop trading at the first loser for the day. The system gives on average 10 trades pr day but he/she knows that it is very rear that it is 6 winning trades in a row so maybe he have a rule of max 7 (or 8 or 9 or...) winners in a row and then stop trading for the day. So during a week he may have one day when he start with a loss and no more trading. Then a couple of days he have around 2-3 winners then loss. Then maybe a couple of days he have 7 winners, no loss and stop trading. Even if his single trades have R/R of "only" 1:1 it will still be very nice R/R for the week right? And if his single trades have R/R 1:3 the R/R for the week is just amazing if he use this model from the same example. Remember this is only examples. I am not saying it is normal to end a week like that. There are probably thousands of different variations of how this can be done and if some of you have personal experience and success (or even total failure) with something like this, or maybe even something totally different, i would love to hear about it and I am sure others out there like to hear also.
Non of the ideas and examples here in this post are my own. Different variations like this have been around long before i start trading and probably even before i was borne.. lol. So i am sure there are many traders out there that have tested this type (and/or similar) of MM with goals/targets in and out, up and down. Lets know about it. Good or bad.. Useful or not..
So this is the sort of things i would like to hear other peoples view and/or experience on. Is it good or bad to stop trading for the day (or week or....) when/if your target is hit even if you know that on average you can still have a lot more trades before the day is over. We all know that the rest of the trades that day can be winners and then you are giving up potential profit right? But they may also be losers and then you are protecting the profit you already locked in that day, or if you stop after a certain loss you protect yourself from even more loss. But then you may miss potential winner that can erase your loss. So what is best? Personally i have to be honest and say i don't know. I have been thinking a lot about this but i have not really been studying it mathematically and i have not been testing it live or “on paper” enough to say i have experience using it.
And about mathematics, i think people that have knowledge about math have a big advantage when it comes to trading and even more so with developing and using MM in a clever way. Personally i do not have more than average skills (probably far less) when it comes to math so i hope maybe some traders that have math skills will join us here in this thread. Another thing that is very useful for a trader is to have some skills using excel. I think a trader that have knowledge about both trading and MM combined with both math and excel skills have a great advantage and good tools to be successful. Excel is far more useful than many traders realize before they learn it and use it for them self.
Other type of MM and ideas of how to make the most of targets/goals or MM in general is also welcome in this thread but please try to stay around the subject of goals and/or MM. It is probably confusing enough already so best not to make it even worst... Hehe..
Arctic4x