There is a recurring problem in the field of independent forex trading that is responsible for a large portion of traders struggling to find success in forex trading…
Failure to perform, and failure to reform.
Results may come in and show that you aren’t profitable, prompting you to make some changes. However, the key with these two simple, yet incredibly important steps, is approaching them the right way.
Acknowledging poor performance is simple enough, as is the decision to make some changes. The trick that can be learned though is to set achievable goals, both long term and short, that directly assess these problems.
Goal-setting may seem like an obvious or low impact solution, but it would be a mistake to think that!
So read on if you want to see how goals can elevate your forex trading to such a degree that you won’t know how you traded without them in the first place!
Why Set Goals in Forex Trading?
With so much emphasis these days put on finding an amazing strategy and social trading taking off on platforms like etoro, the smaller processes that generate success often get ignored. Goals definitely fall under this category.
It can be tricky to find success in forex trading for quite a few reasons, but not respecting the difficulty of trading is the one I see the most. Independent trading is like any other career.
It requires commitment, hard-work, planning, just to name a few.
And that’s not to mention you will very likely be doing all of this on your own…
No bosses, no organizational structure, no corporate ladder to climb.
Just you and your desire to trade.
This is why setting goals is so important in forex trading. It is a way of creating a structure for yourself that will help you immensely in staying on track.
Having something tangible to work towards gives you structure which is crucial in your development as a trader. Remember, you may not have access to an experienced mentor giving you a plan for your growth as a trader. This is something a lot of people struggle with, often without realizing it.
As you can imagine, if you can have smart goals in place, it will do wonders for your trading psychology as well.
A lot of new traders can get frustrated over the feeling that they are not progressing. Months of mediocre or poor results can have a massive impact on your psychology.
This is, sadly, one of the drawbacks of trading independently. You don’t have a boss to give you context of your progress, to show you that you are progressing well, or what areas to focus on and what areas you are doing well in.
Whilst goals can’t fill all of these holes, they go a long way in providing a structure and confidence.
Let’s take a look at what type of goals we need to set.
The Best Goals in Forex Trading
You’ll be happy to know that there is a goal-setting method that is tried and tested:
SMART goals.
Some of you may have come across this acronym before. It is taught to medical students in the UK (maybe in other countries too) for use when they become doctors, and businesses are big users of this method as well.
It is relevant for us that businesses use it – you are, after all, effectively running your own business as an independent trader.
The SMART goal setting method can also be applied to your personal life which, for us traders, is also particularly relevant. Our personal lives are very much intertwined with our trading.
So let’s take a look at each one in some detail.
S: Specific
Creating specific goals is going to go a long way in giving you something tangible to work towards. Broad goals like “I want to be profitable” are not really that effective. We all want to be profitable, but you need to create a goal that is something you can specifically work towards.
So in this case, a specific goal could be:
“I want to achieve my minimum win-rate of 40% in the next 3 months”.
This is answering the question of what, specifically, you need to accomplish. It also specifies what you mean when you are thinking of achieving profitability, instead of an abstract, loose goal of being profitable.
Be specific so you have something tangible to work towards!
M: Measurable
This is seen in the above example by the fact that we have included measurable numbers that you can focus on.
Having measurable goals means you have an effective way of evaluating your performance.
Using the same example as above, let’s say you hit a 38% win-rate. Whilst that hasn’t met your goal, you are incredibly close and this can subsequently give you more confidence because of that. Without that specific number of 40% to anchor your goal to, that 38% win-rate is just “not profitable”.
Having a measurable goal gives you more context and allows you to actually assess your performance. So make sure you use metrics and data that is relevant to your trading.
A: Achievable
Simple yet incredibly important – make sure the goals you set are actually achievable.
Ask yourself: “Is this goal practical?”. In our example, perhaps the timeline is too short, or the win-rate too high depending on your experience, past performance, etc.
We know through multiple studies that people are motivated by goals as long as they are realistic. However, goals that are out of reach serve to take chunks out of your confidence and can derail your feeling of progression.
So make sure you don’t aim too high, too early.
R: Relevant
Relevant goals are important as it keeps your goals focused on the primary objectives you should be working towards.
If you are creating goals that are not relevant to your personal trading growth, they ultimately are not as effective as they should be.
Goals need to make sense for you.
So if you are struggling not with win-rate, but with over trading, you need to tailor your goals to that weakness.
Or perhaps your analysis is great and you can find multiple setups in a day – where you are struggling is your trade management skills.
Make sure your goals are relevant to your trading experience, not others.
T: Time-bound
For me, this is one of the most important ones because I often see abstract goals set far off into the future. The most common are things like “I want to be profitable in one year”.
Whilst this is time-bound, it is quite far off and a lot of stuff happens in a year. You can have it as an overall goal, but there are a boat load of steps you need to take before that goal becomes a reality.
So for trading, having a set of goals that are short-term is absolutely necessary if you are to achieve some of your longer-term goals.
Having this element of time gives your goals more tangibility and is a way of scaling the “become profitable” goal down into bite-size chunks.
Often, people aim at changing the “outputs” of their goals : be more profitable, take more trades, overcome fear of trading. However, it is the “inputs” that deserve more attention.
When I say inputs, I am talking about the steps you are going to take in order to realize the outputs of your goals, like being more profitable.
Setting a timeline with these inputs gives you structure and something to work towards that you can stick to. It helps you avoid the “new years resolution” problem where you have a goal, but you don’t have the steps planned out on how to realize that goal.
So there we have it – SMART goals to encourage smarter goal setting and smarter trading.
Don’t underestimate the importance of setting these goals. A lot of us are trading on our own, without a boss, relying entirely on ourselves.
That’s quite an undertaking and it takes some time to develop discipline and a strong mindset.
SMART goals will help you cultivate these and, ultimately, cultivate your career as a trader.