Reader Question: I really appreciate your work and your email letters. I have a question that perhaps others would also like to have answered.

As background information, I see the big picture on markets and the economy much as you do. I am an intuitive trader as opposed to a system trader and I mainly trade ETFs, both long and short. My goal is to attain a certain percentage gain each month.

What should I do when my goal has been reached? Should I stop trading until the beginning of the next month, cut my risk and just trade smaller or go for even bigger gains?

It seems a shame to risk losing when I have already hit my target but it seems a shame as well to just skip other trading opportunities.

I have been an “investor” for many years but a “trader” for only a few months. Thanks.

Van’s Answer: I don’t see any statement about your objectives. You need to really dig into your objectives and then you can answer the question yourself.

How painful would it be to give back some of those profits? Say 10%? Or 25%?

How painful would it be to give back all of those profits?

You must weigh that against the joy of making bigger profits…say making double your monthly goal.

When you understand your objectives, then you’ll have the answer for yourself.

For example, if the pain of giving back any profits is immense… then stop trading when you meet your goal

If you are willing to give back a certain percentage of them, then trade at a risk level that makes it nearly impossible to give back more than that level of profits.

All of this is in the Definitive Guide to Position Sizing, but thanks for the question because once again it allows me to emphasize the importance of knowing your objectives.