“I Want to Make Money Everyday” by AllxDayXRay
People setting daily trading profit goals or expecting to win money every day is a flawed mental state I see many traders approach trading with, even successful trader!
Confessions Of A Market Maker Report is a daily newsletter that breaks down the strategic thinking, business and money behind trading. If you are not already a subscriber, sign up and join 200,000+ others who are part of our TPlusTwoHoldings community.
People setting daily profit goals or expecting to win money every day is a flawed mental state I see many traders approach trading with, even successful traders. This mentality can lead you down a mistake riddled path chasing your “daily goal”. Yet I’ve seen daily goal purported by some who teach trading. If you make money consistently from trading, hit your daily goal and you’re happy with that, fine, trading is a personal journey, and you get out of it whatever you may; that’s your decision and no one else’s. Having a gambling background, my lens is always tinted through game theory optics and theoretically setting a daily goal suppresses the win rate in the long run. In the following paragraphs I’ll discuss why this is so from a mathematical stance and where this places your mind during trading hours.
Most of your trades- at least from my experience and the many I’ve spoken with- fall within the small win/ small loss spectrum. There is a small percentage of your trades that will be outsized gains, and these are the trades that significantly boost your profit factor and your expected value over the long run. Having a daily goal, in my opinion, is incredibly short sighted in a game where you need to be thinking about context in the long run. I can think of an innumerable number of reasons-most being mental- having a daily goal puts you in the wrong mindset but I’m going to speak to the most important. You stop once you hit your daily goal; you’re proud of yourself and have a sense of achievement, but are market conditions still favorable for your strategies? That’s the real question you need to ask. Don’t get lulled into the false sense of achievement and pride; its only ONE day of trading. Having your trading day based around an arbitrary number doesn’t make sense when you start asking yourself this question; why stop trading when conditions are favorable? You can’t control the market, you can’t control price and you can’t control how much you make trading every day. What you do control is designing yourself a positive expectancy strategy that will produce in the long run, and you execute that strategy and that’s your only concern. Gaining an edge is so hard, that when the edge is there you need to hammer it. Now the converse to this scenario is when your down money on the day, now what do most do? Still trying to chase their daily goal instead of asking themselves, “is this a good environment for my strategies?” People need to understand trading isn’t like a normal job; your pay isn’t fixed. Your paid for your performance and not by the hour. You’re paid for being patient; though we know waiting can stir up uncomfortable emotions. Eating a loss on the day, recognizing it’s not conducive to your strategies can be very uncomfortable, but in many scenarios it’s often the correct action.
If you have a daily goal, do you have a daily stop loss? What’s the ratio on goal to stop loss? I’d imagine most people have its 1/1 risk reward or 2/1 or greater. No matter, if you’re not allowing yourself for some outsized gains it’s truly going to be a grind. Ask anyone whose tracked results; I’ve seen this across other gambling ventures as well. There are a small percentage of days where you have a MONSTER day. How many of those do you have in a month? A year? Remove these days from your results and see the difference; its quite significant. Also, at times it is tough to mitigate your risk; you’ll move your stop; things are more volatile than you anticipated. Allowing yourself to have uncapped ceiling on your day helps boost the win rate when you’ll inevitably have a slip ups.
Personally, I don’t see the benefit to setting daily goals and only see potential pitfalls. I’m ruthlessly monitoring my thoughts and focus and placed in the wrong place, well it can be the ruin of a trader. Removing goals and expectations frees your mental facilities and gives you greater powers of concentration to focus fully on what you can control. Like anything else, this way of thinking and belief comes with experience. Good luck trading.
-Cannoli Fingers (aka AllxDayxRayx - Confessions of a Market Maker co-host)
You can join Ray daily at the Microefutures/EquitiesETC Trading Room where he trades and teaches live everyday with JJ@vwaptrader1