Profit targets are based on an impossible scenario

Profit targets are based on an impossible scenario

| Rich Clifford | Blog
At least a dozen times a week, we are asked:

“What is your profit target?”
“Where do I take a profit?”
“My profit target determines my trade size. Where do I put it?”

Our short answer always is:

As the great Mike Tyson once said, “Everyone has a plan until they get punched in the mouth.” As a trader, profit targets are that plan. The market… is the punch in the mouth.

Setting a specific exit point based on a specific amount of money you want to make both requires the market to behave as you want it to behave… and for that behavior to remain consistent each time you enter the trade. More importantly, setting a specific arbitrary target means cutting off an enormous profit way too early, just because you wanted to follow some arbitrary plan (and then get punched in the face by Mike Tyson).

As a very simple example, In Feb 2022, we had a trade in Crude that had us buying at 92.15 and selling seven days later at 112.65. The trade resulted in a profit of more than 20 points… or roughly 50% of our entire annual profit both of the previous two years. A profit target at any point during that trade would have cut off our nose in spite of our face. Instead, we let the market follow the pattern it was on and exited when our programs told us to… 20 points richer.

The only thing we are asking is for you to step away from the screen, trust the math and physics and trade boring.