Having spent a lot of time working in banks and proprietary trading groups I have seen plenty of examples of the above changes in traders risk preference and trading behaviour occur as they move closer or further away from their target. In one ‘horror’ story I saw a trader go from being £9900 up on the day to being stopped out at -£5000 as they chased an intra-day target of £10,000.

When the markets are trading well, and you are trading the markets well you could hit your 10 pip target very early on in the day and if you then stopped trading you could miss out on future profits when really this is situation is a great opportunity to take advantage of the good market conditions and your trading form. Likewise when the markets are quieter, with less opportunity,  you could find yourself taking more risk or being more adventurous to try and hit your number for the day. As you do not know how many opportunities, or what opportunities the markets will present each day or each week, it is hard to set with any accuracy a realistic target for the day or week. You need to be flexible and responsive to the market.

I am not saying that goals or targets per se cannot be useful in some ways. Goals can be useful in life and in trading in the fact that they can give us direction, motivation and enable us to get feedback on our progress towards them. The types of goals we set can have a dramatic difference to our outcomes. Goals set for performance (e.g. increase your winning trade hold time) or for process or learning (e.g. practise a new market or trading style) can be very beneficial – the amount of control over them is significantly greater than for an outcome based goal such as a P&L target. Goals are particularly unhelpful when we get too attached to them and have to achieve them ‘at all costs’ and they are held to rigidly rather than being flexible which is all too common with traders setting money related goals.

Some traders may find P&L targets useful, and if so then they should carry on using them (although a pips or percentage gain would perhaps be more useful as it is easier to scale up in position size when thinking in these terms),  but my advice would be to set a goal of executing your process as well as you can each day, each week, each month, and let the profits take care of themselves.

Let me know how it goes.

Steve Ward
Traders Coach
If you would like a trading performance or psychology question answered by Steve please send it to askthecoach@fxtradermagazine.com