5 Actionable Trading Goals to Set Now
Ask any trader why they do what they do and the answer is universal – make money. Every year I want (and you want) to make money. No one knows how this is going to turn out, as we head into the new year straight from a holiday high hoping for the best.
The money goal is simple and like many goals in the new year – more positive thinking or eating healthier foods, our chances of achieving it are better if we set some smaller goals.
My belief of focusing on process is more important than the money number itself. Write down the process, follow it and the money is more likely to come.
What exactly were the other trading goals besides money? I realised I had already established a few goals worth repeating. Thanks to Google, I discovered others also worth considering.
Here are some ideas for developing your own trading goals too.
1. Set a Realistic Return
Markets do not give you what you want just because you asked. For my trading style and timeframe, aiming for a 10% to 20% return per trade has been a realistic, achievable and repeatable target. A ten bagger stock return sounds fantastic in theory though it’s a better goal for the investor and not a trader like me. If a multi bagger is my wish then I need to make a different plan and not use the short-term trading plan. This brings us to the next point.
2. Writing Your Trading Plan
Select technical indicators
My standard chart uses two trend indicators GMMA and Heikin-Ashi, the ATR stop loss and the momentum indicator, the Relative Strength Index – RSI
Create short lists of stocks
On a daily basis, I scan for stocks to trade using EzyChart and MetaStock trading software. Other ways of finding the next stock on the move include finding stocks making 52 week highs and the top 20 small cap movers of the week.
Choose preferred time frames
Trading from daily charts calls for a lot of my time and attention. It requires close monitoring on a daily basis to notice and act on nice breakouts. Generally, it’s a lot of work but given enough time, the hunt for good stocks is a process I enjoy.
The weekly chart is great for longer-term positions lasting a few weeks or months. Stopping out prematurely in a larger overall trend is less likely and the trade has potential to develop. Decisions are not required until the end of the week after the weekly candle has closed on Friday afternoon, allowing more time for analysis then action. I’ll be looking at adding more of these weekly based positions.
Risk per Trade
For each trade, I never risk more than 1% to 2% of total capital. The stronger a trend is on the chart, the more likely my maximum loss per trade will be the upper limit of risking 2%.
3. Post Analysis
Review trades on a regular basis
Keep a trading journal. Before opening any position, write out the rationale for entering and then afterwards the reasons for closing the position. It tells the main story of each trade and makes it easier to analyse. Relying on just memory doesn’t work for me.
For every trade, journal and screenshot relevant charts into the trading journal.
Trading discipline review
These are some questions I plan on asking myself more this year when analysing my trades.
Did the position reach the profit target?
Was profit taken or was I greedy for more? What was the outcome or consequences?
Was the trade ever in profit before turning into a loss?
Was the stop loss triggered and obeyed?
4. Avoid overtrading
This is important for capital preservation. If we don’t spell out exactly what overtrading is then we won’t know how to avoid it.
These are a couple of warning signs:
Feeling sad, bad or mad. Leave the trading and do something else. As they say the market will always be there when we come back.
Missing an entry point and watching with regret as the stock price takes off. It is so, so tempting to click the buy button. Sometimes we need to remind ourselves there are plenty of stocks in the market sea. If I’m really keen on a particular stock, I’ll tag it and wait patiently for a pullback in price.
5. Continuous Learning
Learning from others has always been interesting and may help improve our trading. Some of the ways to do this include:
Sign up for online webinars
A great way to learn without leaving your desk. The more the better and often only requires one hour during lunchtime. There’s always at least one takeaway and it might be useful.
Attend conferences
Annual conferences of organisations as well as one day conferences.
Read books related to trading/finance
There are 3 on my list so far:
Encyclopaedia of Chart Patterns - Thomas Bulkowski
The Technical Analysis Course- Learn how to Forecast and Time the Market – Thomas A Meyers
Buy Now, Pay Later: The extraordinary story of Afterpay – Jonathan Shapiro & James Eyers
Set your own personal goals and processes. Hopefully the money goal naturally follows. Good luck!
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