Trading Objectives: Setting Share Trading Goals

Submitted by Marco Palmero on 10 January, 2009 - 10:11

So, you've decided to part with some of your cash and invest it into trading stocks. Share trading is like a business. Your primary purpose is to make a profit. You're not a charity freely giving money back into the markets. Like any successful business formulating a business plan, successful traders also need to have a well thought out trading plan. Remember the traditional goal setting maxims: Goals should be SMART: Specific, Measureable, Attainable, Realistic, Timely.

Specific Share Trading Goals

You need to be specific in what you want to achieve from your share trading. This will help you focus your efforts in clearly defining what you are going to do. What are you going to do? Are you going to achieve a 10 percent return this financial year? Or are you aiming for 100% return? Why is this goal important? Money after all is a means to an end... what are you ultimately trying to accomplish? Finally how are you going to do it? Are you going to use shares? Or will you use margin lending or some other financial derivative?

For example, instead of setting: "I will earn a profit from trading shares this year"; follow the system and set your trading goal to be more specific: "I will earn a 20% return on my $XXXXX capital this year. I will achieve this to beat my usual fund manager and save money on fees. I will be using my Candlestick Strategy #7 for technical analysis and also be using macro and micro fundamental analysis upon the industry and the company. I expect to hold a typical company stock for one to two months.

Measureable Stock Trading Goals

As they say: if you can’t measure it, you can’t manage it. What are your target criteria for measuring your progress to check that you stay on track to your goal? Set milestones. For example, you will achieve a 5 percent increase from the original trading capital each quarter (to achieve 20% for the financial year).

Attainable Trading Goals

As you follow the process of goal setting your trading goals, you begin to strategise and figure out ways to make them come true. As your focus comes in achieving your specific goal, you will see previously overlooked opportunities. Trading goals which are not within your reach, you won’t commit to doing. Even with the best intentions, setting unattainable goals is simply self sabotaging as your subconscious will continue to fight with you. The goal you set should be within your reach – just as you reach for the top shelf when you were a kid – it should stretch you a little.

Realistic Share Trading Goal Setting

Realistic doesn't mean setting easy goals. Realistic means doable. Here, you will need a plan of attack to make your goal realistic to you. Set your bar high enough so it is satisfying to achieve, not too high so it isn’t attainable. Setting a share trading goal of doubling your trading capital in a year isn’t realistic if you haven’t even traded a stock in your life.

Setting a Timeframe for Your Stock Trading Goals

Set a time frame for your stock trading goals. Are your goals for the current financial year or are they for the long term? Not setting a time will leave your goal too vague, and when that happens you will find you will leave it as you feel as if you can start any time. Without a time limit there is no urgency. While setting your timeframe, keep in mind that your deadline should also be measureable, realistic and attainable. For your longer term investments you may like to set a goal of 5 to 10 years, with yearly milestone checkups. For shorter term, trading, you may like to set a month to month goal, a daily goal, a quarterly goal and a final annual goal.

Photo by Jan the manson