The number one goal-setting mistake traders make is setting goals related to money. Active traders will often tell me that they have a goal of making X-dollars a day or X-points a day. That’s just not a good way to structure a goal.
Trading Goals Related to Money
What happens when the market trades in a very narrow range? Typically, price movement will remain within the first hour’s range throughout the day. That range might only be 5 or 6 points — too narrow to offer much trading opportunity. It is very difficult to make money on such narrow range days.
So, if you goal was to make X dollars a day how do you do that on a narrow range day? Since it is nearly impossible to make good trades on such a day, you would have failed to achieve your goal. And, if you couldn’t read that the market has narrowed its range and instead tried to reach your money goal, you would have likely been trying to trade at every little turn and wound up over trading a choppy, range-bound day. At best your money goal had set you up for failure because you couldn’t achieve it. Worse, your money goal caused you to force trades in a choppy market, and maybe you lost money. Goals that promote failure, poor trading habits, and losses are not useful goals.
A Better Trading Goal
A better goal focuses on your development as a trader. It will help you improve your trading knowledge, skills, or abilities. Rather than thinking about money, think instead about the process of trading. The process of trading simply refers to the skillful actions a trader takes in trading effectively. A useful question to ask is:
What trading process, if I were to improve and develop in this area, would add to my ability as a trader?
Example of a Better Trading Goal
An example will help to illustrate how to do this. Let’s say you want to improve your ability in trading trends. You have done a self-assessment of your trading on trending days and find that your greatest limitation is that you tend to counter trade the trend. A simple solution might be to notice whether the market is moving with momentum and making higher lows and higher highs (for a bullish trend). A useful process goal then becomes:
Prior to taking a trade that fades a move, I will assess whether the market is moving with momentum and making higher highs and higher lows. If it is trending, I will not take the trade. I will execute this process on at least 85% of all trades considered over the next 20 trading days.
Note that this goal is useful because it builds skills and ability in assessing market movement. It also keeps the trader from taking poor quality trades. The next step for this trader would be to develop a goal to execute trades consistent with the trend – again, a process goal.
Trading goals should be designed to help you achieve. Goals related to money, points, or other ‘stats’ won’t help you do that. Work on trading goals that are related to achievement by helping you to develop your trading skills.
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Editors’ Picks
EUR/USD holds losses below 1.1650 on renewed USD uptick
EUR/USD is off the low but remains in the red below 1.1650 in European trading on Thursday. The pair faces headwinds from a renewed uptick in the US Dollar amid a negative shift in risk sentiment. Surging energy prices due to the Middle East war keep the bearish pressure intact on the Euro. The US Jobless Claims data are next of note.
GBP/USD stays weak near 1.3350 amid UK stagflation risks
GBP/USD sticks to losses near 1.3350 in the European session on Thursday. The Pound Sterling loses ground amid fears that the United Kingdom economy could face stagflation risks due to higher energy prices, while the US Dollar attracts fresh havem demand ahead of the US Jobless Claims data.
Japanese Yen turns upside down against US Dollar as dovish Fed bets recede
The Japanese Yen gives back its early gains and turns negative against the US Dollar during the European trading session on Thursday. The USD/JPY pair rises to near 157.35 as the US Dollar resumes its upside journey after a corrective move. As of writing, the US Dollar Index trades 0.4% higher to near 99.15.
Editors’ Picks
EUR/USD holds losses below 1.1650 on renewed USD uptick
EUR/USD is off the low but remains in the red below 1.1650 in European trading on Thursday. The pair faces headwinds from a renewed uptick in the US Dollar amid a negative shift in risk sentiment. Surging energy prices due to the Middle East war keep the bearish pressure intact on the Euro. The US Jobless Claims data are next of note.
GBP/USD stays weak near 1.3350 amid UK stagflation risks
GBP/USD sticks to losses near 1.3350 in the European session on Thursday. The Pound Sterling loses ground amid fears that the United Kingdom economy could face stagflation risks due to higher energy prices, while the US Dollar attracts fresh havem demand ahead of the US Jobless Claims data.
Gold climbs near $5,200 as Iran war fuels safe-haven demand
Gold price extends its gains for the second successive session on Thursday as traders seek safety amid the ongoing war in the Middle East. US and Israeli strikes across Iranian territory and widespread Iranian missile and drone retaliation across the Middle East, including attacks on regional targets and military sites, prolong the crisis and its impact.
Three reasons to be bearish on Bitcoin
Bitcoin is holding up well taking into account the uncertainty stemming from the Middle East. Despite this week’s rally, the long-term outlook remains bearish. Here are three reasons why I think the storm for the largest cryptocurrency isn't over yet.
FX alert: When Energy still writes the macro script the Dollar holds the pen
The market is quietly sliding back into the trade nobody wanted to own, but everyone now has to respect again. The no quick off-ramp trade. Yesterday’s bounce in risk assets already looks less like a turning point and more like a classic relief rally in a market that briefly inhaled before realizing the room was still on fire.
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