Updated from its original posting on 07-01-2011
If you’ve already made a bit of progress in your forex trading resolutions, I want you to give yourself a pat on the back. Naysayers think nothing more of them than just a waste of time, but I beg to differ.
Goals are important! Not only do they represent expectations and aspirations, goals also serve as a bridge from reality to the ideal.
The moment you set a goal, you face reality by acknowledging the need to address your shortcomings or maybe simply fulfill your desire to do better. I mean, you would only say that your goal is to be able to finish a full marathon in four hours only if you haven’t done it yet, right? Of course achieving that goal would be possible if you put some work in your running in the first place.
By putting in a substantial amount of effort that consequently leads to progress, goals keep you grounded when you see that it’s the little things that can make a big difference in the long run. Small things like adding a minute to your jogging routine, drinking only a cup of coffee instead of your usual two, or moving your stop loss a pip or two above breakeven could have huge rewards down the road.
You then become more aware of yourself and realize your strengths. In this aspect, goals keep you motivated as each step you take gives you a better glimpse of what you’ll be like if you push yourself a little further. Imagining yourself achieving success gets you closer to the real thing! Just ask Arnold Schwarzenegger who credits his seven Mr. Universe titles to his workout routine which included him just standing in the corner, visualizing himself winning again.
However, proper goal-setting is not as easy as it sounds. Some traders often become too preoccupied with their desired outcomes, such as making a truckload of pips or bouncing back from their losses, that they overlook the realistic aspect of these goals. You have to think about whether your goals are achievable depending on your trade plan, your risk management, and even your own personality.
Another reason why some traders fail to achieve their goals is the lack of concrete follow through. It’s not enough to set a particular weekly profit target, think happy thoughts, and expect it to magically become a reality. Keep in mind that goals must be accompanied by specific steps to attain it, must be realistic, and must be action-oriented.
To facilitate this, one must also figure out which type of goal to aim for.
For beginner traders, it would be wise to set out on goals that focus on the process, as opposed to the outcome. These types of goals help reinforce and shape your trading skills, so that you learn to trade properly. Whether or not you end up in a loss doesn’t matter – the point is that you trade the right way and focus on the process. Examples of such process goals can pertain to certain aspects of trading like risk management (choosing the correct lot size) and execution (closing trades when they hit your stop loss). In the long run, it will be highly beneficial to your development as a trader.
On the other hand, if you are a more experienced trader, having outcome-oriented goals may prove to be more effective. Having a monetary or pip target can help remind you of what must be done in order to achieve the goal. Remember though, you must first have the necessary skills and experience to actually know what process you must go through in order to hit your target.
No matter which type of goal you decide to choose, the goal should help you improve as a trader. The purpose of a goal is not only for you to achieve it; it should breed motivation, learning, and confidence. By setting goals and striving to achieve them, you can accelerate your trading development exponentially.