Daily profit targets and what they do to your last trades

[Fairman]

Daily profit targets and what they do to your last trades

A lot of traders set a daily profit target. Make a certain amount, or a certain number of R, then stop. The intention is sensible. Lock in a good day, avoid giving it back. In practice it can change how you trade in ways that aren't obvious.

The problem shows up when you're close to the target. Say you're at 1.6R and the target is 2R. Now every setup looks like the one that gets you there. You start taking trades you'd normally pass on, because you want to finish the day. The target becomes something to chase instead of a reason to stop.

The other side is early in the day. A target can make you passive after a good first trade. If one trade gets you most of the way, you might stop trading a session that was actually offering good setups.

A few alternatives.

Use a loss limit without a profit target. Protect the downside, let the upside take care of itself.

If you want a profit rule, make it a trailing one. Once you're up a certain amount, a smaller pullback from the day's high ends the session.

Or set a trade count limit instead. That puts a cap on activity without tying it to a money number that you'll want to hit.

Whatever you pick, look at your last trade of each day in your journal. If those trades are worse than average, the target might be the reason.

[Fairman]

Money targets are especially tricky because they tie the trading day to personal needs. A trader who wants to make enough each day to cover a bill is trading with a goal the market doesn't care about. On days when the market offers nothing, the pressure to hit the number leads to forced trades. Thinking in terms of weekly or monthly results smooths this out, because a quiet day is no longer a failure as long as the week works out on average. A weekly view also makes it easier to accept a flat day without feeling behind.

[Fairman]

Prop traders often confuse the challenge target with a daily target, splitting the total into a daily amount and trying to hit it every day. That turns a flexible goal into a rigid daily one. Markets don't deliver evenly. Some days will give much more than the average, many will give less or nothing. Trying to make the daily share every day leads to the same chasing behaviour, often against a tighter daily loss limit than personal accounts have. Treating the target as a total for the whole challenge keeps the daily pressure off.

[Fairman]

If you do keep a daily target, consider what happens on the days you reach it early. Stopping completely might leave good setups on the table, but continuing at full size risks giving it back. A middle path is to keep trading with reduced size, maybe half, once the target is reached. That lets you keep taking good setups without putting the day's result at full risk. It's a compromise, but it removes most of the pressure the target creates near the threshold. Half size after the target is a rule that's easy to follow and easy to review.

[Fairman]

Track how often you hit, miss or exceed your target, and what happened on each of those days. If missing the target is frequent and those days include a lot of rule breaks late in the session, the target is creating pressure rather than helping. If hitting it early is common and you stop, look at what the rest of those sessions would have offered. The journal should tell you whether the target is a useful tool for you or just a source of stress. A simple column for target hit, missed or exceeded, next to the day's notes, is enough.

[FXS London Scalper]

The 1.6R near a 2R target situation is very familiar. One alternative is a time based end to the session rather than a money based one. For example, trading stops at 11:00 London whatever the result. That removes the pull toward the target and also keeps the trader out of the lull when setups get weaker. Some people combine both: a time stop as the main rule and a large loss limit. The profit target then becomes just a number in the journal rather than something that changes the last trades of the day.

[Shadow Trader]

Five-digit quotes make everything look finer than it is. Three things get mixed up all the time.

A pip is the unit most targets and stops are discussed in. A pipette is a tenth of that, the fifth decimal on most pairs. A tick is simply a price update, and it can move by a pipette, by several, or not change the displayed price at all.

They look alike on the screen because the last digit flickers constantly. But the flicker below the pip is mostly the feed shuffling between providers and the spread breathing, not buyers and sellers disagreeing. A scalper who reads that last digit as momentum is reading noise.

Where it bites: a target of 3 pips has 30 pipettes of room, and a spread that jumps from 0.2 to 0.6 pips eats a bigger share of that than it seems. Moving a stop by two pipettes to dodge a wick sounds precise, but it sits inside the range the quote wanders in anyway.

Also worth knowing, the number of ticks per candle says nothing reliable about volume across brokers. Tick volume depends on how often the feed pushes updates, which varies from feed to feed.

So the digits below the pip are useful for measuring cost, and close to useless for reading direction.

Do you ever size stops or targets in pipettes, and has it made any measurable difference?