Financial Market Goal Setting

I recently asked five different traders what their goals for the coming year were, and here are the responses:

• Trader One: Goal was to make $200,000 in the coming year
• Trader Two: Goal was to make $50,000 in the coming year
• Trader Three: Goal was to make $125,000 in the coming year
• Trader Four: Goal was to make $20,000 in the coming year
• Trader Five: Goal was to turn a profit in trading this year.

Each of these trader’s goals for the coming year revolved around how much money they wanted to make. This is hardly a surprising revelation as success in the financial markets is determined almost exclusively on the amount of money you make trading. The amount of money you make in the course of year can be defined as a yearly macro goal, and while there are benefits to this type of goal setting, there are certainly drawbacks as well.

The benefits to large financial macro goals relate to the accompanying article on goal setting. Making money for the financial markets trader is the dream that provides the motivation to do the necessary work each day. Few people would spend the countless hours of research and methodically following a trading plan if it weren’t for the goal of acquiring money. This dream in a real way provides the fuel necessary to do the required work.

However, perhaps unlike any other field of investing, macro goals in financial market trading have their drawbacks. Let’s say a trader has the goal of making $120,000 this year, or $10,000 a month. Because traders are numerically inclined, they usually know where they sit in relation to their financial goals. If they fall behind in their goal projections, there can be an inclination to try and catch up. If the year or month starts slow, there may be the temptation to enter trades that do not fit their trading rules, and that is when a trader enters a gambler’s mindset. Anyone that has ever sat at a blackjack table knows the feeling of trying to get back to even, or saying that they will leave when they are $100 ahead. The mindset traders have is very similar to this when they chase monetary goals. This can easily avoided if the trader applies the proper discipline, and follows the trading rules that he or she has set up.
Along this line of thought, when setting your micro goals for the coming year, absolutely do not quantify the amount of money you want to make each day. It is far too common for traders to say they want to make $100, $300, $500 a day. This is perhaps the worst type of goal you can set for the coming year. Macro goals can serve as motivation, but quantifying daily micro goals can too easily put you in a dangerous gamblers mindset.
Instead of monetarily quantifying your financial market micro goals, focus on areas that can productively help you in achieving your larger macro goals. Here are a couple of micro goals you can set for the coming year:

Discipline. If you don’t have it, acquiring it should be the top goal you set for the coming year. Simply setting a goal of acquiring discipline is far too abstract to be useful, so break it down into a couple of areas. First, if you have not written down your trading rules, do so. If nothing else, this will serve as a valuable review, and give you something to contemplate. If acquiring discipline is a priority, then make a goal of reviewing your trading rules on a daily basis. Set aside ten to fifteen minutes before each trading session to review the rules that you have set for yourself. This will be time well spent.

Keep a Trading Journal. Set, as a goal, to develop a trading journal that will track all trades you enter. Write down not only the parameters that went into make the trade (entry price, exit price, etc.), but also a quick note on your thoughts about the trade before you enter it. This can be valuable information later on.

Expand Your Trading Network. Too often, traders sit isolated from the world in their virtual world of numbers. Finding other traders can be a valuable source of information and someone to talk shop with. A simple goal could be to add five people to your network this year.

Review Each Losing Trade. A goal for the coming year could be to set up a methodical process for reviewing any losing trades you make. Set aside time each day or week to review your losers to see if all rules were followed, and if there was anything that you might have missed that you can learn from.
These are a few micro goals that you can set as a trader for the coming year. Traders come in all degrees of desire, but making money is the ultimate goal. Don’t forget about the process of making money, and don’t set goals that can lead to the gambler’s mindset. Structure your trading, and success is far more likely. My personal macro goal for the coming year is to not make a single trade that does not follow the rules I have set. I am pretty sure if I accomplish that goal, then the monetary goals will follow.

This came from a news letter I receive from rich dad poor dad I just wanted to share it to everyone.