Trading Tips

Good Trading Goals: Focus on what you can control

Alex at My Trader’s Journal got me thinking about objectives with his 2009 Goals blog post. In it he discusses the goals he is thinking about setting for his trading this year. He’s got one or two things he talks about fixing in his trading moving ahead, but a big part of his thinking seems to be on performance.

Performance based trading goals
I am not personally a big fan of traders making goals to achieve some given % return for the year (or any given timeframe). The simple reason for this is that whether you achieve your objective or not tends to be based on things out of your control. By that I mean for most traders the market is the biggest deciding factor in whether a given performance objective can be reached (or exceeded) than anything else. If the market just doesn’t provide the good opportunities you need, there really isn’t anything that can be done. In that case, missing the performance objective doesn’t come down to anything you could do or have done.

The exception to that general rule is traders who have short-term strategies which produce a high trade frequency. That high trade volume tends to produce a higher level of performance consistency and predictability.

Execution based trading goals
What I do like to see traders have is objectives based on execution of desired actions – things they can control. For most traders this often boils down to not doing something which has consistently proven detrimental to performance. Trading against the longer-term trend is an example of that. Not trading in the US afternoon might be another some forex traders would have. Or, to put them more positively, trading with the trend and trading in the more active times of the forex trading day.

The idea here is to develop consistency of trading effort and execution. If you consistently do the things you should and avoid the things you shouldn’t, then the performance will tend to follow.

It’s like I used to tell my players when I was coaching: You cannot control what other people do or what external events may impact you along the way. You can only control your own mindset and efforts, and how you react to things. Focus on that and good things will happen.

By John

Author of The Essentials of Trading