Profit & Time Targets
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Once you have dismissed the P&L chart, TSPE goes on to ask you about your goals for this trading system with the screen below:


TSPE calculates default values for the Profit Target and Time Target based on the input of your P&L string. These values represent reasonable expectations from the trading system represented. You might begin TSPE evaluations with these default values and then adjust, as needed, according to the considerations below.

Target Profit (Goal): You should attempt to identify a goal commensurate with expected investment risk. TSPE can readily compute required investment capital, but it cannot simulate a market trading program without knowing what would be a reasonable dollar objective or goal. It could take a few simulated trading exercises with TSPE to refine the targeted goal. The default response is generated from your input P&L.

Just about any investor knows what he might earn without any appreciable risk by simply visiting his local bank or examining published CD rates. Of course such a pursuit should take into account discounted losses due to real dollar inflation. Perhaps such an exercise should be a basic starting point in determining a reasonable goal. Another consideration related to the setting of a goal would be the number of trades one might be willing to tolerate before taking his capital from the market and applying it elsewhere. This latter constraint, described below, has an elapsed time value which the trader should understand before he enters the market.

The dollar level of goal specified should provide for a handsome return that will exceed nominal bank rates by some substantial multiple of bank rates less the economy's rate of inflation. Keep in mind that the probability of recovering invested capital plus goal should be as close to certainty as possible to undertake the planned investment.

Time Target: This is the number of trades you would like to execute to achieve your stated goal. If it is less than 100, you may want to increase it and the Target Profit by a power of ten. This input makes it possible for you to compare your expected profits with those you might receive from interest-bearing alternatives.

See "How the Number of Trades Affects the Probability of Marginal Performance" for more information on these two inputs."

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