What is profit target?

What it means

The target is easy in isolation and hard in combination with the loss limits. The binding constraint is almost never the target itself but the requirement to reach it without triggering a daily or maximum drawdown breach along the way.

Why it matters

Two-phase evaluations typically use a higher first-phase target and a lower second-phase one, on the reasoning that the second phase tests consistency rather than capability. Some firms have moved to single-phase models with lower targets and tighter rules instead.

What this changes in practice

For a systematic approach the sensible framing is expected time rather than expected difficulty. A system with a realistic monthly return needs a predictable number of months to reach the target, and the question becomes whether the drawdown limits are survivable over that period — which is arithmetic, not ambition.