Why Goal Setting as a Trader is Vital

Goals. They are these things that were harped on in school, by teachers, parents and many of those life “gurus” you may see online or in person. There are many coaches, athletes, professionals and leaders that say that not setting goals can set your back farther than you can imagine. In the book Fundamentals of Sport and Exercise Psychology by Alan S. Kornspan, he argues that “Goal setting is one of the most important skills taught to athletes in order ot help them achieve optimal performance.” Athletes like Michael Phelps set goals for themselves and those goals help drive them. Michael Phelps said that if he had goals and he came up short, he would readjust them and hopefully get there sometime in the future. He also says that it was important to set goals that he focused on and wanted to achieve and did not worry about what others thought he should be doing. He set goals that were what were best for him. Phelps said that he and his coach had goals set for him to accomplish and they would go from step to step to get there. Michael Jordan wrote about goals in his book I can’t Accept Not Trying: Michael Jordan on the Pursuit of Excellence. He said he had always set short-term goals and that each one of those were steps or successes to the next one. Some of his first goals were as a kid and they were simply becoming a starter on the varsity squad.

It is not just athletes that set these goals and use them to pursue greatness. Businessmen and businesswomen, and anyone who wants to perform in a competitive environment use goals to grow and further themselves from their field. Traders are one of these key groups of people that operate in a highly competitive and ever-changing environment. Your performance as a trader rests solely on your shoulders and without goals, getting better can be that much harder. Goals can be used to track your progress, plan for the future, and better lay out where your focus should be. Goals allow you to better allocate your time and maximize your growth. Setting proper and appropriate goals can only help you in the long run, so why wouldn’t you take the time to set the realistic goals for your trading?

What Kind of Goals Should You Set as a Beginner

SMART

If you are a new or beginning trader that is still just trying to get their profitability legs underneath them, or if you think you could be performing better in the markets, then effective goal setting is definitely something you should focus on. A driver that does not have a road map of some kind is sure to get lost if he is not familiar with the road before him. There are numerous books and articles out there that you can research into how to set goals, but we will tell you that setting SMART goals is definitely a help.

S- Specific- you want to be clear with you goals. Simply saying “I want to make more money” is vague and has no “juice” behind it. Here take this $1 bill, you made more money. Also saying “I want to be better at trading”. Ok well how? Think of answering the Who, What, when, where and why in this section.

M-Measurable- Again simply saying I want to make more money is not going to help as much. Having a goal like “I want to make $3,000 in the month of September with a win% over 50% and a risk:reward ratio of 3:1 or better, now that is a measurable goal. Now you can ask yourself before every trade, is this going to help me reach my goal and is it within my goal parameters? You can now also measure and track your progress toward you goal along the way.

A-Attainable- Alright now real talk, these goals have to be realistic. If you are a new trader with little capital  and you say “I want to make $1,000,000 in my first year of trading”. Alright calm down. I know that it is good to have motivation and be confident, but setting these unattainable goals can discourage you in the long run. Now don’t make the goals too easy. Setting the right level of goal is key and requires you to look inward and do your research. These goals need to motivate you without later crushing your spirit if you don’t reach them.

R-Relevant-     You need to make the goals relevant to what you are going. The goals need to align with your mission and vision. Setting unrelated goals that don’t align with your vision may only cause confusion and frustration. Is it the right time to set this goal? Is the goal worthwhile to set? Are you the right person to reach this goal?

T-Timely-         Set that target date. Don’t leave it completely open-ended. Saying I want to make “X” amount of money from trading in the future can be helpful. But if that is the only goal you have, it will not give you any sense of urgency. You need to have a date you want to reach certain milestones so that you can make sure you are making the progress along the way.

Setting these SMART goals is simply one guideline you can use to make sure they are effective and powerful goals. Now we are not saying that you shouldn’t have these overarching “vision goals”. Saying subjective things like I want to be a master of trading, or I want to be financially free, or I want to be a millionaire from the markets, or even just I want to be a successful trader, can still be good goals. They keep your mind right and on the empowering path. Trading can be discouraging at times so it is good to have this vision.

As a new trader it is imperative that you set goals that align with what you should be doing. Set goals to help develop good habits in trading that will benefit you in the future. Compounding good habits is a powerful tool. Set goals that help set you on the path toward getting better. You don’t want to set goals to try to create shortcuts to making money. You want to set goals to help make you better as a trader and the profits will naturally follow. Now setting monetary goals and trade result specific goals is fine too, just make sure they are suited to you.

Examples of Some of the Goals of Our Traders

We asked some traders what some goals they set as new traders and just what some goals they set in general are. Here are some of the many varying results.

• I want to have a win% over 50% in my setup A, a win% of 60% and above in my setup B, a win% of 30% and above in setup C (and so on).
• I want to make $10,000 in the month of June.
• I want to be on my computer and doing research by 7:00 AM est every day in the month of March.
• I want to write a detailed review every day after the market closes over the next two weeks.
• By September I want to have made enough money in trading to buy my wife that purse she wants for her birthday.
• By the end of the year I want to have my trading account balance be greater than “X”.
• I want to add 3 new plays to my trading arsenal by the end of the summer that I feel are consistent and tested.
• I want to have 1 new automated trading strategy trading live this year that is consistently profitable every week.
• I want to make a positive return in the month of August.
• I don’t want to enter any trade with less than a 4:1 risk:reward ratio this week.

And so on and so on. There are many different types of goals you can set. And some guys set more overarching and long-term goals as well as goals for the day. The point is they all know where they want to be going in their trading and they take the time to make sure they are taking the steps necessary to get there.

Reviewing Your Goals Effectively

Now simply setting goals, either reaching them or not, and then moving on won’t necessarily cut it either. After ending a period of goals, you need to review those goals and determine whether they are appropriate goals. If you did not reach them, determine why. Look back and see what things may have set you back in reaching those goals. Maybe you realized you took some trades that didn’t fit your parameters, or maybe you made some mistakes you didn’t realize at the time. Or maybe you just set some unrealistic goals for the time and environment and you need to review your goal setting. Looking back and making sure you are setting the right goals is crucial. Don’t worry!!! Not many people will reach all of their goals. If you do achieve of your goals, great maybe you really did knock it out of the park, or maybe you just weren’t ambitious enough with your goals. Try upping them for the next period. Review review review. So make it a goal to set some goals this week. Even just a few. It will feel good to check that off your list and the more you do it, the easier it will get! It will take time at first but like trading, with repetition it can get easier. If you don’t always feel like it, just go through the motions anyway, your body will still build those habits you need. So go out! Set forth and set your goals!