Three Goals Every New Trader Should Have
01/01/2015 6:00 am EST
Casey Stubbs, of WinnersEdgeTrading.com, highlights three goals that every new trader should have written down in his trading journal, which should only be kept an arm's-length away, to always be accessible and constantly referenced on a regular basis.
There can be no denying that people who set goals in their personal and professional life are overwhelmingly more successful in both. It is that commitment to a set goal that makes it more achievable. In fact, studies have shown that at least 67% of business people who are successful in their field physically write their goals down.
As a new trader, what do you think your goals should be? The obvious answer, of course, is to make lots of money. But one key component to making a goal and achieving it is that it be realistic. To look back at those successful goal-making business people would it surprise you to know that 86% of them believe that continued self improvement through education is key to continued success?
Your Trading Journal
Before you start thinking about your goals, you need to decide how you are going to make them. Should they be in your head or should you write them down? I recently got a peak inside of the journal of a good friend, and successful forex trader. His goals both long- and short-term were not only prominent in the front of his journal, there were reminders scattered throughout asking him how close he was to those goals and how much longer he had to achieve them.
This constant reinforcement serves to keep the trader grounded and focused on what their plans are. When you choose yours for the upcoming year, I strongly suggest following this method.
So What Are Your Goals?
The answer to your first goal can be found in the beginning of this article. Continuing your forex education should be on the top of the list. Even as a seasoned trader, I can tell you that you will never learn enough.
Refrain from being vague about your education goals. Instead, look at where your weaknesses are. Have you mastered your currency pair yet? Are you ready to start studying another? Or it could be that your weakness is in understanding forecasters in reports. Wherever you see room for improvement, put that in big black letters at the front of your journal.
So, let’s say you chose to learn a new currency pair. In your journal, at the beginning of February, write this question: “What currency pair am I learning and why?” Now another two months in ask yourself: “What have I learned about my new currency pair?” Keep going like that for every two months or so. This makes sure that you never forget what your goal is.
The next two goals you set for yourself involve the actual process of forex trading. Not about how much money you will earn, but rather what you can do to make sure that happens.
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Don’t Enter a Trade Without a Plan
This is a process goal that is going to make you a better trader overall. By instilling this discipline as a goal, you are ensuring that every trade you make gets the careful consideration it deserves.
What should your plan include? Well, if you are still asking this, then you haven’t been trading right up until now. The plan should include the dollar amount you can afford to trade with it, an evaluation of your risk to reward ratio, careful analysis of whether you should use leverage, and for how much.
Next is where to enter and when to set up your exit and stop loss. A logged plan should also include the reasons why you came to these decisions. What indicators are driving your decision? Was there something you saw in a financial report? All of this logged information is going to help you become a stronger trader in the long run.
I found this discipline to be tedious at first, but over time, it became second nature. As I analyzed my trades, I was finding myself automatically reaching for the journal to make notes. This system ended up becoming more effective than trying to remember all of my thought processes at the end.
Sit One Out
Due to the small amounts of money involved—in forex trading—money management is about learning how to earn money and how to avoid losing any. This sometimes means going out to lunch instead of entering a trade when the market is not favorable to your strategy.
Make it your goal to learn when not to trade. If you lose one, analyze it and find the indicators that were screaming at you to stay away. Note all of this inside of your journal for future reference. Having the discipline that allows you to sometimes take a break from trading will end up saving you thousands of dollars over your forex trading career.
Whether it is for business or personal reasons, setting clear and concise goals is the key to being successful. Remind yourself of these important forex trading goals constantly and it will be your trading account that reaps the rewards.
By Casey Stubbs, Founder, WinnersEdgeTrading.com