I’ve written about setting trading goals and how those goals need to be different from ‘normal’ every day life goals. And I want to spend a little more time thinking about that concept. Trading successfully is not about making large amounts of money quickly, or only ever making big winners. It’s about consistently managing to eek out a small win, over and over again.
Sure, from time to time the big win comes, but the real magic is in avoiding losing large or medium amounts of money when you do, and in capitalising on the cumulative effect of consistently banking winners.
That sounds pretty easy, but it’s not. There are all sorts of challenges that come with trying to achieve and maintain consistency. These challenges are mainly internal “thinking framework” challenges. In other words, the problem is us. We can create a trading system or strategy that makes money over time, but we struggle to stick to it. We can get really good at identifying opportunities to trade and make money, but we either don’t take them or we take too much risk on them (then usually the ones we take don’t work and the ones we don’t work perfectly).
So, what does this have to do with goals? Well, the thinking framework stuff, pretty much nothing, but what we can do is to set goals for ourselves in terms of consistency. In a blog post I wrote a while back on goals, I said that we should set goals around sticking to our rules, taking our stops and following the process of responsibly trading. That is absolutely what we need to do. I am now adding a winning streak counter to the mix. So far, my best this year is 10 straight green days in a row. My goal now is to make that 12. I have also been tracking my average winners and losers (in terms of size) and my goals are to bring the size of the losers down and the size of the winners up.
These goals have very little to do with the actual trades themselves, or the amount of money that I want to make, but instead focus on discipline. Not only will it increase my discipline, but it will set a new precedent for myself in terms of what is possible for me to do. A small increase in the value of my average winner could do well to change my own set of beliefs around what I am capable of earning.
Beliefs become habits, habits become lifestyles. Setting goals around losing less (on average) and winning more (on average), should help me cut my losers quicker and ride my winners longer. Which is the whole idea, right?
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