By Rob Colville on August 26, 2016 in
“What are you trying to accomplish in your trading?” It’s a popular question, and one with a pretty universal answer considering that the underlying reason for most every trader beginning their market pursuits is the same: To make money. Is your trading objective any different?
Well, it should be different, and what we want to do today is explore why. You see, in refocusing on my own trading objective of late, I did some online reading, and inevitably came across misdirected manifestos all about “Sending the kids to college,” or “Achieving early retirement;” and then there was my personal favorite, “Finally buying that dream home I’ve always wanted.”
Now those are some lofty objectives, aren’t they? And while I don’t want to discourage anyone from aspiring to achieve great things, I think every trading objective should be something that’s attainable day in and day out. So rather than aiming to achieve newfound wealth and material possessions down the road through trading, here’s how to focus your trading objective in the present to realize success and fulfillment that’s not dependent upon the financial outcome of your every trade.
If your primary trading objective is to finance your early retirement, or to buy a big house or a fancy car, then what do you tell yourself after a very-well-executed trade that goes against you, or that only results in a small win? Both of those scenarios are worth celebrating, and yet due to a long-term, financially-inspired trading objective, they might feel like failures instead.
See related: Trading Goals That Have Nothing to Do with Money
Moreover, when trading with big money in mind, it’s harder to stick to your rules that govern risk, position size, and the requirements for trading a given set-up…especially since you’ve got to earn enough to buy that Ferrari, right?
Quite simply, having your trading objective be about money and material things creates a condition where there’s too much riding on every trade. Plus, the fact that the end goal is many years away (at best) gives individual trades and trading days happening now an impossible purpose.
Part-time traders, too, don’t trade enough size or frequency to get rich quick trading…and that’s the point! It’s a more leisurely, lower-risk, and more accommodating activity that lifestyle traders even call a “hobby.” So don’t subject yourself to such a high-pressure trading experience, especially when a proper trading objective can help you feel successful and “on track” with each passing day, even if you didn’t achieve life-changing wealth in the process.
Most won’t be surprised by this, but my advice for establishing a fitting trading objective is the same advice I’ll often lend to other facets of trading: “Focus on the process, not end results.” Make your trading objective (or objectives, if you wish) about such things as consistently sticking to your trading strategy and risk parameters, building knowledge and “mastering your method,” and maybe most of all, incorporating your trading activities as a fun and rewarding component of your total lifestyle.
A few ideas include:
Discipline & plan compliance: If you establish but one trading objective, I’d say to make it all about discipline and “following the rules” set forth by your trading strategy right down to the finest detail. If you do, believe me, results and monetary performance should naturally follow, especially over the long term. So heading into each trading day, don’t set expectations about how much money you “have to” earn, but instead, be fixated on how disciplined you’ll be when it comes to selecting and managing trades.
Trading objective: “To achieve 97% or higher plan compliance in terms of trade selection, risk, and money management using the rules for each as dictated by my trading strategy.”
Learning & continuing education: In part because no two trades or trading days are ever the same, each foray into the markets is a chance to gain newfound knowledge and/or perspective about price action and the psychology behind market movement, not to mention invaluable lessons about your trading strategy, and what works (and what doesn’t). The pursuit of such lessons can be inspiration for your trading objective, too. For example…
Trading objective: “To learn and document in my trade journal a new realization about the markets or my strategy, a theory worth testing, or a newfound tactical or psychological lesson I might carry with me in pursuit of better and more informed trading in the future.”
Having fun and achieving balance: For most traders, self-imposed pressure and our strong drive to succeed means that the trading objective that’s most often overlooked is having fun and achieving the proper balance between, say, work, trading, and life beyond the markets. Remember that it’s called “lifestyle trading” for a reason, though, so to help keep trading in its rightful perspective, perhaps incorporating fun and balance into a trading objective is a smart decision.
Trading objective: “To derive enjoyment from my ongoing market pursuits, accept challenges and negative outcomes as part of the trading process, and to view trading as a fun and elective activity that adds depth and diversity to my broader lifestyle.”
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