Just like any of life’s endeavors, becoming a successful trader requires goal setting. Unfortunately, many traders jump right into trading without giving the first thought to where they’d like their new found profession to take them.
I would argue that goal setting is the most overlooked aspect when it comes to trading. And in my opinion, attempting to profit from the markets without having clear goals in mind is like trying to steer a rudderless ship.
But here’s the thing…
The trading goals I’m referring to are most likely vastly different from what you’re visualizing right now.
Chances are you’re thinking about a goal such as, make 500 pips each month.
Well, I hate to be the bearer of bad news, but that type of goal setting will get you in a heap of trouble. But if you’ve been trading for a while the chances are good that you’ve already come to that conclusion.
So what type of goals do you need as a Forex trader?
That’s what today’s post is all about. We’ll cover three must-follow rules, and I’ll even give you some examples of the kind of goals you should be setting.
1. Focus on the Process, Not the Results
For anyone familiar with goal setting, this one is going to take some getting used to.
You may well know that the number one rule when setting goals is to make them measurable and specific. By doing so, you give a goal meaning and also stimulate your subconscious mind to begin acting on your behalf.
So instead of writing “I want to lose 10 pounds”, you write “by October 17th at 9 pm EST I will have lost 10 pounds.”
See the difference?
The latter is specific and thus has more meaning while the former’s lack of detail is uninspiring at best.
When it comes to goal setting, specificity breeds results. And when it comes to setting goals for a business, most revolve around making a specific revenue or profit.
But as I’ve said in the past, trading is unlike any other endeavor you will pursue in your lifetime.
As a Forex trader, you should avoid setting goals that focus on making a specific amount (pips or money) by a specified date and time, at least not in the beginning.
Doing so is a surefire way to blow your account.
If you do this, you’re setting yourself up to trade too often and risk too much.
The market doesn’t care about your goals and it certainly doesn’t move on a set schedule, so why try to pretend that it does?
I get hundreds of emails every month, and a significant portion of those include a question about the amount of money that a trader can expect to make each month.
My answer is always the same, and it goes like this…
Don’t focus on the money, focus on the process.
You see, when you direct your efforts toward perfecting the process, the profits will follow naturally. The key word is “naturally” because any forced effort with the sole purpose of making money will end badly.
Ask me how I know.
So if you want the profits, focus on the process. Things like prudent risk management, robust technical analysis and patience that only allows for the taking of the most favorable trade setups are a great place to start.
These are the things that will turn your trading around.
Of course, this type of response will dissuade many, but that’s okay. I’d rather be up front with someone than try to convince them of some magic formula to make 2,000 pips every month, even if that means losing their attention entirely.
So what type of process-oriented goals should you set?
While this is highly dependent on your style of trading, here are a few general guidelines to get you started:
Outline your daily routine
Some factors directly affect your trading such as the strategy you utilize while others are more indirect like your daily routine. Unfortunately, these indirect forces are overlooked far too often because they don’t fall squarely into the realm of trading topics.
But make no mistake, what you do from the moment you wake up to the time you lay your head down at night impacts your trading performance.
For example, if you aren’t eating healthy and exercising often, this will have an adverse impact on your ability to achieve consistent profits.
This isn’t surprising when you consider that proper mental health is a key factor for those who find success as a trader.
Goal: Eat four to six healthy meals each day, exercise for a minimum of 30 minutes and get at least 7 hours of sleep each night.
Of course, you’ll need to do the legwork to figure out what’s healthy and what isn’t. But I think most of us know the basics, it’s just a matter of acting on that knowledge.
Construct a process for analyzing market conditions
What’s the first thing you do when you sit down at your trading computer?
For most, the answer will vary depending on the day. But having a defined process for how you go about analyzing market conditions is essential if you intend to achieve consistent profits.
This process should be the same every single day. This alone will help you develop discipline as it teaches your brain (and your body) to perform certain functions at specific times.
There’s a reason why military forces follow a particular routine every single day – it breeds discipline. Your process for analyzing the markets should do the same.
Goal: Never take a trade until I have completed my process for analyzing market conditions.
I’ll get into the details of what that process might look like in a future post.
Develop patience by limiting screen time
How much time do you spend sitting in front of your computer staring at your charts on any given day?
Chances are it’s at least an hour. And for some of you, it could be several hours every single day.
If you’re only studying the markets, this amount of screen time might be acceptable. After all, analyzing how the market moves is an excellent way to develop your trading skills.
But if you’re spending several hours each day looking for trade setups, you’re likely making a huge mistake.
If an opportunity doesn’t jump out at you within the first ten to fifteen minutes after sitting down, it probably isn’t worth the risk. Remember, the best trade setups are the most obvious.
