I just did a podcast about how to set the right trading goals. I felt I needed to address this after a recent YouTube Live video where, when asked, traders said that their goals are to make a certain amount of pips, percentage and money. And, of course, those things are very important as traders, but they cannot be trading goals.
If you prefer listening, I also made a recent podcast about it. And you can find all my past podcast episodes here: Traders Improved Podcast
The wrong goals: Money, return, pips
You cannot control how much you take out of the market. You cannot control how many setups you get within a week or within a month. You cannot control how many of your trades will go on towards your TP and how many fail. Of course, over the long term, you can have fairly accurate statistics about your performance and expectations, but the short term follows different rules. Anything can happen on a week to week basis.
Thus, having results-based goals can be detrimental to a trader’s performance. If you hit your goal early, are you going to take the rest of the week/month off and miss potentially profitable trades? If not, why do you have such a goal in the first place?
If you are short of your goal, you are more likely to over-trade or take excessive risk. This will, most likely, bring you further away from your goal and lead to an overall bad trading quality.
Finally, where do those results based goals come from in the first place? How did you come up with them? Most likely, they are just made up. I have seen countless of traders performance wishful-thinking calculations where they pull up a spreadsheet and backward engineer how much return they have to generate to meet an artificial goal, such as making 1 million Dollars within a given time period. Obviously, this has nothing to do with reality and the market and the world could care less about what you want. Your one and only job as a trader is to make the best trades possible, but you cannot control when they happen.
The right trading goals: Become the best trader possible
The famous trading quote “Just make the best trades possible. Money is then the natural byproduct” should be your inspiration when it comes to setting the right goals.
Your goal should be to become the best trader possible and the money will follow. Aim for small weekly improvements, steady progress and adopt the long game mentality.
Trading goals that are worth adopting are:
- No mistakes
A trader whose goal it is to make the least amount of mistakes within a given week/month will naturally trade better. Improve your entries by chasing fewer trades, not getting in too early, not breaking your rules and applying patience to the setups that slowly unfold in front of you. Also, look for improving exits. Exits can be improved by letting winners run longer and cutting losses effectively while reducing all emotionally driven decisions. Finally, try avoiding all risk management errors such as over-trading, taking too much risk or scaling in/out in an emotional way. Such a goal will inevitably make you a better trader.
In our Edgewonk.com trading journal, the Tiltmeter-Challenge is the first challenge a trader will go through. It forces a trader to become more aware of how he/she trades and mistakes will become obvious very quickly. Many traders reported that this first challenge has helped them turn their trading around rather quickly.
- Better and more professional trading routine
Many traders could improve their trading routine easily and so establish a more professional approach to trading. Trading is a business and you need to set your trading up in such a way. Journaling all trades by the end of the day can be a great goal to have. There is no better and more effective way of becoming a better trader than journaling and having a real review routine. Setting aside 30 minutes every morning to check what has happened overnight and to update your charts will also help you become more organized, miss fewer trades and have a consistent approach. Creating daily trading plans should be a must for every trader and just taking 30 minutes per day to create detailed trading plans where you map out potential trade ideas can be a game changer.
The weakest link in any trading business is usually always the trader itself. It is, therefore, imperative that you work on yourself. Scheduling 30 minutes per day to read an inspiring, motivating or educative book can open up so many new ideas. As I keep saying (and probably someone way smarter than me said it before), all it takes is one small new idea to spark a huge fire and potentially change your whole life. Meditating a few minutes every morning or engaging in any self-awareness training should be mandatory for anyone who is looking to improve the quality of their lives. But we shouldn’t only train our minds. Daily exercise is a must to blow off steam and to counteract all the negative effects that come from our sedentary lifestyle.
You can probably already feel how such trading goals will have a much more positive effect on your overall life. Chasing money is one-dimensional and just forces an outcome where you have no control over. But becoming the best trader you can be will transform your whole life and turn you into a winner.