How to Set Realistic Trading Goals for Your Trading Account (2024)

In this article, we will discuss

• Assessing Your Trading Account
• Establish Goals That Fit Your Timeline
• Creating a Trading Plan
• Monitoring and Adjusting Your Trading Goals
• Psychology of Trading Goals

Setting clear and realistic goals is a key element for success in online share trading. It helps traders make better decisions and track their progress over time. However, many traders struggle to set achievable goals, leading to disappointment and frustration.This article will provide insights and practical strategies to help you set realistic trading targets based on their account size, risk tolerance, and trading style. By following a well-defined trading plan and focusing on the process, traders can improve their trading performance and achieve long-term success.Did you know that 80% of day traders quit within the first year due to losses and poor performance? By setting realistic goals and monitoring their progress, you can avoid being one of them. Whether you're new to trading or have years of experience, this article is a must-read for anyone looking to set achievable trading targets and improve their performance.

Assessing Your Trading Account

Before setting any trading goals, it is important to assess your online share trading account. This will help you understand your limitations and capabilities and set realistic goals accordingly.

• Understanding Your Account Size

The size of your trading account plays a crucial role in determining your trading goals. If you have a small account, you may be unable to aim for high-profit targets as the risk may be too high. On the other hand, if you have a larger account, you can take on higher risks and aim for larger profits.According to a study by DailyFX, traders with smaller accounts tend to experience higher volatility and risk of ruin. Compared to traders with larger account sizes, they are more likely to lose their entire trading account. Therefore, it is important to set realistic targets that align with your account size to avoid risking too much.

• Identifying Your Risk Tolerance

Your risk tolerance is your ability to withstand losses without getting emotional or making irrational decisions. This is an important factor to consider when setting online share trading goals. A risk-averse trader may aim for smaller profits with lower risk, while a risk-seeking trader may aim for higher profits with higher risk.A survey by the CFA Institute found that 42% of investors have a low-risk tolerance, 25% have a moderate risk tolerance, and 33% have a high-risk tolerance. Clear goals will help you avoid making emotional decisions and stay disciplined in your strategy.

• Evaluating Your Past Trading Performance

Evaluating your past trading performance is crucial when setting trading goals. This will help you understand your strengths and weaknesses and set realistic targets accordingly. When evaluating your past performance, consider the number of winning and losing trades, average profit and loss, and maximum drawdown.According to a study by the Harvard Business Review, traders who track their performance and set targets tend to perform better than those who don't. By evaluating your past performance, you can set achievable goals that align with your trading strategy and risk tolerance.

Establish Goals That Fit Your Timeline

Setting realistic goals is crucial for any trader looking to make consistent profits in the financial markets. Establishing clear objectives is essential to stay focused on your strategy and avoiding emotional trading decisions.

1. Short-term goals

Short-term goals refer to targets you aim to achieve in the short term, such as daily, weekly, or monthly. These targets help you track your progress and show how much profit you can expect to make in a specific time frame.

• Daily trading goals

A daily trading goal should be achievable, realistic, and based on your risk tolerance. For instance, you can set a goal of making 1-2% profit per day or reaching a specific number of successful trades. A realistic daily goal is important as it will help you stay motivated and prevent over-trading.

• Weekly trading goals

Weekly goals help you to set a target for your overall weekly trading activity. You can set a weekly target based on your monthly or yearly targets. For instance, if you aim to make a 10% profit per month, you can set a weekly target of 2.5%. This way, you can adjust your online share trading strategy accordingly and maintain consistency.

• Monthly trading goals

Monthly targets provide an overview of your trading performance for the month. You can set a monthly goal based on your account size, risk tolerance, and trading strategy. For instance, if you have Rs 10,000 trading account and aim to make a 5% monthly profit, your monthly target must be Rs 500.

2. Long-term goals

Long-term goals are higher targets you aim to achieve over a longer period, such as a year or several years. These targets require more planning and evaluation of your online share trading strategy to ensure that you stay on track.

• Annual trading goals

Annual goals are a great way to measure your overall trading performance for the year. You can set an annual goal based on your previous online share trading performance, risk tolerance, and account size. For instance, if you made a 50% profit in the previous year, you can set a goal of making a 60% profit in the current year.

• Multi-year trading goals

Multi-year goals are long-term targets that you aim to achieve over several years. These goals require a detailed trading plan and evaluation of your trading strategy. For instance, if you aim to achieve financial independence through online share trading, you can set a multi-year goal of growing your account size to a specific amount, maybe, Rs 10 Lakhs.

Creating a Trading Plan

Creating a plan is essential for achieving your goals. The plan will help you to stay organized, disciplined, and focused on your objectives. It will also enable you to make informed decisions that are rooted in logical analysis rather than emotional impulses.

