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The best way to set a trading goal

Posted by Tradeguider Team on Wednesday, October 6, 2021
Tradeguider Team

What`s your goal with your trading? Lose your pension? Wreck your health through stress? No we didn`t think so and we don`t want that for you either. So how to avoid that? Read on for more ideas for how to set realistic goals as a trader.

 

 

Don’t want to be a loser? Clarity and Discipline are what you need

Let’s get real – most retail traders lose money and are engaged in a game of self-deception

If you haven’t heard about thinking errors, cognitive biases or attributional thinking styles, make that the first thing you do after you finish reading this blog.

They are the reason why the majority of retail traders lose money and carry on trading: it is the same reason why gamblers think they can beat the house, why humanity hasn’t taken on board the fact that we are headed towards extinction because of climate change, why people think they won’t run into trouble when using their handheld device while driving.

So yes, can we say it any more loudly: the majority of retail traders lose money.

But also, those that are uninitiated in the ways of the market makers, the big professional trading companies, the banks and hedge funds, they are engaged in waging a massive act of group deception on retail traders, albeit legal. Players with huge account sizes can outwit new retail traders who, for example, pay too much attention to the news and buy into an asset whose price is about to drop.

So it’s not without clarity and discipline that you won’t be one of the traders who loses money time after time. Want to trade successfully? Do the following....

 

Treat your trading like a business

Part of that discipline is treating your trading like a business. While individual traders who engage in the activity outside of an existing job might see it as a hobby and therefore think that they don`t need to apply standard performance measurements and indicators to it, most people don`t want to burn through money without consideration. So it is important to put some checks and balances in place, both to stop money loss but also to promote increasing profits.

So, get clear on the following:

1 - The WHY - What is your mission statement? What, in one sentence, is your overarching goal?

Are you clear on what you exactly want to get from your trading activity?  Is it a way to pass the time, to burn through your pension, to add some extra money for treats, to double your savings pot in ten years, crack how to trade FOREX successfully? Get that clear in your head so you could pitch it to a fellow occupant of the proverbial elevator.

Then make sure that everything in your strategy - when you trade and how long for, what style of trader you are, what your risk reward ratio is, what the amount you are prepared to lose is  - matches your goal. It doesn`t matter whether it is the first goal of a novice trader or for someone who has been trading for decades - this always needs reappraisal and recalibration. 

 2 – The WHAT - Do you have a viable business proposition? Remember that the market is not your asset, nor is your amount of capital. You are your key asset. You are your product because it is your mindset which dictates everything. If you have a solid mindset you will make good decisions about what market suits you best, what style of trader you are, and of course, when to enter and exit a trade. You also will make good decisions about which information sources to focus on.

Are you hooked on social media influencers who might be pumping out paid-for stock recommendations? Do you waste time looking for patterns in the chart based on past price performance, when price movements are random, and the only patterns that are worth looking for are the moves of the smart money or perhaps long-term trends?

If your asset is strong, you will be focusing on methodologies and information that are born out by market truths.

3 – The HOW - Do you have processes to create structure around your activity to build your success? Are you practicing self-awareness so you can respond to your emotions rather than react to them unawares? From that, be sure you execute with discipline the small steps that get you there:

  • Having the right trading space
  • Being rested, watered, well fed
  • Have a stress management plan in place
  • Stick to your routines
  • Be disciplined about logging, analysing and improving upon your performance
  • Practice non-striving and acceptance whether you win or lose

 

And then get specific

What is your specific trading goal and over what period of time? Is it: 

  • To get your trading account to US$xK in a year’s time
  • A specific figure for your daily profit and loss ratio
  • Always sticking to no more than 2% of your capital on any one trade
  • Writing up your past trades in your trading journal every time
  • Have a good stress management system in place

 

 

Anyone who has ever been near any coaching knows it is often said that objectives need to be SMART [SMART criteria - Wikipedia] Specific, Measurable, Achievable, Relevant and Time-based.

How are you going to measure your performance? Is it as simple as comparisons in a spreadsheet? Are you going to rank yourself at the end of each month, as this article [Realistic Goals For A Forex Trader - Trading College] suggests?

 

And if you miss your goals?

First of all, did you just narrowly miss them or were you wide of the mark?
 
Then stop trading immediately and go and get acquainted with what you are feeling. There is a sweet spot to this. Don`t do it so much that you end up ruminating without hope (a hallmark of depression) or get paralysed by analysis. But you do want to do it to some degree because a surefire way to make yourself be inefficient as a trader, unhappy as a person and arguably physically ill, is to not be aware of and acknowledge emotions. 
 
For instance, you might find at the end of the day, after writing up your trading journal and running some numbers, that you`ve not hit your cash and/or your behavioural targets. This might send you into a spiral of negativity, where anger, frustration, hopelessness might play a part. Don`t make any decisions while these emotions are at play, but go and journal about them/exercise/meditate whether still or in movement/garden/do something productive while they are there. Drinking, smoking weed, having a cigarette, binge eating might feel like good ways of dealing with emotion but they backfire long term.
 
Then once you`ve aired those feelings appropriately, forgive yourself. Self-approach doesn`t aid progress. 
 
Then have a think in a logical and dispassionate way about what factors prevented you from getting to where you wanted. Parse out what factors were beyond your control versus what was within your control. Then work out what you would do differently next time. 
 
It isn`t knowledge that is power, it is the application of knowledge that is power. Be sure to rehearse, both mentally, and actually, your new and improved procedures so that you can internalize them and use them next time you need these new skills.
 
 

Summary: Reality check with yourself: your mindset is everything

Be real with yourself: do you believe you can achieve either your overarching goal or the small steps it will take to get there along the way? If not then have an honest conversation with yourself because setting yourself a target that, deep down, a large part of you doesn’t really believe you can meet is a recipe for failure.

Visualise and believe you can achieve it, both the small daily items and the big overarching goal, and it will come easier. But nothing comes without applying yourself and without focus on your particular end game. That has to be goal number 1.

Sources

How to set effective trading goals - Rob Booker Trading

Considerations when defining effective trading goals - CMC Markets

What are realistic goals for a FOREX trader - Trading College

How to set realistic goals as a trader - Business Mole

 

 


Tradeguider is the home of Wyckoff VSA. A core part of setting goals is putting a trading plan together so that you can meet them. We`ve developed a mentorship program to help you with creating your own trading plan that you can use time and time again. Head over to our Mentorship Collection and scroll down to `Creating your own trading plan` so you can make sure you`re getting the best foundations in place. 

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