Profit Targets

How it is measured

Most firms count the target on the account balance, meaning closed trades, so a target is reached when you close the trade that takes the balance over the line. A few count equity. Fees, commissions and swaps on the simulated account reduce the balance, so the gross profit needed is slightly more than the headline target.

Target against drawdown

A 10 percent target with a 10 percent maximum loss means you must make as much as you are allowed to lose, a ratio of one to one. An 8 percent target against a 10 percent loss is easier; a 10 percent target against a 6 percent loss is much harder. Compare firms on this ratio before anything else, because it is what decides how many losing trades your method can absorb on the way to the target.

What is realistic

A professional fund manager who makes 10 percent in a year is doing well. A challenge asks for it in weeks, on a simulated account, with a loss cap. That is only possible with leverage and concentration that would be reckless on your own money, which is the point: the firm's capital, not yours, is at risk. A realistic plan for a 10 percent target risks around 1 percent per trade, needs a strategy with positive expectancy, and expects the target to take several weeks and a run of good conditions.

The temptation

The quickest way to hit a target is to risk a large share of the account on a few trades. It is also the quickest way to hit the loss limit. Firms know this and price challenges expecting it. A trader who sizes as if the account were their own savings passes less often on any single attempt but far more often across several.

Key takeaways

• Targets are usually measured on closed balance, net of simulated costs.
• The target-to-maximum-loss ratio is the best single measure of difficulty.
• Ten percent in weeks requires risk that would be reckless on your own money.
• Size as if the account were yours; it passes more often over time.