First of all, if you are reading this forex options trading piece off the back of a new year’s resolution, well done! No matter what the pessimists say, well done for taking it – now it’s about taking action.
Goals are important. They represent the bridge between the reality and the ideal. Once you know what the bridge is, you can start planning how to build it. Setting a goal implies acknowledging that you are currently missing some things to get there. You obviously wouldn’t set yourself a goal that you have already reached. That wouldn’t make sense.
A goal helps you take those day to day steps that 1) keep you focussed and 2) make a difference in the long run. This will help you become more conscious of your strengths and weaknesses. It also helps you realize what you can do if you push yourself just a little bit further. And this is even more true in forex options trading, where adding a pip a day to your profits (or taking away a pip a day to your losses) can make a massive difference to your profit and loss at the end of the month.
However, goal setting is not as easy as it seems. Especially in forex options trading where the pressure to perform is strong, sometimes traders get overly concerned about reaching a given profit or making back their losses that they overlook the realistic aspect of these goals. When setting objectives, you need to make sure these are achievable depending on your forex options trading trading strategy, capital available, risk appetite and last but not least, personality.
In addition to the “realistic” factor, another reason for why trading fail to reach their objective is the lack of systematic follow through. Traders often get a feel good factor from setting targets and visualizing themselves succeed. That certainly helps keeping motivated in their forex options trading activities, but as important as goal setting is defining a clear action plan with daily tasks / steps to get there.
To this extent, it’s also important to distinguish which kind of goal to aim for.
For less experienced traders, it’s important to focus on the process rather than the outcome. This will help you hone your trading skills, teach you good risk management and get you through good and bad times. Especially in forex options trading, going through bad times is a key skill to acquire. It teaches how to handle large losses from an emotional perspective – goes without saying that in trading emotion management is as important as risk management. Whether you end up in a profit or in a loss doesn’t matter too much – what matters is that you fine tune the process. Once you’ve perfected it, all you need to do is scale it up. Examples of things you would learn would be closing positions when they hit your target profit / stop loss or choosing the right trade notional, etc.
For more experienced traders, outcome-oriented goals are more appropriate. Having a profit target will keep you focussed on what you need to do to achieve it. But obviously you need to have already acquired the skills that would get you there.
Forex options trading is as much about markets as it’s about yourself and improving yourself. Goal setting is a key tool in making sure you reach your target in the fastest and most efficient way.