“Set your goals first!” Perhaps this is the top trading advice that new traders get when they begin their trading journey. Yet, many don’t follow this. Or, they set goals that are not aligned with their best trading interests.
Either way, unrealistic goals lead to nothing but a trading disaster. One of the reasons why traders fail to pay attention to this is because they are eager to make money. They often think that they can figure things out after they start trading and don’t focus on devising a well-defined plan.
But trading without a clear plan is not recommended. Setting goals is an integral part of becoming a successful trader. Without them, you will not survive a day of trading. For example, you would need to make a deposit to open a trade. Now, how much deposit should you make? Despite having decent capital, you can’t throw all your capital at risk.
You will have to estimate the margin requirement based on the trade size and leverage, which you can correctly find out using a margin calculator. But you would take more risks when you don’t have a clear goal or trading plan to follow. Do you still think you do not need trading goals?
If you do, here are some reasons why you need to set trading goals before starting to trade.
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Goals Create Measurable Metrics
Having a goal/target in trading sets you on the road to successful trading. Take a pause. Think: If you don’t have goals, how would you know if trading is worth your time or not? Expecting you to make money by opening random traders is illogical.
The forex market is prone to sudden price movements, shuddering the trading accounts of even professional traders. Once you set clear goals, you will have a daily or weekly goal and be able to trade realistically and prevent your account from experiencing drastic price movements.
In addition to this, you can find a long-term trading path for yourself. However, you would need a tested strategy and a trading plan to achieve your trading goals.
There is no quick way to build that. The most reliable way to do that is by creating your trading strategy on a demo trading account. A demo trading account gives traders a virtual trading environment to practice their trades. Everything looks the same there – as if you are trading on a live account.
However, there is one expectation – demo trading is performed with virtual funds, unlike live trading. Trading on this practice account can eliminate the fear of losing money, allowing you to set realistic goals and achieve them without any psychological pressure.
After your strategy is ready, you could start live trading with a small target. For beginners, setting new goals on a live account can be intimidating because of unexpected price movements and stress.
Therefore, you should take advantage of trading tools to set your target profits. Keeping note of your risk tolerance, a trading tool would provide you with the accurate values you need to place your trades smartly.
It Helps You Count Your Requirements
The answer to “Why do you want to trade?” is the same for almost everybody – “Because I need to make more money.” But is that all? Making money is a survival need. However, there is an underlying reason for picking trading to do so – besides, it gives you a large earning potential.
Is this because you want to attain financial freedom or earn from the comfort of your home by becoming a full-time trader?
Each trader will have some goals they want to achieve in their trading journey. Without these goals, you will feel confused about which path to take.
On the contrary, when you approach trading with a goal, you are taking one step closer to fulfilling your dreams, and if a passion backs your goals for trading, it will act like a fuel that keeps you going.
This motivation would also help you during tough days when you will not get the results you expect. With a little bit of practice, you can revise your trading plan and strategy and overcome setbacks.
Goals Keep You Focused
Having goals keeps traders focused and gives them a target. How would it turn out if you went into a trade without any plan?
Without any direction, you would engage in random trading, leading to losses. This is what happens with 90% of the new traders.
When they kickstart their journey, they do so with great enthusiasm. However, because they do not have a clear goal and trading plan, they engage in aimless trading, opening trades without any knowledge or risk management.
When there are no goals to work for, they have nothing specific to aim for, such traders find trading manipulative. And they quit as a result of poor trading experience.
On the other hand, traders who come up with goals open trades with a strategy. They have a whole plan laid out: entry and exit points, risk management, and a tested trading strategy. Why is their trading more comprehensive?
It’s because they have trading goals! When you have a target in mind, you want to ensure that you do the right things to achieve it – a mindset that separates a real trader from others.
From what we have discussed, it is now clear how having goals can increase your likelihood of becoming profitable in the market. The prejudice about not having trading goals comes from a lack of trading knowledge. Myths such as that trading is gambling or that it is a manipulative market hinder traders from approaching trading with the right mindset. The truth is that you can make trading easier if you have targets.
Even having small trading goals can make a lot of difference to how you navigate the market. Thus, “set your trading goals first” is one of the best pieces of advice that you should follow if you want to become a real trader.