The Power Of Weekly Profit Goals In Day Trading

Submitted by Markus on Mon, 10/27/2008 - 17:50.

For many years we have been teaching the power of weekly profit goals in our Day Trading Coaching Program.

We help our students to determine a weekly goal that is attractive for them and realistic. Once this goal is achieved, we tell them to stop trading for the rest of the week and start fresh the next week.

At first glance this sounds weird and traders ask me: "Why should I stop trading when I am ahead? If I keep trading, I will make more money".Ã‚Â

Let me show you proof:

This morning I received a trading log from a trader who has been taking 138 trades in the past 4 weeks. Unfortunately the past couple of weeks have been challenging for him: he realized a loss of $1,365.

Analyzing his trading logs I quickly identified his true problem: Overtrading.

Here's what happened:

Week 1:
After only 5 trades he was up $1,166, but he continued trading. At the end of the week he completed 15 trades for a total profit of only $494. By continuing to trade he gave back $672 to the markets.
.
Week 2:
This week he started off with a few losing trades, but then managed to come back: After 16 trades he was up $1,492, but he continued trading and gave it all back by the end of the week. He finished this week with a loss of $248.
..
Week 3:
This was his best and worst week at the same time: After a couple of trades he was up $2,170, but then he gave it all back and ended the week with a loss of $73.50.
.
Week 4:
His most challenging week. Though he followed his plan, the markets did not cooperate and from the first to the last trade of this week he was never positive. He had a couple of winning and a couple of losing trades and ended the week with a loss of $1,537.50. The closest he ever got to the zero

Do you see what happened?

Every single week this trader has seen profits exceeding $1,000, but since he kept trading, he gave back the money to the markets.Ã‚Â

And now you can see the power of weekly goals: If this trader would have stopped trading for the week after realizing $1,000 in profits, he would have realized a profit of $1,462.50, instead of losing $1,365. That's a difference of $2,827.50!

Believe me, THIS trader now uses weekly profit goals, and I am confident that his trading results will improve.

What about you? Isn't it time for you to learn about this important concept and - even more important - start implementing it?

Enjoy your day!

Weekly Stop Loss

Submitted by Anonymous on Tue, 10/28/2008 - 12:05.

Hi Markus,
Nice post, I watched another webinar and you Explained this Weekly Profit Target. My Questions is for the week that everything goes wrong like on the week 4 on your sample, I believe you need a limit of losses for the week on your trade plan, right?
It will not work to have Good 3 weeks earning 1k USD each and have a terrible week with -5K USD for example? These things happens we know.
If your trade plan have this limit what is the limit for the week? 1 for 1?
Thanks
Oliveira

Weekly profit

Submitted by Anonymous on Tue, 10/28/2008 - 16:24.

Great article. What puzzles me is when to stop when things go wrong.
I agree in having a weekly goal for maybe somehow different reasons.
1) Trading will take a lot of energy from you.
2) Trading long hours will expose you longer to the risk of getting emotional and go for less than A+ trades.

From a mathematical standpoint: if you only have a 50% winning strategy with a pt/sl ratio of 1.5/1 you will make money and themore you trade themore money you will make. The only thing is, we are HUMAN. From my one experience I dont trust myself i will only take A+ trades if i trade more and thats were you are starting to lose.

Having said that, if you encounter a bad week, there is no stop sign and theoretically if you are loosing in a week you can do 100 trades or more (assuming there are such many valid set ups).
You wont stop because you still not reached your weekly goal.
But you will expose yourself to the dangers described above.
So i think you also need a "stop sign" for the case you have a loosing week.

Could be e.g. a maximum of trades a day, a maximum of trades per strategy per day, a maximum trades per market per day, a maximum loss per day, etc.

What about the following?
If you didnt reach already your weekly goal, you take max. a day:
> 1 conservative trade either in the minis or the bonds
> 1 trendfading trade in the minis
> 1 conservative trade in the grains
> 1 medium aggressive trade in the minis

(assuming you are trading these 2 strategies and these markets)

Regards,

Mario Bouwmeester

Re: Weekly Stop Loss

Submitted by Markus on Tue, 10/28/2008 - 18:00.

Hi Oliveira,

Excellent question.

In order to find the "best" weekly stop loss, you need detailled trading log of your trades. You can not simply say that you would go "one-for-one", i.e. that you stop trading after a $1,000 loss for the week.

You need to analyze your maximum drawdown per week: How much were you down before bouncing back. I personally like to add 25%-50% to this maximum drawdown, since they say that "your largest drawdown is alway ahead of you".Ã‚Â

Based on this you then need to determine your weekly profit goal.

I personally like to set a weekly goal at 50% of the maximum weekly drawdown. But this decision is influenced by the statistcis I get from my trading log. I know that I usually achieve my weekly goal for several weeks in a row before experiencing a losing week.Ã‚Â

If your trading log shows you that you experience one winning week and then one losing week, then you need a weekly profit target that's larger than your weekly stop loss.

Does this help?