Goal: Spend no more than 30 minutes each day analyzing my charts for buying or selling opportunities. If nothing jumps out at me, do nothing until the next day.
There are many other ways in which you can achieve real results through process-oriented goal setting, but the three above would make for a great start in my opinion.
2. Stay on the Defensive
The best offense is a good defense.
For the sports fan out there, this is a statement you’ve no doubt heard countless times. But for the trader, this is a concept that should be practiced every single day.
When setting your goals, it’s essential that you keep them defense-minded rather than offensive-minded. Otherwise, you’re going to find yourself chasing trades to make the gains necessary to achieve the goals you’ve set.
Here’s an example. Let’s say you have a goal to make 5% each month. But with only four days left in the month, you’ve only managed to squeeze out a 3% profit.
In any other profession, you’d just put in the extra effort to bridge the gap and achieve your goal. But as a Forex trader, trying harder can have devastating consequences.
So what’s the solution, you ask?
Forget about the profits, at least until you develop enough self-discipline to know when to back off.
But wait, isn’t making money what trading is all about?
Not according to my book.
Protecting the trading capital you have is what it’s all about – that is always your number one job as a trader; making money comes second.
After all, if you run out of capital, you’re out of business.
It’s no secret that those who enter the Forex market looking to make a quick buck eventually go bust. It’s one of the reasons the failure rate for retail traders is so high.
The very allure of making money as a Forex trader becomes a single point of failure for many.
One way to stay defensive is to set goals that encourage protecting what you have rather than attempting to make more of it.
For example, one thing you can do is limit the number of trades you take each month. So one of your goals could be to take no more than ten setups within any given month. I’m confident that if more traders did this, we’d have a lot more success stories from the retail crowd.
But don’t take my word for it, try it for yourself.
At the start of the next month, strive to take half of the setups you took in the previous months. Or if you’re feeling adventurous, make it 25% of the trades you took last month. So if you placed 20 trades in the previous month, you’d only be able to put on 5 trades in the current month.
Regardless of what you choose, the idea is to focus on quality over quantity.
As Bill Lipschutz once said:
If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.
Although I would argue that he could have easily said 70 percent, especially if you’re trading from the daily time frame.
Here are a couple more ideas for you to consider:
- Set drawdown limits for the month. Once reached you must halt trading until a new month begins.
- Discover your risk tolerance and make it a point only to risk that amount on each trade. Whether it’s 1% or 3% of your account balance, the key is discipline and consistency.
These statements may seem odd at first glance. After all, a goal to not lose money isn’t very inspiring. But then it isn’t about being inspired; it’s about discipline, patience and protecting the money in your account.
It’s completely acceptable to have a trading goal that states, “I must stop trading for the month if I lose more than 8% of my tradable equity”.
Remember, there is nothing conventional or typical about trading. It’s an endeavor that requires an almost contrarian thought process if you wish to succeed.
3. Make Your Goals Progressive
Let’s assume for a moment that you’re training for a marathon, and I’m your coach. You haven’t run in seven years, and even then it was more of a light jog around the neighborhood than a training event for one of the most challenging races in existence.
Right, so for your first run I want you to finish the entire 26 miles. Chop, chop!
Say what?! (your response as you turn and walk away).
And I wouldn’t be one bit surprised.
Having you run the entire length of a marathon for your first run in seven years would be crazy not to mention completely irresponsible as your coach. You could get seriously injured not to mention demoralized about the whole idea of running a marathon.
But this is what Forex traders do all the time. They want to skip the training process and jump right into making big money.
I received an email just the other day from someone who wanted to trade full time on less than $7,000. They said they only need $2,000 a month for living expenses and asked me if this was doable.
If you know me, you’re aware that I’m all about breaking barriers. I love a good challenge, and I always maintain the belief that anything is possible if you put your mind to it and follow it up with the right amount of effort.
But as I mentioned at the beginning of this post, trading is a different monster entirely.
With a $7,000 account and a $2,000 a month income requirement, this trader would need to make nearly 30% profit each and every month. And it would never get easier because of the need to pull those profits from the account to pay bills.
And I won’t even mention the taxation on those profits.
So is this achievable?
No, it isn’t, at least not consistently. In fact, not only are the chances of pulling this off statistically insignificant, but the odds of this person blowing the entire $7,000 are far greater than being able to achieve such a feat.
Becoming a great trader is all about small victories, and I’m not talking about profitable trades. I’m referring to cutting your trading frequency in half or maybe breaking the habit of using the lower time frames.
Those are victories you can hang your hat on and it’s exactly what you should be striving to achieve, especially in the beginning.
