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 looks sidelined below 1.1600
EUR/USD remains on the back foot in the latter part of the NA session on Thursday, now attempting a consolidative theme in the sub-1.1600 region. A more cautious market mood, driven by the escalating conflict in the Middle East, together with broad-based strength in the US Dollar, is favouring the continuation of the leg lower in spot.
GBP/USD stays offered near 1.3340
GBP/USD fades Wednesday’s uptick and trades with decent losses in the 1.3340 zone in the latter part of Thursday’s session. Cable’s weakness, alongside the rest of the risk complex, follows the strong performance of the Greenback amid intense geopolitical jitters.
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 looks sidelined below 1.1600
EUR/USD remains on the back foot in the latter part of the NA session on Thursday, now attempting a consolidative theme in the sub-1.1600 region. A more cautious market mood, driven by the escalating conflict in the Middle East, together with broad-based strength in the US Dollar, is favouring the continuation of the leg lower in spot.
GBP/USD stays offered near 1.3340
GBP/USD fades Wednesday’s uptick and trades with decent losses in the 1.3340 zone in the latter part of Thursday’s session. Cable’s weakness, alongside the rest of the risk complex, follows the strong performance of the Greenback amid intense geopolitical jitters.
Gold: further weakness could challenge $5,000
Gold comes under fresh selling pressure on Thursday, slipping back below the $5,100 mark per troy ounce. Persistent strength in the US Dollar (USD) is preventing the yellow metal from building a meaningful recovery, even as markets remain risk-averse amid the deepening conflict in the Middle East.
Crypto Today: Bitcoin, Ethereum, XRP hold weekly gains despite US-Iran war
The cryptocurrency market is gaining strength on Thursday, building on Wednesday's upswing, which saw Bitcoin reach a weekly high above $74,000. Ethereum and Ripple are moderating their recent gains amid uncertainty stemming from the escalating war in the Middle East.
Two PMIs, two Chinas Premium
China’s economic data are often treated with a degree of caution by global investors. The challenge is not necessarily that the numbers are incorrect, but that they can describe very different parts of a vast and complex economy. Nowhere is that more evident than in China’s PMIs.
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