Setting Profit Goals: in Pips or Percentage Gain per Day?

Send​ your question to our traders coach:

Setting, Profit Goals,Pips, Percentage, Gain, per Day, Forex training, Learn, Coach, How to trade

“Hi, I’d like to increase my performance in gaining more pips but I’m not sure what is a good goal to set for myself to be conservative. I read a lot about 10 pips per day strategy. As of now my trades are automatically set to 10 pips goal and 5 pip stop loss. Should I focus on going for a certain number of pips or a percentage gain per day? Week? What are your thoughts?" Charles M.

This is a great question, and one which in different forms I have discussed with many traders, particularly those working in proprietary trading groups, and on shorter term trading desks where the trading time frames are typically intra-day to short term swing based.

For the purpose of specificity (and word count!) I am going to focus my answer specifically around your end question ‘Should I focus on going for a certain number of pips or a percentage gain per day? week?’ which I think will be of interest to many readers.

First of all let me give you my answer, and then I will explain my thinking behind it.

My thoughts would be that you should neither set yourself a certain number of pips, or a percentage gain per day or week, but rather that you should seek to maximise the amount of opportunity that the market presents to you within any given time period so that you can achieve your best possible returns. Having a daily or weekly, even monthly, quarterly or yearly target can be limiting and have adverse effects on your trading decision making, behaviour and performance.

Let’s take a look at the behaviour for example of bank traders in relation to their progress towards (or away from) their annual target (budget).  Traders who are ahead of budget can find themselves easing off the gas later in the year, to protect what they have, especially coming up to bonus time, in doing so they may be missing out on good opportunities to gain more – here target focus has created loss aversion. Where traders are behind budget they can find themselves chasing the market, pushing to create the money they need, often leading to increasing risk seeking behaviour. Both of these examples lead to ‘style drift’ where the trader is drawn away from their optimum and most profitable trading styles and approaches, away from being their best trading self, and losing discipline.