Happy Financial New Year! I hope the year ahead is a safe and prosperous one for you and your loved ones.

Now is a great time to set some goals for the year ahead. I like to set my goals using the SMART acronym, which was published in a 1981 article by George Doran. The acronym SMART stands for Specific, Measurable, Attainable, Realistic and Timely (or Time-bound). Let’s explore this from a trader’s perspective:

Specific

Many people come to trading with a vague notion that they want to make “some money”, or as is more often the case, a whole load of money! The problem with this is that their brain isn’t quite sure just how much “some money” is, or what constitutes a “whole load of money”, so it can’t act quickly to begin the process of acquiring the money.

Alternatively, if a trader sets a goal of $120,000 per year from trading, or $10,000 per month from trading, the brain has more clarity and can get to work more quickly in helping them achieve that target.

As traders, we can set specific goals around a profit target for the year, or for the month, or even for a day. We can use dollar amounts (eg $500 a day) or percentages of our account (eg 10% increase per month). You can also set goals that aren’t related to money, such as Reward to Risk multiple goals. For example, Safety in the Market’s Active Trader Program teaches our students to target a 10 to 1 Reward to Risk Ratio on their trades, which means that for every dollar risked on a trade, a profitable trade will return $10. You could set a goal for taking a trade with a 10 to 1, or 20 to 1 or even higher Reward to Risk Ratio. I’ve recently been discussing a trade on the Australian Dollar with a 68 to 1 Reward to Risk Ratio in our coaching classes.

Measurable

Trading is not something that is mastered and completed overnight. There is time required for learning, time for analyzing markets and searching for trades, and then time spent actually IN trades. If a goal drags out too long, it is easy to lose focus or grow discouraged. This is why it’s important for a goal to be measurable. If you are measuring your goal and seeing consistent progress, you will be energized to continue moving forward.

This is why Plato said “never discourage anyone who continually makes progress, no matter how slowly.”

If your goal is to make $120,000 per year, you can break it down to $10,000 per month, or $2,500 a week over 48 weeks (allowing time for holidays!), which is just $500 a day. This can help you observe your progress over time, so that during periods where there are no trades on offer for several days or even weeks, you can look at your progress and know that you are still moving forward.

Keep in mind that you probably won’t make exactly $500 every single day! You might make $100 on the first day, then $700 on day 2, then you might not trade on day 3, then you might lose $200 on day 4 and make $1,700 on day 5. Look for steady progress, tracked over a period of time.

Attainable

Some people thrive by setting goals that are small and easily achievable, ticking off small wins and building momentum by gradually increasing the size of their goals. Others like to set massive goals to begin with, and then try to grow into a person who is capable of achieving that goal. The important thing is that YOU (not anybody else, but YOU) believe that your goal is attainable. Look back on some of your previous successes, consider the goals that you set yourself, and then consider whether those goals helped or hindered you on your journey.

The reality is that any trading goal is attainable. Want to be a millionaire? Most stocks that you’ve heard of have a lot more than a million dollars worth of buying and selling transactions every single trading day. Want to be a billionaire? Crude Oil, one single commodity, has an average turnover of over $US37 billion every single trading day. Want to be a trillionaire? Over six trillion dollars every single day passes through the foreign exchange or FX markets. So any financial goal that you have in your life can be achieved by trading financial markets.

However, just because a goal is attainable, it doesn’t mean that it is realistic.

Realistic

In 1992, a trader by the name of George Soros became famous virtually overnight when it was announced that he had bet against the Bank of England and won, making over $US1 billion in profits in a single day (16 September, 1992) by shorting the British Pound.

Now, is that sort of goal attainable for your average trader? Yes! But can you realistically expect to make this amount in a single day of trading, right now? Probably not. This was an experienced trader entering a MASSIVE trade, at the end of a seven year move, and who had a very large trading account (Soros reportedly took a $US10 billion position, which is slightly larger than the average trading account for an individual trader!). So make sure that your goals are realistic based on your own experience, your current trading account size and your current risk profile.

Any Safety in the Market students who are interested in learning more about the 1992 British Pound crash, including how it was recognizable many months before it occurred, might find my research notes, which are contained in the Active Trader Program Online Training case studies, very interesting.

Time-bound

Finally, all of our goals should have a date attached to them to provide just enough pressure or encouragement to drive you forward. Think back to your school or university days – you were given weeks, if not months to complete most assignments, and yet the vast majority of people will do most of the work a few days beforehand, as the pressure builds up to get the assignment completed in time.

Now, the trick is to use Time to give yourself a focus point and some encouragement. If you give yourself too much time, it can sometimes be hard to get motivated to do the work, however if you give yourself too LITTLE time, the whole process can become a lot more stressful than it should be, and can end up being counter-productive.

Let’s look at an example. Bob has a $10,000 trading account, and would like to make an extra $1,000 per month from trading. He has never traded before, but he would like to be making this extra income within the next six months to offset the increase in his home loan rate once his fixed rate contract expires. He will aim to take 5 trades per month, each with a 10 to 1 Reward to Risk Ratio, risking 2% of his account or $200 on each trade, knowing that he only needs ONE of those 5 trades to be successful each month for him to reach his goal.

Is Bob’s goal:

1. Specific? Yes – $1,000 per month.
2. Measurable? Yes – he knows exactly how many trades he needs to take each month.
3. Attainable? Yes! Perhaps not immediately, but once Bob has put in some time studying and learned how to use swing charts and how to identify market turning points in advance, finding one successful trade out of every five trades he takes is very attainable, and in fact, he will probably do much better than this.
4. Realistic? Yes. If anything, the goal is conservative, but I believe new traders should focus on simply getting profitable in the beginning. Once you are profitable, it is very easy to add extra zeros to your trades, as both your confidence and your account size grow.
5. Time-bound? Yes. Bob has set himself six months to build up to this level.

At the end of the day, there are many ways to write your goals, so don’t stress too much over writing the perfect goal down. As long as your goal encourages you to take steps to move forward, and as long as you’re seeing progress, chances are that your goal is working for you.

Finally, just a reminder to all Safety in the Market students that you can email the Trading Tutors Support Service at any time if you’d like to ask any questions or clarify anything. And if you’ve been away from trading for a little while, send us a message via the Facebook platform and we’ll email you a study guide for going back over your materials and getting back up and running. Remember, once a student, always a student – we are here to help you when you are ready!