Every trader who has already spent some time in the market knows very well that making money once in the stock market is not an art – even if we are talking about higher than average returns. Real winning is a steady profit that satisfies us. But very often the latter is the problem. What results really satisfy us?
What amounts or what percentage of capital should we earn every month to consider trading successful?
Sometimes we think we have absolutely everything to achieve success. Our strategy is effective and proven, it strictly defines Stop Loss (limitation of losses) and Take Profit (realization of profits) levels and an undoubtedly favorable ratio of potential profit and risk, we trade consistently, do not allow ourselves to be influenced by emotions, properly manage the size of the position. And yet, over time, we begin to think that we can do more, we try to "fix" our trading system, or we begin to open positions under the influence of "intuition", and as a result, instead of improving the rate of return we generate, we begin to experience losses, which causes us disappointment, which is our own in turn leads to further, even more serious mistakes.
Is this really the right approach? Apparently not, right? So, is it possible to avoid such an unfavorable scenario in a trader's career? Of course. The key to success is the right approach by setting the right trading goals. Below we will present a method known from the world of business management, which also works well in managing our trade and should practically promote the professionalism of our trading:
How to set trading goals?
The SMART method is considered the best method for setting goals, originating from the field of management, but also works well in the field of marketing. According to him, each goal must be analyzed from several angles. SMART is an acronym that covers exactly these aspects. So what does this acronym mean?
S (comprehensive)
S – in some detail. The statement "I want to make a lot of money" or "I want to live from trading" will not work here. Here we need to set a specific value that we intend to earn every day, week, month or maybe a year. How can such a value be determined?
First, we should analyze the results of our last weeks of regular trading. What was our average profit per position? How many positions did we open on average per day? What was our efficiency – the number of positions reached with Take Profit compared to the Stop Loss reached. What was our average reward/risk ratio? These questions are not always pleasant, and to thoroughly analyze each element of the selected period is a tedious, time-consuming task. However, only after conducting such an analysis will we be able to reliably determine our capabilities.
M (measurable)
M – how measurable. Every goal must be measurable. In the case of trading, this aspect of setting goals is relatively easy, as our goal should be a specific, hard-coded rate of return.
A (attractive)
A – how attractive. To stay motivated, our trading goal must bring real benefits to our lives. If we make money through trading, we need to feel that we are not doing it just for the sake of having it. Therefore, it is worth financing yourself a certain material reward for the honest achievement of your trading goals. However, it is important to remember that in the case of short-term success, you should not rest on your laurels and maintain your effectiveness.
R (realistic)
R for how realistic. The assumption "I want to make as much money from trading as Warren Buffett and George Soros combined" or "I want to beat Larry Williams' return record of 11376%" is not a realistic approach. Of course, coaches and motivational speakers will immediately tell you that "the sky's the limit." However, they themselves still conduct training and work with others, and for some reason we do not find them on the Forbes list of the richest people in the world.
Therefore, the chosen targets must be completely realistic, so that they can be achieved according to the trading strategy that we use and based on the results that we have regularly achieved in the past.
T (period)
T is what period. How long do we plan to reach our long-term goal? How long will it take to reach a smaller short-term goal? Setting a point to work towards is an added motivation. What happens if we miss the deadline or miss the goal? Then we have the perfect time to do a trading "examination of conscience".
In such a situation, we must think carefully about what we could have done better, where we made mistakes, and then immediately eliminate them, draw the right conclusions and prevent such mistakes from being repeated in the future. This is not an easy task, but it is definitely possible.
What else should be kept in mind when setting trading goals?
Finally, one more tip will come in handy. Well, it's a good idea to start by making our short-term goal a little lower than our estimated average trading result, of course, as long as it's positive, and if we make a living from trading – this allows us to meet the needs of the household budget. However, once we find that we can easily achieve it for at least a dozen continuous sessions, we can gradually increase it.
Of course, it's all within reason – so you don't put too much pressure on yourself. Still relying on the SMART method, we should remember that our goal must be attractive, but at the same time, it cannot stop being realistic.
Prepared on the basis of foreign websites
