Becoming a Better Trader – How to Set Goals

Goals are an important part of setting out to accomplish anything we put our minds to, but an overemphasis in trading on profit objectives, especially with time constraints, is a recipe for frustration. Focus on following various rules as goals should be the objective.

We understand the difficulties of trading, which is why we’ve put together a variety of guides designed to help traders of all experience levels.

Making money shouldn’t be the #1 goal

When asked what the #1 goal for a trader should be, “to make money” might seem like the obvious answer. Yes, at the end of the day performance is ultimately measured by returns, however; focus shouldn’t be on profitability markers, but rather the steps that go into making good trades which culminate into long-term success.

Setting monetary goals actually doesn’t make sense, especially with time constraints – i.e., I will make x amount over y amount of time. The reason being, is that markets are dynamic and don’t provide opportunities in linear fashion. Opportunities cluster. Some periods of trading are good and will be conducive to your trading style while other periods won’t.

good trading, bad trading like a sine wave

We have no control over the market, just how we trade them.

By setting specific monetary targets you set yourself up for frustration when you don’t reach them. You will become fixated on forcing returns rather than making good trades or staying out of the market altogether when things aren’t going your way.

Other common goals which are hollow are, ‘be more disciplined’, ‘be more consistent’, ‘trade this or that strategy better’, and so on. How exactly do you achieve or measure those? By following a specific process and setting goals surrounding those facets of your trading which you have identified as giving you an edge, or advantage, you set yourself to achieve those vague goals.

Whether you are a new trader building a foundation or an experienced trader struggling (happens to the best), here are some ideas for Building Confidence in Trading

Focus on process-oriented goals

Goals should be about following your game-plan. (If you don’t have one, check out this past webinar where we discuss how to construct a trading plan.) Creating goals surrounding the rules in your game-plan keeps you focused on the details which go into making proper trades.

On way to do this, is to think of following the process as “If, then…” statements. If this happens, then I will do this. For example – If EUR/USD pulls back to a certain price level and posts a key-reversal bar, then I will enter long. It could be any number of criteria depending on your trading style, but the point is to bring attention to doing the right thing according to your plan.

If you follow your rules, then regardless of the outcome – win or lose – it was a successful trade. If you have an edge with proper risk management rules (another set of rules/goals), then you give yourself a chance at profitability over time.

One shouldn’t think about profitable trade as ‘good’ trades, and unprofitable as ‘bad’ trades. You can take a ‘good’ trade and it still be a loser (as many will be), and a ‘bad’ trade and make money. Keep in mind, poor behavior which leads to a profitable outcome is negative reinforcement, and conversely the same can be said about good behavior being positive reinforcement. You want to make sure you are focused on the latter.

Tracking goals/progress

One powerful way to make sure you are trading in accordance to your plan, is to use a checklist. This not only keeps you focused on making proper trades, but also highlights your weakness, areas you need to work on. Those areas which need to be worked on can become new goals to focus on.

For example, maybe you are having difficulty with sticking to your stop-loss or target objectives. This often times stems from too aggressive of a position-size. The simple fix here is to reduce the risk-per-trade so that you aren’t making emotional decisions because your P&L swings are too big.

For more, you can check out these past webinars for details on how to use a checklist and designing a risk management plan.

Idea: Create a scorecard for each trade, where you allot a certain number of points per facet of the trade and run a tally to see how effectively you are sticking to the plan. This will highlight areas of weakness and provide clarity on what you need to work on. New goals.

All-in-all, by emphasizing goals geared towards ‘doing the right thing’ you will best set yourself up towards achieving long-term profitability. There are certainly no guarantees, but if you are just ‘slinging it around’ without structure and proper goals, any short-term success achieved isn’t going to be sustainable.

For the full conversation, please see the video above…

Enjoy the video? Join Paul or any of the team’s analysts live each week for webinars covering analysis, fundamental events, and education.

Past recordings you might be interested in:Creating a Trading Plan; Handling Drawdowns; Risk Management; Analysis, keeping it simple; 6 Mistakes Traders Make; Building Consistency; Classic Chart Patterns, Part I; Classic Chart Patterns, Part II

—Written by Paul Robinson, Market Analyst

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