• Identifying trading strategies

The first step in creating an online share trading plan is identifying strategies that align with your trading goals. Traders use several strategies, including trend following, breakout, and counter-trend trading. Choose a strategy that suits your trading style, risk tolerance, and financial objectives.

• Setting Entry and Exit Rules

Once you have identified your trading strategy, you must set entry and exit rules. Entry rules determine when you will enter a trade, while exit rules determine when you will exit a trade. For instance, if you use a trend-following strategy, your entry rules may require you to enter a trade only when a specific moving average crossover occurs. Your exit rules may require you to exit the trade when the price exceeds the moving average.

• Calculating risk-to-reward ratios

Risk-to-reward ratios are essential in determining the potential profitability of a trade. The risk-to-reward ratio compares the potential risk of a trade to its potential reward. When the risk-to-reward ratio is high, this means that the potential reward will likely outweigh the potential risk. Calculating your risk-to-reward ratio will help you to determine the size of your position, which is critical in managing your risk.

• Creating a trading journal

A trading journal is an essential tool that can help you track your trading performance and improve your trading skills. The journal should include details such as the date and time of the trade, the trading instrument, the entry and exit prices, the reason for entering the trade, the risk-to-reward ratio, and the outcome of the trade. Analyzing your online share trading journal regularly can help you identify improvement areas and avoid repeating mistakes.

Monitoring and Adjusting Your Trading Goals

As a trader, it is vital to regularly review and monitor your trading goals to ensure you are on track to achieve them. By regularly assessing your progress, you can adjust your online share trading plan to improve your performance and increase your chances of success.One way to monitor your trading targets is to keep track of your trades in a trading journal. This can help you identify patterns in your trading behavior and pinpoint areas where you need to make adjustments. It can also help you evaluate your risk-to-reward ratios and assess your trading strategies' effectiveness.In addition to monitoring your progress, it is important to be open to adjusting your online share trading plan when necessary. Market conditions can change quickly, and your trading plan should be flexible enough to adapt. This may involve modifying your entry and exit rules or adjusting your risk-to-reward ratios.Staying disciplined and focused is also key to achieving your trading targets. It can be easy to become emotional and deviate from your trading plan when faced with market volatility or unexpected events. However, sticking to your plan and maintaining a calm and disciplined approach can help you make rational decisions and avoid costly mistakes.Remember that achieving your online share trading goals is a journey; getting there takes time and effort. Regularly monitoring your progress, adjusting your trading plan when necessary, and staying disciplined and focused can increase your chances of success and achieving your trading goals.

Psychology of Trading Goals

• Avoiding emotional decision-making

Online share trading can be an emotional rollercoaster, and emotions can lead to making irrational decisions. Fear and greed are two emotions that can significantly impact trading performance. Fear can lead traders to close positions too early or avoid taking trades altogether, while greed can cause traders to hold positions for too long, hoping for even higher profits. It's essential to acknowledge and understand these emotions and have the plan to manage them.

• Staying patient and consistent

Successful trading requires patience and consistency. Impatience can lead traders to make hasty decisions and take unnecessary risks. Consistency in trading approach and strategy is also crucial for success. It helps traders avoid making impulsive decisions not aligned with their targets.

• Focusing on the process rather than the outcome

Traders often focus too much on the outcome of individual trades rather than the overall performance of their accounts. While evaluating individual performance is essential, focusing on the overall process of online share trading is equally important. The results will follow if traders stick to their overall plans and execute their strategies with discipline and consistency. Focusing on the process can also help traders avoid getting caught up in the emotions of individual trades and keep a long-term perspective.Research suggests that traders who maintain a positive attitude and remain disciplined and patient tend to be more successful in achieving their trading targets. It's crucial to focus on the bigger picture and avoid getting caught up in short-term fluctuations or setbacks.

Conclusion

Setting realistic trading goals is crucial for successful trading in the financial markets. By understanding your account size, risk tolerance, and past trading performance, you can create short-term and long-term goals that are achievable and aligned with your overall online share trading strategy. Creating a trading plan that includes entry and exit rules, risk-to-reward ratios, and a trading journal to monitor and adjust your progress.It is vital to review and adjust your plan regularly to achieve your trading goals. You can avoid emotional decision-making and make consistent progress toward your targets by staying disciplined, patient, and focused on the process rather than the outcome.The Samco app makes investing less intimidating than it once was. They have the tools to make wise investment decisions, whether you're an experienced investor or just getting started. Samco provides various financial products to help you diversify your portfolio, ranging from stocks and mutual funds to ETFs and derivatives. Why wait? Now is the time to control your financial future with Samco.