Trading to Monthly or Weekly Profit Target Or Take Every Systematic Trade? Thoughts.

In the complex arena of algorithmic trading, practitioners grapple with a pivotal choice: should they adhere to trading with specific targets, or should they capitalize on every opportunity their system flags? This decision can significantly impact their trading journey.

Trading to Target: The Pros and Cons

Opting for trading to target means setting predefined objectives, such as weekly or monthly earnings benchmarks. George Soros, known for his exceptional trading acumen, once said, “It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.” This emphasizes the advantage of trading to target: risk management. By establishing clear targets, traders can avoid excessive exposure and safeguard their capital.

However, this strategy isn’t without its flaws. Markets are inherently unpredictable, and inflexible targets might lead to missed opportunities. Paul Tudor Jones, a trading legend, highlighted the fluidity required in trading: “You adapt, evolve, compete or die.” Rigidly adhering to targets could prevent traders from maximizing their gains in volatile or unusually favorable markets.

Taking Every Trade: The Pros and Cons

Conversely, taking every trade that a system suggests relies on the belief in the system’s long-term edge. This method aims to capture every potential profit, adhering to the philosophy that success in trading comes from exploiting all opportunities. As Ed Seykota, a pioneer of computerized trading, famously said, “The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.” This underscores the importance of embracing every trade but also the critical need for effective risk management within this strategy.

Yet, indiscriminately following every signal can lead to overtrading, where transaction costs erode profits. Moreover, not all trades generated by an algorithm are created equal, and pursuing every signal might lead to diminished returns due to lower-quality trades.

How To Choose a Monthly Profit Target for Your Pair Trading System

Setting a monthly profit target for a trading system involves a careful consideration of historical performance, risk tolerance, and market conditions. Here’s how traders can approach this task:

1. Analyze Historical Data: Begin by reviewing the historical performance of your trading system. Look at average monthly profits, the win/loss ratio, and the standard deviation of returns. This analysis will provide a foundation for understanding what’s realistic in terms of monthly targets.

2. Determine Risk Tolerance: Risk tolerance varies from trader to trader. Some may be comfortable with aiming for higher returns with the understanding that it comes with higher risk, while others may prefer a more conservative approach. Warren Buffett’s advice, “Do not put all your eggs in one basket,” highlights the importance of understanding your risk tolerance before setting targets.

3. Consider Market Conditions: The financial markets are influenced by numerous factors, including economic indicators, political events, and seasonal trends. It’s essential to adjust your expectations based on current and anticipated market conditions. As Paul Tudor Jones notes, “The secret to being successful from a trading perspective is to have an indefatigable and an unquenchable thirst for information and knowledge.”

4. Set a Realistic Target: Based on your analysis and risk tolerance, set a realistic monthly profit target. Remember, it’s vital to set achievable goals to maintain motivation and confidence in your trading strategy. As Jesse Livermore famously said, “The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.”

5. Review and Adjust: Finally, regularly review your trading performance against your targets. If you consistently meet or exceed your goals, consider whether your initial targets were too conservative. Conversely, if you’re regularly falling short, it may be time to adjust your strategy or targets to reflect your system’s actual performance and market conditions.

Setting a monthly profit target is not about rigidly sticking to a number but about guiding your trading decisions within the context of a well-considered strategy. It’s a dynamic process that requires ongoing adjustment and refinement based on performance and changing market dynamics.


Whether to trade with a target in mind or to take every trade proposed by a system is a nuanced decision that depends on individual risk tolerance, faith in one’s trading strategy, and personal objectives. A balanced approach, incorporating the discipline of target trading with the flexibility to seize exceptional opportunities, might offer the best path forward. As Warren Buffett advises, “The stock market is designed to transfer money from the Active to the Patient.” This wisdom can be applied to algorithmic trading, emphasizing the importance of discipline, patience, and adaptability in pursuing trading success.

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