The Importance Of Setting Trading Goals And How To Do It

Growing up, we were all taught that setting goals was essential. Goals, after all, help us remain focused and motivated to move forward with minimal distraction.

Setting goals is more than just giving us that extra push, though. For the most part, setting goals can help you pave the way towards planning a course of action that you need into order to realize them. For instance, if your goal is to lose 35 pounds in one year, then your plan should be crafted around losing about 3 or 4 pounds per month, on average.

The same principle can be applied to trading in the market. How should you develop a trading goal to begin with, you ask?

There’s no one strict way of doing it, of course. At best, setting trading goals should be a personal matter that’s best left for you to decide on. It would do you well, however, to learn some important principles about setting trading goals. Allow us to give you some essential futures trading education!

Perform a Self-Assessment

Understanding yourself is crucial when it comes to setting goals. Are you a risk taker? What kind of trader are you? Do you prefer holding on for longer periods or are you a swing trader type of person?

Aligning yourself properly is key to understanding what your trading habits will be and ultimately what reasonable trading goal you should have. These habits will most certainly dictate how you act during trading hours, so being sincere and honest with yourself is important.

Use Your End-Goal as a Base

In the earlier example we gave you, we discussed the sample goal of losing 35 pounds in one year and then planning your weekly or monthly goals from there. The same concept should be applied to trading.

Here’s a good example:

Suppose you want to set a goal of making $52,000 in one year through trading. Since there are 52 weeks in a year, a good course of action to stick by is aiming to make $1,000 a week on average. You can then break that down to $200 a day for five days in order to make the cut. From there, you can start setting smaller targets, like how many trades you should do every day and how much each of those trades should be.

Adopt a Good Strategy

You need a good strategy to help you find success, but what strategy you intend to follow is entirely dependent upon you. However, we do recommend that when planning this, you take into consideration five important points, which we’ll leave below:

5 Important Points To Consider When Planning Your Strategy

• Risk Management: This means figuring out your risk tolerance. Remember, one trade is all it takes to lose all your money, so try to understand how much you’re willing to risk and potentially lose.
• Direction: A good strategy is understanding whether the market’s direction is going up or down.
• Entry: This means knowing when to start buying. This point goes hand in hand with your direction strategy in that knowing when the market is about to go up should dictate what your entry strategy should be.
• Stops: Conversely, this means knowing when to stop buying and is, again, tied to your direction strategy.
• Limits: This means knowing when to exit trading, ideally, with profits which should be aligned to your trading goals.