Successful people set high goals and make specific plans to achieve them. Goals can be motivating. The more specific you set a goal, the better. Abstract goals often seem impossible to achieve and are weak motivators. By breaking down a larger goal into specific steps, or sub-goals, you will be more likely to achieve the goal. Rather than an amorphous, undefined fantasy, specific goals help you see how even a seemingly unattainable goal can be realized. When you see the specifics, you will be more able to develop plans for achieving your goals.
When specific goals help you see how your broader goals can be achieved, they can be highly motivating. But goal setting isn’t straightforward when it comes to trading. Sure, you shouldn’t set the nebulous goal of becoming a “winning trader” without a specific set of sub-goals, such as planning to learn specific trading strategies or planning to practice executing trades in a variety of market conditions over time. It is possible, however, to set a performance goal that is so specific that it interferes with your ability to trade in a peak performance mindset. Trying to reach a specific dollar amount per day, for example, can be motivating to some traders but self-defeating to others.
There are usually several advantages to setting specific goals, but setting a specific dollar amount when trading has disadvantages. For example, traders may make poor, impulsive decisions when trying to achieve a specific dollar amount. They may overtrade. They may take poor trading setups because they feel a sense of urgency to reach a specific dollar goal.
This approach usually fails. When poor setups are taken, traders often end up losing money. In addition, a daily or weekly dollar goal tends to make one think that he or she should trade every day, regardless of whether the market has opportunities, or regardless of whether one is in an optimal psychological state. It is often wise to let the market tell you how much it is willing to give you on a particular day or week.
You can’t always dictate how much you can make. It’s also wise to stand aside when you see conflicting market information or when you are in poor spirits. By setting a specific amount to make, though, you’ll tend to feel guilty about staying out of the markets when you are either in poor spirits or when the markets are just not conducive to profitable trading.
Although it is necessary to trade profitably, it may not be wise to focus on trying to reach a specific dollar goal. This puts pressure on you to perform, and when the pressure is on, most buckle under the strain. It is better to trade in a more carefree way. Focus on the process of trading. It is a paradox, but when you focus on outcomes, you will have trouble reaching them.
When you focus on the process of trading and act as if you just don’t care what happens, you’ll end up making more profits. Rather than focus on dollars, focus on whether you follow your trading plan. Look at how many justified wins you achieve, rather than the dollars you make. If you trade consistently and according to plan, you’ll end up profitable (assuming you use sound trading methods). In addition, you will feel more carefree and detached from the outcomes. When you focus on dollar amounts, you’ll tend to think of the money in concrete terms; you’ll think of what you can buy with the money, rather than think of it as just abstract points or ticks that you work with.
Goals can be motivating when used in the proper way. It may be nice to occasionally look at how much money we are making, such as once a month. If we focus on it too much, however, it can be a disadvantage. We will put extreme pressure on ourselves to perform. We may feel euphoric when we make big wins, but discouraged when we face losing trades. It’s better for our emotions to keep things as objective as possible, and that usually means focusing on the process of trading consistently and decisively. The more you can focus on the process, the more profitably you’ll trade in the long run.