Here are a few more ideas for you to mull over:
- Removing or at least reducing your dependency on indicators
- Risking no more than you can afford to lose emotionally
- Removing the word “hope” from your vocabulary and your mind
These are all things you can begin doing today. And while each one requires weeks and months to perfect, they will offer you the quick wins needed to increase your level of confidence while maintaining a defensive mindset.
Quick wins like the ones above will help build the momentum necessary to tackle financial goals later on.
Sometimes to achieve a goal (making money in this case) you have to home in on the various processes that produce the desired outcome rather than the outcome itself.
Said differently, process over profits.
Don't Be Afraid to Break the Rules, Eventually
Contradictions abound in trading, and one such contradiction is that of setting specific financial goals. By this, I’m referring to a goal to make a return of 25% in a given year or perhaps making 3% each month.
But here’s the key…
Any novice trader who attempts to set financial goals is doomed to failure. And while it’s possible to get lucky for a week or two or maybe even a month, the laws of the market will eventually catch up with you.
So here’s a simple rule to follow – if you aren’t yet consistently profitable, stay away from setting financial goals. It’s as simple as that.
As I mentioned above, it’s imperative that your goals are sequential. In the world of trading that involves (eventually) moving from process-oriented goals to some form of measurable goals, such as striving to make 20% in a calendar year.
When it comes to structuring these financial goals, it’s important to have both offensive and defensive goals. So just because you’re venturing into the world of monetary goal setting doesn’t mean you should forget where you came from.
In fact, the foundation you set in the beginning (defensive, process-oriented goals) are what enable you to keep the profits that you make as a Forex trader.
Whether you’ve been trading Forex for 6 years or 6 months, having clear trading goals is a must.
However, unlike most goals in life, your trading goals need to be process-oriented and not profit-oriented. This will help keep you from overtrading and risking too much.
As a general rule, goals in the Forex market should be defensive. In other words, they should focus on protecting the capital you have rather than attempting to gain additional money.
Let making money become a natural byproduct of the process you construct.
It’s okay to set goals for financial gain, but only once you have perfected the process. Moving into this later stage of goal setting too soon can be extremely disruptive to your trading career.
Which brings me to my last point – trading Forex or any other financial market is a career. It’s a business and not a hobby and therefore requires some form of goal setting, because what you measure grows.
What are your Forex trading goals?
I’d love to hear from you, so be sure to leave your comment or question below, and I’ll get back to you shortly.
Thank you so much for the great guidelines … and as you said its my turn now to achieve them
thank you again
Glad I could help, Abraham. Let me know if I can be of assistance and best of luck with your goal setting. 🙂
My goals are that by the next year I would have grsped all the trading concepts
Norma, that sounds like a good goal to me.
Thank you for this article, Sir Justin. I’m currently experiencing this situation – overtrading just to make profit daily. That is why i’m giving back my profit. Hope i will learn from this and start doing it. Thank you so much.
You’re very welcome. Glad I could help. Let me know if you have any questions.
Thanks u are realy opening my eyesI I wil do it
You’re welcome, Piet. Let me know if you have any questions.
Thank you Justin, your rules is true, I struggling with my mentality to push my self to make big profit to square my loss with one word HOPE, the market will move according to my goal. I have to discipline my mind to erase word HOPE when I am trading. This is valuable lesson for me to change my, attitude and finally character when I make a position in forex trading. I agree with you protecting capital more important than big profit. I must trade with cool blood.
Ferry, you’re welcome. Removing the word “hope” from your trading can do wonders. All of a sudden you begin to view the market from an objective lens rather than hoping and wishing for it to move in your favor. This allows you to act decisively without the emotional strings that are all too common in this business.
Best of luck with your goal setting. 🙂
Thank you for your goal settings articles. I am also setting my trading goal e.g achieve 9% profit per month base on my capital and achieve 100% in a year. Does this sound reasonable?
Steven, that sounds a bit lofty, but that doesn’t mean it isn’t doable. However, as I mentioned in the post, it’s best to focus on perfecting the process rather than attempting to achieve a certain amount of profit. By doing this, you allow the profit to become a byproduct of the process rather than forcing trades to meet a goal.
Thank you so much justin. All your saying is so truee. I have been trading forex for 2 years and got nothing but loss money. The goals and the idea of wanting to get quick and easily money is one of many factors that makes me lose more.
I keep learning forex and save my capital until im ready!
My pleasure, Hansy. You’re right; it’s always best to focus on the process and allow the profits to come naturally. Unfortunately, most traders don’t approach the Forex market with this mindset.
Thanks for the article. Very informative and challenging since most of us focus on the results and not the process!
looking forward to the next Post!
