Setting the right goal is half the battle in any endeavor. However, determining it can be quite challenging. As a result, many traders either trade aimlessly or follow the wrong path. How can one find the right direction?
In this article you will learn:
- Proper goal-setting in trading is crucial for success, emphasizing a focus on the trading process rather than solely on end results, as the market remains unpredictable and beyond traders’ control.
- Incorrect trading goals, such as monetary targets or vague aspirations, can lead traders astray, hindering progress and undermining their ability to measure success effectively.
- Effective goal-setting strategies in trading involve prioritizing aspects within traders’ control, such as risk management, trade planning, and continuous self-improvement, fostering a proactive and growth-oriented mindset essential for long-term success in the markets.
What psychological motives should drive a person to engage in trading?
Trading is just like any other profession. What motivates a person to choose a career as a doctor, teacher, or engineer? Primarily, it’s an interest in the field and a willingness to dedicate a significant part of one’s life to mastering its intricacies.
To achieve truly high results in trading, individuals need to possess certain character traits. For instance, a high tolerance for risk, low anxiety, and the ability to make decisions in uncertain conditions. Not everyone entering trading possesses these traits initially, but with determination, they can be developed. The key is to approach trading as a profession rather than expecting quick financial gains.
Unfortunately, many enter the market with a desire to get rich quickly with minimal effort and investment. These individuals lack an understanding of what being a trader entails and the psychological and emotional burdens it carries. Naturally, such traders often drop out quickly.
Trading is a business, and like any business, success requires hard work, primarily self-improvement. Traders aren’t born; anyone can become a successful trader if they’re willing to put in the effort.
Are Money Goals Enough?
Of course, there is one overarching, abstract goal: to consistently earn money and remain profitable in the long run. But when it comes to specific goals, money itself cannot be the goal in trading or in life. Imagine dreaming of $100 million. You wake up one morning, and there’s a pile of cash in the middle of your room. It’s all yours, but there’s one condition: no one can know about it, and you can’t spend it. Are you happy?
The vast majority of people asked this question naturally answer “no.” Therefore, people don’t need money itself but rather what they want to exchange it for. Money is a means to an end, not the end itself.
To become a successful trader, one must love what they do. They should derive pleasure not from a profitable trade but from the trading process itself, studying the market, and understanding its mechanisms. In this case, financial success will inevitably follow.
What Trading Goals are Wrong?
First and foremost, the goal in trading should be oriented not towards the end result but towards the process itself. That is, the goal cannot be a specific number of profit points or a certain amount of money within a unit of time. Any monetary or quantitative goal, let’s call it that, is inadmissible in principle when applied to trading simply because you depend on the market.
What could be examples of incorrect goals in trading? “I want to earn $500 per day/week/on a single trade, etc.” or “I want to execute 100 trades within a certain period.”
Another type of incorrect goals in trading is “empty goals.” These are vague and immeasurable goals. For example, “I will be more disciplined, more consistent, better at following trading system signals, etc.” But how will you know if you have achieved the goal? You won’t. Therefore, this goal is empty.
So, how to set the right goal?
In trading, there are certain things you can control:
- The amount of money you invest in each specific trade.
- Entry and exit points.
- Assets you decide to work with.
There are also things you cannot control, and that’s the market. Don’t set your goals from the perspective of the market. Let them be based on factors you can control.
Among the most important goals are:
- Risk management goals — goals related to the size of trades and drawdowns.
- Trading process planning — goals related to generating trading ideas and developing plans.
- Trade management — goals related to managing open positions, including hedging and scaling, exiting a trade.
- Portfolio management — goals related to managing your finances, including those not involved in trading.
- Self-development and learning — goals related to maintaining constructive thinking for making optimal decisions.
- Personal and non-trading goals — goals related to various aspects of your life but affecting trading results, including physical health, relationships, spirituality, etc.
Most traders tend to set goals more focused on preserving the existing status quo rather than on development. For them, it’s more important not to lose than to earn. Essentially, this is a dead-end path. Goals should be oriented towards earning, not just preserving.