Trading Goals - Do you have them?

[permanentjaun]

Who has thought about their goals?

Quick thought that's running through my head; who has written down or at least come to a very serious conclusion about what they want to do with their trading? If your goal is to trade full time then have you broken it down such that you know exactly what you need to do so? Is it a pip amount? Is it a dollar amount per month? Week? Day? Year?

I'm starting to wonder if most people fail in trading because they don't know where they are going. Would anyone trade a 30 minute chart if they really only wanted an extra $10K a year? What if the goal is to make $40K a year off of trading? $200K?

Another question to add to this is somewhat personal. Please write down what your goal in trading is and what your current trading strategy is. Do you think the strategy matches your goals?

I started this thread because many of the most successful people in the world say they have written down their goals at one point or another. I'll write down my goals in my next post. Another reason I started this thread is to see if anyones goals match mine and then look at their strategy. Perhaps I could get a different way of accomplishing my goals from this. Or perhaps others could critique my strategy for accomplishing my goals. That's all for this post. Now on to my goals and strategy. Matt

[permanentjaun]

Here is my goal:

I would surely love to become a full time trader. I have no set dollar amount that I'd like to make however. Why is this? From my experience I have found that I work well by slow steady building and management. I used to be a computer gamer years ago playing strategy war games. My strategy included myself always starting from ground zero and slowly building my army such that I would be very conservative in the beginning. I focused on defenses and bringing in money rather than attacking and trying risky tactics. I would consistently ward off intruders. Eventually my army would begin to grow steadily to the point that I almost couldn't manage the whole thing and couldn't spend money quickly enough on new expenses.

I imagine my real life investing strategy should be the same way. No one ever became successful in a day, week, or even a year. It takes time. I entered into forex two weeks ago. I made a quick $1000 and then lost $1300 over that time over several trades. This has whats got me thinking about my goals and strategy.

I've been trading stocks for several years and am hopefully going to make the full switch to forex. I traded penny stocks and tried to go big every time. I made several great trades. My main problem was holding for too long hoping that this stock would be the one to change my life. As I sit here now I can only think about how nice my life would be right now if I had just sold and realized it takes time to change a life.

So, what do I plan to do? I plan on making a simple strategy of going long/short in a position when a currency crosses a significant MA such as a 200 or even 400 on a 2 or 4 hour chart. I'll set a certain goal of only making 15-20 pips. I have 15 currencies that I've studied and favor their movement. I'm hoping that over 15 currencies I will find several plays a week. If not, oh well. I'm looking to make pips I can bank on.

This may sound like a very conservative approach for most of you considering some make plays of 50-100 pips on a regular basis. I'm not trading for today though. I'm trading for a year, 2 years, from now when that 15-20 pips isn't $250 anymore. Instead it's $2500, $25,000, etc..

If my wealth was determined by how many pips I have in my savings account then maybe I would look for a strategy with 50-100 pip trades. It's not however. What matters is how much cash I make off those pips and how much of that I keep.

I imagine that eventually my pip value will grow just like my armies in the computer games I played. They will become large and poweful and I'll have difficulty spending them quickly enough. If I make just $10K this year off this strategy then so be it. Next year it could be $20K. Compounding is a powerful tool.

So please, critique my strategy. Tell me what yours is? Do your goals match your strategy? Did you even have a goal in mind when making a strategy?

Thanks. Matt

[permanentjaun]

No one has any goals? I either find that hard to believe or am now more afraid for those putting their money into trading. Everyone must have some sort of goal considering they entered investing though. Something about you was unsatisfied and saw trading as your solution. What was it you were unsatisfied about or wanted? WHAT ARE YOUR GOALS? After that we'll go from there to what strategies everyone has.

This all breaks down to types of plays, money management, time, dedication, etc.. This is an open discussion. Don't be afraid.

Something to also consider is the military approach. During training they give you many small tasks to accomplish such that your self esteem builds as you complete each objective. Then at the end you realize that all those small tasks have added up to a much more professional and versatile person than when you started. This would have been much more difficult if they simply told you to take the final test to pass training from day one. So perhaps, you may have one goal, say to make $10K, from trading this year. What are the smaller steps you have in place? Maybe if you're trading with $100K it's not a big deal to do so, but what if you only have $500? Are your sights too high? Too low? Unrealistic? Misguided?

I'm starting to think we should have all taken this first step in becoming traders rather than read on how to trade. Adios. Matt

[SoundFX]

How much do you plan to risk to make those 15-20 pips? I'm all for simplicity as well, BTW. My goals are simply to trade well each day and to let the market tell me how many pips I make, as one can't predict the market's movement but can only flow with it. If that's -15 pips, so be it, 150 pips, so be it. Whatever the market would like to give up. Best of luck, PJ.

