Today's Quote: “True success is overcoming the fear of being unsuccessful." - Wilson Mizner.

Conclusion on targets:

There is no better way to improve anything about your trading then to track and review. There are certain things you should track all the time as they are the ‘market internals’ to your trading. This would include things like your Sharpe ratio and batting average. Many other things should be tracked on a daily basis also. There are a couple of additional things you can track that are helpful to keep you getting to those targets. If you don’t do them daily at least do them when you are having a problem to help you see what is happening.

The first item it to simply record in your results what you actual target was and put in a column for what percentage of your target you actually achieve on an on going basis. It is like a report card on your reward-to-risk ratio. You may SAY you are going to take a 3-1, but if you are only taking 1-1 on average this column will show a 33% for the percentage of the target actually being achieved. An all or nothing trader would in theory always has 100% here. This column shows you how good you are at getting to the target you have picked. But are you picking good targets?

The second item to track will help show you how good you are picking targets. It involves recording one additional number, the ‘maximum possible’ number. This is how far your stock actually went up before triggering your planned ‘sell’ per your management plan. In other words, it may be fine to achieve a $1.00 target, but what if the stock actually moved $5.50? Getting all of a ‘chicken’ target is nothing to brag about. So this column tells you how much of the possible move you are targeting.

For both of these numbers, there is no magic number to hit. The key is to watch if they change over time. You may be doing fine for a while but then you notice your profit eroding. You notice that your ‘Average Target versus Maximum Possible’ column has dropped from 62% to 25%. It is possible that the market has gone from a sideways consolidation to a strong uptrend but you are still using targets as if the market were still sideways.

Without using these tools you will never have the knowledge of how well you are doing at achieving targets. When you start paying attention to these numbers you may find areas for improvement in your trading.