Friday, 11 June 2010

Setting Initial Daily Profit Targets

I had a guy here a couple of days ago to move one of my internet lines. He saw my wall of screens and of course we started talking about trading.

It turned out that he had started trading currencies and proudly told me that he had made £1,000 on his first trade. Naturally, my next question was (in a kind way), how long had it taken him to lose it. The response was that it happened on the next trade because he had upped his size and had a tighter stop and had gotten stopped out after which, of course, the price went in his direction.

One of the useful things to think about in writing your first trading plan is whether it is a good idea or not for you to have a daily target for profits and limits on losses. Every time you put on a trade, you take on risk. After becoming CP in SIM so you can trade in your sleep gives you an idea of your trading profile. many of us went through the stage of making money in the first part of the day only to give it back in the last part of the day. By making a modest profit target you satisfy your soul that you are CP and after time, the target can be increased and then eliminated.

I have spoken to a number of traders whose dream is to make 4 ES points a day.  Once you get to CP it doesn't look difficult. Do it with a 5 lot and you have earned £1,000 a day.

How do you achieve this. One way is to find a setup that has a high win rate and only trade that one setup. Isolate the trade including context, back test it up the kazoo, learn it in SIM until you can do it blindfolded for at least every day for a month or two, go live with 1 contract. Done!

Gap trade was on again. This could be the trade to make your initial 4+ ES points on. Today it was good for 6+ points. The market was pushed down on the numbers so it was set up very well, far enough from yesterday's close to make it worthwhile and inside yesterday's profile. Then we had more numbers just before 10am in NY and it gave the last pop to close the gap. Jackie Gleeson time - "How sweet it is".

If you are a follower of the blog and have done the necessary work you will find another great high win rate trade that I earn my living from. I can make it anything from 57% to 82% win rate depending on how much I filter it. Of course the surer the trade, the less often it appears and the bigger size I need to trade to earn the same amount per month. Seemingly less risk with the 82% version, but is it?

1 comment:

  1. Thanks for the gap info EL. For a long time I could never "get it" when it came to gaps but your comments today provided some ideas that I'll test.