How to Set and Achieve Realistic Trading Goals
The Forex market is the most liquid financial market in the world, so many traders decide to try their hand at Forex trading in hopes of becoming successful. However, it often appears that those new to Forex trading (and trading as a whole) fail to set realistic goals for themselves.
In this article, you will learn why it's important to establish reasonable trading goals, how your trading experience may affect your future goals, and what you need to consider to set realistic and achievable goals.
Why Forex trading goals matter
While Forex trading becomes increasingly popular with each passing day, many people misunderstand how it works. The most common misconception is that trading is easy. Some traders even treat it like gambling, thinking they can earn money by buying and selling random assets without research.
Naturally, trading is much more complex than that. It requires advanced analytical skills, an understanding of how financial markets operate, strong discipline, attention to detail, and willingness to continue one's self-improvement journey. So, if you want to succeed in Forex trading and make a considerable profit, you must understand that the way there won't be linear.
It's like a winding staircase. Your ultimate dream is at the top of the staircase while you're at the bottom. No matter how hard you try, you can't jump so high from where you currently stand. At best, you'll get tired from such a workout and give up on the idea entirely; at worst, you'll end up hurting yourself. What you need to do is take the step. Getting there may take a while, but at least you will know what you're doing and eventually arrive where you want to be.
These steps are your trading goals or milestones that help you improve your trading skills, bringing you closer to your dream of being a successful trader. Setting these goals lets you outline the path to success, stay consistent with your trading progress, and avoid making mistakes that might lead to your downfall.
Trading goals for amateur and experienced Forex traders
Forex traders who have only recently started trading might have a harder time defining their trading goals because they still have much to learn about trading. And this is precisely what amateur Forex traders need to start with before moving on to bigger goals. Learning the basics of trading and how to use various tools, keeping track of their earnings and losses, what risk management strategies to employ, and other valuable skills that can help them navigate the financial markets better.
As professional traders, their experience allows them to focus on the financial side of trading. For them, it's essential to set realistic profit targets, focus on growing and diversifying your portfolio, and make trading plans elaborating on how to achieve those goals.
Now that you know what to focus on depending on your skill level and trading background, let's see how exactly you can achieve these goals.
How to achieve your trading goals
Learning the trading basics
Before you start trading, you need to take your time to study the basics of how financial markets work and what Forex trading actually entails. While it's common knowledge that Forex trading involves buying and selling currency pairs, the mechanism of how the purchase and sale occur and how to spot profitable opportunities require studious learning. Knowing them is necessary to improve as a trader in the long run, which is what you must do to achieve your dreams of becoming successful.
Thankfully, it isn't hard to learn the basics of trading. There are myriad learning resources explicitly tailored to amateur Forex traders online. FBS also has courses for traders of various proficiency levels created by financial analytics and aims to introduce traders to the world of trading. Using such resources, you will quickly learn everything you need to know to start trading, while practicing will help you advance your skills to the next level.
Using trading tools
Many years ago, traders used to calculate potential price changes manually by using complex mathematical formulae. Nowadays, this can be done with various trading tools and indicators that calculate and measure different price parameters, like momentum, trading volume, support and resistance levels, etc.
Learning to use those tools is crucial to your success as a trader because they help you determine potential entry and exit points. And if you know when to expect price changes, you can plan your actions and react much quicker when they occur.
Keeping track of wins and losses
Keeping track of how much you win or lose is not only important for your wallet but also helps you better understand your current success rate and learn how to improve your trading. Analyzing your previous trades is an excellent way to find your weak points and learn to correct them.
Besides, if you compare your current win rate with your previous records, you can see how much you have progressed within that time. This can give you an additional confidence boost and motivate you to continue improving your trading skills to achieve your ultimate goal.
Building risk management strategies
Without proper risk management, becoming a successful trader is virtually impossible. While it's hard to accept, sometimes it's impossible to avoid losing trades. But you can mitigate the harm by applying risk management strategies.
The easiest way to avoid excessive losses is trading the amount of money you wouldn't be devastated to lose, like 30% of your capital. However, many tools, such as stop-loss orders, automatically exit your active trades, mitigating potential losses. Even a simple risk management strategy can save you hundreds or thousands of dollars, so skipping it may have unpleasant consequences.
Setting realistic profit targets
Of course, most people turn to trading because they want to earn more money. However, if you set your profit target too high, you might have to wait a long time to achieve it and miss much better opportunities. It's much better to set lower profit targets and make smaller but steady profits than lose money waiting for something that might never happen.
Making a trading plan
A trading plan is a set of rules traders create for themselves in order to stay focused on their goals. Trading plans include information about a trader's profit goals, capital, strategy, volume and time of a trade, risk management tools, etc.
Basically, trading plans outline everything traders want to achieve and help them avoid getting distracted. With a trading plan in place, it is also easier to keep track of one's profits and losses, analyze previous trades, and avoid common trading pitfalls and mistakes.
Diversifying your portfolio
Diversification is an important part of risk management. It involves purchasing different types of assets to mitigate potential losses should one of those assets depreciate. In Forex trading, diversification might involve trading currency pairs with low or negative correlation. However, it's important to remember that diversification helps to mitigate potential risks but doesn't eliminate them entirely.
Achieve success with realistic Forex trading goals
Realistic goals play an important role in Forex trading. They help traders stay motivated and avoid making mistakes on their way to success. They also allow traders to evaluate their opportunities and mitigate potential risks. Now that you know what goals can help you improve your skills, you can focus on realizing them and growing as a trader, which is precisely what you need to turn trading into a successful career.