-S

[permanentjaun]

I plan to trade 2 lots such that I exit a trade with $250 profit. In doing so I limit myself such that I protect my profits and know where I I'm out at. There is no thought process in it. I've made my $250 and I move on. As soon as a currency starts to move away from where my trade was triggered it needs to be traded using a different method. It's much easier for the trade to go against me. Will the trend continue? Retrace? Reverse? Trade sideways? I'm developing my system such that I don't have to worry about those questions. I enter a trade when it looks good. I bank the $250 then don't enter a trade in that currency until it recharges such that it is repositioned for another similar signal.

Eventually I'd like to make it such that I start adding more lots to the trade such that I need fewer and fewer pips to make the $250. This means I am much more likely to reach my goal of $250. In time, hopefully, as my bankroll grows then it will become much more intelligent to play for 5-10 pips if my pip value exceeds $250. At that point I still may just play for 4-10 pips to lock in profits and be happy with $1000 or more. That's a long ways away though.

To me it's just the consistency of finding 10-20 pips. Trading a 2 or 4 hour chart and watching trends is easier to bank 10-20 pips. Worrying about finding 50-200 pips gets a little more difficult. Kapeesh?

[SoundFX]

PermanentJuan,

I'm not trying to dissuade you from your goals. I think its laudable to have set-goals with Forex and likely wise to trade longer timeframes when starting out in Forex, as long as you trade very small relative to your account size. However, in my humble opinion, I think that when trading 4HR charts, you are most definitely better off going for at least 50-100 pips per trade. I would use the smaller time frames (5-30M) for 20 pip trades as the momentum in these frames lends themselves more readily to smaller pip targets. Just my 2 cents worth. Getting 20 pips out of a 5M chart is not too tough, and there are far more opportunities for that. YOu may well acheieve your goal with the 2 and 4HR, but the opportunities will be fewer. Just be cautious. I've traded stocks before. Also traded futures and forex for the last 8 years. Forex is an entirely different game, leverage-wise and one certainly needs to exercise caution when going for a small pip amount on a large time frame. My goals are to make more each week than I lose, and luckily, I've been able to achieve that through prudence for sometime now. But my methods rely on divergence, trendline breaks, time-of day trades and chart patterns...stuff that has come to make sense to me after years of watching the charts every day. But there are many methods to profit. Risk management is first and foremost. Again, best of luck to you. Why not start a journal?

-S

[permanentjaun]

My thoughts were that as you look at longer time frames the trend is much more substantial, obviously. So I am much more likely to bank the 10-20 pips. Yes I understand that a 20 minute chart can easily show pip swings that would allow me to get the pips I want, but would they be as reliable as on a 2 or 4 hour chart? I would be sacrificing frequency of trades to gain reliability in signal.

I may have a solution to that. I can look at a 2/4 hour chart with 50/100/200 MA's plotted. Those are all relatively significant MA's and I could play each one equally such that a break of each would give me a trade signal.

I don't imagine I need to make 50 trades a week either. If I watch enough currencies I favor, currently 15, then the signals will come. Last week GBP/USD would have given me 3 signals to trade on a 2 hour chart. The week before it would not have. USD/CHF would have given me 2 this week on a 2 hour chart. My point is to be in it for the long haul and not to pay next months bills. As many have said, sometimes the best trade is not being in one.

You're trying to dissuade me from looking for small pips on a large time frame. Why is this? I don't understand because if I look for the larger pip movements I place myself at larger risk. I always thought protecting profits was a smart move. How does leverage change that? TIA. Matt

[SoundFX]

Matt,

Whatever method works for you, go for it. However, don't think that going for more pips leads to more risk. Quite the contrary. Why not keep your stops where they are and let the markets roll on in their intended direction, as evidenced by a trendline and MA break, until the trend dies out in the form of another trendline break? Maximizing your profits. For me, I'm typically risking 10-20 pips per trade per day with the potential to make 20-100. Usually breakouts with confirmation in the form of divergence or candle patterns. I guess I'm just still unlear as to your protecion level (i.e. where and why you place stops to get you out of a trade when it turns against you).

-S

P.S. Your thoughts on the best trade sometimes being NOT a trade at all is dead on. Its taken me a lot of years to realize that you don't HAVE to tade every day. You have to wait until you're sure you know what's going to happen. And of course be ready to admit you were wrong.