Goal Setting in Trading: How to Set Process Goals?
Author: Timofey Zuev
Let us talk about such a thing as goal-setting in trading. Today, everyone advises you to place goals and even visualize them to let out the powers of your subconscious. Well, your subconscious is a much more complicated mechanism than described in popular psychology books, so we will leave those recommendations out and turn to practical experience.
There are two types of goals in trading – financial and process. A financial goal motivates a trader by a potential profit, while a process goal – by scrupulously completing the trading plan.
Life shows that there is only one group of traders that can afford to place financial goals – they are experts. For all other traders, process goals will be much more efficient.
In fact, for experts, following the financial plan is also the number one goal but financial motives may push them further forward and increase working efficiency. The complicated part of trading is that money is both the measure of the result and a reward for it. This is different from, for example, sports where a sportsperson gains points but also gets a reward that depends on the point quite indirectly.
All in all, as long as in trading, the process and result are intertwined, the trader needs to separate the process from anything else and focus on it. This is not that simple, of course, because the completion of the plan depends on the ability to perform repeated actions calmly, even if they lead to a series of losing trades.
Process approach to goal-setting in trading
In a lecture, Alexander Elder spoke about his friend who had used to be a losing trader but some time later became one of the most successful managers. When asked about his secret, the man explained that he succeeded after he imagined that he had a boss living in the Bahamas who paid him for completing trades by a certain plan, not for the sums he earned. He imagined that even he made money at the expense of violating the plan, his boss would not pay him; conversely, if he lost money following the plan, the boss would pay.
This logic is a perfect representation of the process approach to trading. When I am asked: “
What profit characterizes an expert in trading?”, I reply that profits do not characterize a trader at all. In the short term, a profit may demonstrate a random coincidence of the trader’s action and the market state; also, keep in mind that the trader’s task is not to make money in the short term but to survive in the market and keep earning in the medium/long term. This is a sign of a successful method/system and compliance with it; this should be called professional trading.
How to set process goals in trading?
A goal “to trade as well as I can” is not a goal at all, it is formulated non-specifically, and we know that non-specific goals are very hard to reach. A process goal must deal with specific skills that you would like to develop and specific habits that you would like to change.
To find out what exactly you lack or what hinders your work, try logging your trading, writing down your results, and commenting on your decisions. A bit later you will see what needs correcting.
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Sincerely,
RoboForex team