John, you’re very welcome. Pleased to hear you enjoyed the article. And you’re right, most traders overlook the process and instead focus on the results, which can end up being a massive roadblock.
Thanks for stopping by.
Thanck you for useful information !! What risk per trade do you recommend to use?
You’re welcome, Alex. It’s best that you determine your risk as it needs to be something you’re comfortable with. This post should help with that https://dailypriceaction.com/free-forex-trading-lessons/forex-money-management
first of all i thank GOD for your wonderful and generous personalty to share your experienced precious analysis and views to all traders.from the day i have been subscribed your market updated trade setup letters my trading life has been enhanced and i have felt have been blessed in thinking of professional trading life.MAY GOD BLESS ALL YOUR WORKS AND FULFILL ALL YOUR DREAMS IN LIFE.LORD BLESS
That’s great to hear, Jakin. Glad to help. Let me know if you have any questions.
Excellent post, for the newbie and veteran trader. A good reminder of trading basics. 🙂
I need to take Trading to the next level. I took the OTA futures class, and now With the Apiary Fund. I am pre-funded now with 1k. Im doing ok, but still take way too many losses.My expectancy is always negative even though I have more winning trades than loosing trades After reading this post, I need to make some changes. I do this full time, and think I am on the right track, but I need to become profitable on a regular basis asap. Thank you for all you do to help.
I am very grateful for the basic guideline that is so true of you, and would I apply to my trading future, may God bless you always, again I thank you mr. Justine
You’re welcome, Moh. Glad I could help.
I am so inspired by this article. Even when its not exactly six months I’ve started trading, i feel there are lots to learn in this business. It has helped me to develop new perspective to the way i view my trades. Training myself to get up every day early and scan for 3 to 8 pairs before i step out of my trading room has built my confidence over time. Thanks for being my Forex guide to success.
Victor, you’re most welcome. It’s my pleasure. A solid routine is an excellent way to develop discipline and confidence for sure. Thanks for commenting.
Hi first of all, i have to appreciate for your valuable information and sharing freely (Most part of them) to those who really anxious and concern for their future and business in this unpredictable Business.I have studied a lot but for Pin Bar or mostly price action i couldn’t find out very acceptable and logical methods for trading in different pairs ,TFs, situation and different markets. And kindly i have to say i haven’t found very reliable methods in your books Just ask you very simple question, Could you really profit 8 out of 10 in FOREX market in long run by PIN BAR trading ? Thanks a lot
I’m not sure what you mean by “8 out of 10”. Also, I use (and teach) a lot more than just pin bars.
With that said, you could make a living solely on pin bars. But like everything we do it takes patience, discipline and years of practice.
Am very gratefull for this wonderfull article you posted, bcos is like u speak my mind this afternoon thanks alot. My goal for the new year 2017 is to have/develop a system or strategy that can give me 3 winings out of 5 trades in a month with risk reward ratio of 1:3 using monthly,weekly and daily time frame to source for the setup and make use of 4HR time frame to enter the trade. but if i should loss 3 trades consecutivelly i will close for the month. i make sure that i deleted any time frame below 4HR not to distract my attension. If there is anyway u can still advice me on this pls winning to hear from you. Thanks
Hi Kehinde, that sounds like a solid approach. You could also try to implement a pyramid strategy for the trades that move in your favor. This should help: https://dailypriceaction.com/free-forex-trading-lessons/pyramid-trading-strategy-double-your-profit-potential.
Thanks for stopping by and best of luck for the new year.
These articles really hit home. Just reading them a few times one can truly see the wisdom in your writings.
thanks so much, in fact my goals are just getting to know the foundation of been in a consistent profit and not trying to make profit as a beginners.
You’re welcome. That’s the best approach when just starting out in my opinion.
You hit it dead on the head with your articles. I really like what was said about the importance of knowing when not to trade, and “Focus on quality over quantity” . I have a question what is the correct way to set up a Trading focus list?
Be a long-term profitable trader 😜
Great article – really related to this! – Thanks for posting.
I am very grateful,this material it has been helpful and it’s knowledgeable, I have found more of what i didn’t knew and understood, now I am going to study more fervently to trade on to next level.
great advice very informative ,
Thanks allot. Great read. I’m still struggling to get my head over news releases and trading. How can I specifically trade technically with so many news events. Please help with tricks or ideas that I can implement?
Thank you for your nice answer.
i found my answer by reading your article.
My trading goal is ” maximize my profits and minimize my losses day by day”.
if you have any good suggestion about my goal please share.
again thanks alot
Just started, making profit as much as more losses at the same time. Reason being not skill in process analysis ,structural mis understanding ,high risk apettite and lack of time contributed.Though am new ,pls i need ur help to master the act as am taking it as business.