Stop Over-Trading Your Forex Account – The Power Of Goal Setting

By:  Tim Barnby

Have you ever had one of those trading weeks that started out great?  You know the week I mean.  You’re on fire.  You can’t place a bad trade.  Then something happens.  You start losing.  You can’t get an entry, your stop losses are hit to the pip, price never gets deep enough to take profit, etc.  This is a symptom of a bigger problem.  The problem is over-trading.

There’s an easy cure for over-trading.  It’s called goal setting.  When you start your trading session with a goal in mind, you know when to call your efforts successful.  Without this goal, you have no idea when to quit.  You keep going and going and eventually lose all of your gains, and probably some of your carry forward equity as well.

I create a trading plan at the beginning of the month.  The first step in creating that plan is a SMART goal.  I know you’ve all heard several definitions for the acronym SMART.  It doesn’t matter what else you’ve read.  For my purposes, it stands for Specific, Measurable, Attainable, Relevant, and Time Constrained.  A good example of a SMART goal on a trading plan is:  “20% equity growth every 30 days.”  This goal is specific and measurable (20%), it is attainable and realistic (I teach my clients how to do this with 50 pips or less per week), and it is time constrained (30 days).

Each week, I create a weekly trading plan.  Each weekly plan is completely independent of the preceding week unless a higher-timeframe goal is already reached.  If I meet my monthly goal of 20% equity gains in the first trade of the first week of the month, I’m done trading for the month.  There are no exceptions to this rule.  However, if I made only 2% the preceding week, I will not attempt to make that up in the following weeks.  I aim for 5% equity growth per week.  I stop trading when a trade closes and my account crosses that 5% threshold.  I have found that those short weeks are easily taken care of by trades that have tighter stop losses or run longer into profit.  There is no reason to try to catch up.  Catching up is an outcome of consistent plan execution.

Goal setting accomplishes several things for you:  First, it gives you a break from looking at charts.  Second, it tells you when you are successful.  Last, it gives you a complete reset at the beginning of every week.  This is a big help in the mental-game of trading.  When I started trading this way, I stopped carrying those terrible weeks with me into the following week.  This week, my personal trading was finished by about 01:00 CDT on Monday morning on a short EURUSD trade that ran for a 40 pip profit and netted me a 7.2% equity increase.  That brokerage account will not be opened again until Sunday and I can concentrate on other things.

If you are not as profitable as you should be, the chances are good that your goal setting needs some work.

Free Forex Signal – Updated 1 Dec 2009