It might sound silly, but setting goals for yourself might not be as straightforward as you think.
It's important to set a goal whenever you're working towards something, otherwise how will you ever know if you've achieved it? Goals can be motivating and help to keep you on the right track to success.
However, it's just as important to spend time ensuring the goals are meaningful rather than purely inspirational. Things that are actually going to help you reach a desired outcome and monitor your progress towards it, not just a hollow statement.
For example, when you set goals for your trading progress, have you ever relied on statements along the lines of "I want to become more profitable" or "I want to open more great trades?".
I have to hold my hands up to that one, I've used goals like that in the past - most traders have! Unfortunately, these sort of blanket statements just fall into the category of 'easier said than done'. We need to get more specific.
Setting the right goals
Each of us has different strengths, weaknesses, sticking points and past experiences that affect our trading. We all have different areas we need to work on if we want to progress and succeed in the markets.
By using a blanket statement about our overall trading, we're not really going to be measuring progress in the areas that matter to us individually.
Rather than setting goals and measuring our success based on improvements in our P&L, we should be identifying sticking points that are holding us back and find an appropriate measure that shows progress in that specific area.
By doing that, it will help us to focus our development plan in a way that's meaningful and encourage trading in a way that's more sustainable. Things that avoid us being tempted into risky approaches in an attempt to hit profit targets, without any improvements actually being made to our ability.
What's your ratio?
To help put this in practical terms, there's a quote from the book 'Good to Great' by Jim Collins that has always resonated with me. It's intended to apply to business, but I think it can also be adapted to apply to trading or any other area of your life you're hoping to improve.
"If you could pick one and only one ratio - profit per x - to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?"
That's definitely something to think about. The word 'sustainable' is the key one - we don't want to hit a profit target for the sake of it, we want to see an improvement in a sustainable way. Improvements that lead to dependable and repeatable returns in the market, not a one-hit wonder.
Have a think about it - what would your ratio be? What would truly show whether your performance as a trader is moving in the right direction?
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