What You Need To Know When Setting Your Trading And Investing Goals
Goal setting in trading and investing, and indeed in any area of your life, has two vital items involved in goal setting and goal attainment: i) perceived difficulty of the goal; and ii) how specific your goal is.
The more difficult a goal is to achieve and the more specific the goal is, the more likely you are to raise your performance level to achieve the goal. Now, this doesn’t mean that you will automatically achieve the goal because it is difficult and specific, it means that with these two elements in place you are more likely to produce high performance which in turn will produce the best overall results.
In a trading example a goal to earn $50,000 next year through your trading activity is good. However, a goal to achieve, say $51,600 will likely produce better performance as it is perceived by your brain as more specific.
A lot of people think you should set easy goals. Not so. The best goals are difficult goals that are specific. Goals should be difficult and specific. So if you believe that your trading goal of $51,600 is easily achievable then raise it to a level that you believe will be more challenging, perhaps $72,400.
Don’t be unrealistic though, as you are more likely to perform if you believe you can achieve your goal. Base your goal on your knowledge, training, skills and past experiences. If you know it can happen, that you can make it happen, then your performance can increase.
So that is the setting of your trading goal. What about along the way…on the journey to achieving the goal? You will be most committed to achieving a goal when you believe that achieving the goal is important. Also when you can see that progress is being made towards achieving the goal, you get the best results.
A way of measuring your trading progress, can be done as simply as keeping an ongoing running tally of your trading outcomes for the year. For example, if your goal is to earn $72,400 from trading for the year and by half way through the year your trading tally is $38,100 you can measure how well you are placed to achieving your goal – you have more than half of your goal achieved.
Often when we start off in trading/investing we do not set goals. Often we’re just happy to see ourselves make some money. This unfortunately is not specific or difficult – it is not going to challenge or focus your performance.
Think about your trading goals. Set yourself some specific, difficult and measurable trading goals and understand why you want to achieve them. Then start measuring your progress.
Kevin Hogan talks about “the least acceptable result” in his book “The Psychology of Persuasion”. Your least acceptable result is often the true goal that people achieve from any activity – what is your trading/investing least acceptable result. Make your least acceptable result your goal and watch your trading/investing performance results.
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