I believe that setting goals for yourself is a very important part of life. It helps to keep you focused and on the right track. So when unexpected opportunities come across your path, you have the privilege of deciding whether or not that opportunity will get you closer to your goal.
Setting goals for your trading however, is somewhat different to normal life. For example, I can set a goal for myself for a certain number of hours that I want to spend reading per week or month. However, I cannot set a goal for how much money I want to make trading for a week or month. The reason here is simply because trading doesn’t work that way.
There is no direct relationship between input or effort, and outcome. In fact, in many cases if we set a goal to make a certain amount of money, we cause ourselves a great deal of stress and quite commonly, losses.
Trading is a ‘take what you can get’ kind of game, and thus setting monetary targets or goals is counterproductive. When you are close to reaching your goal or unable to make your monetary target, your decision-making process deteriorates. You become more focused on hitting the target than you are on proper trading discipline. This does not mean that you cannot set trading goals for yourself, it simply means that the nature of the goals need to be adapted to trading.
In other words, if you are setting yourself a trading goal, it should be pinned to an aspect of trading that is completely in your control. The market is absolutely not in your control, so setting a return or daily/ weekly/ monthly profit goal is pointless. You can however control yourself and the way in which you execute your trading strategy. That means that you can set a goal for yourself to make 20 perfect trades in a row. That is, trades in which you stuck to your rules and remained perfectly disciplined.
In other words (yes, more other words), you can set personal goals that are attached to your self control and discipline. To take a few days off after a winning streak, to obey every stop loss, to take every entry when triggered. A way of doing this would be to start counting how many perfect trades you take before you mess up, and then aim to do better than that next time. You can then keep challenging yourself to keep making more and more perfect trades between mess-ups.
In case you are wondering what a perfect trade is, have a look at “What makes a good trade?” and Simon’s video on a perfect trade.
Remember, having rules and sticking to them is really the most important part of trading. Despite all the excitement and drama, the ones who succeed are the ones who are disciplined enough to follow their own rules.
Happy trading!
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