Targets stated in results - a dollar figure, a percentage, a payout - which motivate well and control badly.
Outcome goals are useful at long horizons and harmful at short ones. A yearly return objective shapes strategy selection sensibly. A daily profit target shapes behaviour badly, because the market does not supply opportunities on your schedule.
The characteristic damage is forced trading near a deadline. A trader who needs a set figure by Friday will manufacture setups on Thursday afternoon, size up to close a gap, or hold a winner past its exit to reach a round number.
Keep outcome goals long, wide, and expressed as ranges. Convert them into the behaviour that would produce them, then manage the behaviour. See process-goals.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Risk and reward on one trade. One trade on a price scale: the entry sits 2.00 points above the stop and 6.00 points below the target, so the shaded reward band is three times the risk band. The ratio compares what is lost if the stop is hit with what is gained if the target is reached.
Educational only, not advice. Spotted an error? Post in Site Feedback.