Step 3: Define Your Trading Goals
Now that you've realized the amount of time you must commit to your trading plan, the next step is to define your trading goals.
But it's not enough to define trading goals, you must define trading goals that are effective.
There are too many traders that start out with goals that are too vague.
For example, "I will be more disciplined," "I will make more money" or "be more consistent" just don't follow a systematic process that make for SMART goals (Specific, Measurable, Actionable, Realistic, and Timely).
Effective trading goals are all about carving out a process for yourself and sticking to it.
So how can you align your goals with a systematic process that works for you?
Well, you have to start with a mental shift, develop a trade system, and control your irrational self.
Shift Your Perspective About Money and Trading
No one trades to lose money. In fact, the only acceptable outcome is income. But if that's the case, you might as well stick with a 9-5 job if you want guaranteed income.
You're already aware that the stock market doesn't care about what you want. Believe it or not, there are too many traders who set unrealistic goals such as:
"I will make X amount of money per week or per month."
While this is somewhat measurable, it is not realistic.
This is because markets have periods of volatility you can't time. So you can't set periodical trading goals to "make more money" on a consistent basis.
This is where you have to make a mental shift in defining your trading goals.
That's because trying to make money in trading is actually counterproductive. And trying to make that the sole outcome will lead to recklessness and frustration.
In fact, the only way to become profitable is to NOT focus on profit but to focus on process.
Because profits come to those who follow a systematic process.
And the main process is to not lose money. In fact, the less you focus on making money, the more likely you are to make money.
Focus on the process of trading because that's the part you have control over.
So how do you practice a good systematic process with your trading goals?
Develop a Systematic Trading Goal That Works for You
There are several systematic processes you can implement to create effective trading goals.
These are processes that Wall Street and other big corporations have been using to control price and volume.
So it makes sense to model those strategies.
One tested process you can use is "If, then…" statements.
For example, "If gold drops down to a certain price level and posts a key-reversal, then I will enter long."
Or you can use execution or risk management criteria to determine if an entry or stop loss makes sense.
The fact remains, following tested and proven trade criteria make your trading goals SMART.
But the real test is whether you can stick to the process and measure your progress. And that requires the ultimate discipline.
Can you do this?
Control Your Irrational Self
This part may upset you. But everybody needs "hard- to-swallow" pills sometimes.
It's important to keep in mind that even if you have a systematic process and criteria to define effective trading goals…
You might still lose money. This is where you have to reinforce the mental shift about profit not always being the sole outcome.
Because you can make a good trade and STILL lose money.
This can take the average trader some time to wrap their head around.
How can a trade be good if you lost money? Remember to focus on process, and not the outcome.
Markets are dynamic and won't follow your trading style during their cycles of bullish or bearish periods.
Some losses are okay as long as you don't lose all your capital. Think of it as a hand in poker. Sometimes, you just have to fold.
The aim is to make sure you don't bust out. IF all rules are followed, then regardless of the outcome the goal of proper trading was achieved. WIN or LOSE.
That way you can try again with your established processes when the odds line up in your favor.
Part of defining your best trading goals is to forge the mental capacity and discipline to stick with them.
Stay True to Your Trading Goals
Do not abandon your trading process because it didn't lead to profit. And don't load up all your capital on a trade when your trade indicators align either.
There is no bigger threat to your trading success than your human nature. It's important to master your irrational tendencies such as impatience and greed.
When it comes to trading, you can't let the monkey in your brain take over.
Take charge and control your irrational self. A good way is to assess how you feel when you pull the trigger. You should always feel good about your trade and not deviate from your process.
Accept that money and profit is not always guaranteed, develop a sound process that allows for reasonable profits and minimizes risk, and trade with integrity and commitment.
That's the one way to stay true to effective trading goals
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