Are you a professional online Forex trader? Or are you a hobbyist with the intention of ramping up your trading into a side hustle or even a full-time occupation? And are you struggling to meet your trading goals? Do you even have trading goals? Or is your trading more of a hit and miss adventure, resulting in more losses than profits?
These questions are valid and deserve a considered answer
Therefore, let’s start this discussion by looking at what trading goals are and why you should set goals before embarking on any online share trading activities. Once this topic has been discussed, the next step is to look at why you are struggling to meet your trading goals and use this information to turn your investment losses into gains.
Trading goals: What, why, and how?
The fundamental aims of setting trading goals are to provide boundaries for your trading activities and to navigate the global Forex market successfully.
At this juncture, it is essential to note that not only to traders, especially novice traders, not set goals, but they also set the wrong types of goals that can result in significant losses.
Secondly, it is essential to be aware that when setting goals, they must be achievable. By way of expanding on this point, let’s consider the following scenario:
You are a novice online Forex trader and are interested in day trading. However, you are starting on your trading journey. And you understand the need to set goals, so you decide the following:
You’ve deposited $6 000 in your trading account, and you would like to double it in 3 months. Therefore, you need to make $6 000 in 90 days, or $2 000 per month or 30 days. You also assume that 99% of all your trades will be winning trades, so you don’t bother with essential risk-reducing strategies like setting stop losses on all your trades.
How feasible is this goal?
This goal is a lofty ambition, and the reasons will be discussed in the section below that describe why you are struggling to meet your trading goals. History shows that you will not win every trade; therefore, you must implement a strategy that earns more than it loses as well as a strategy that mitigates the risk of online trading.
Reasons why you are struggling to meet your trading goals
Based on the discussion highlighted above, let’s consider five reasons why you might not be meeting your trading goals.
1. They are not achievable goals
While the section discussing the nuances of setting trading goals cites a scenario where the novice trader has set a goal that is not achievable, it is worth reiterating this point because this is possibly the single most crucial aspect of all trading activities, whether online or through a broker. When selecting a broker, you should always make the choice wisely, looking for the broker who best fits your trading strategies and ethics.
Consequently, it is essential to spend time setting out achievable goals.
2. There is no win/loss strategy
As highlighted above, it is unreasonable to expect to win every trade. Your goal should be to win more than you lose; thereby, increasing your online trading funds.
Again, let’s assume you are a day trader. This is a short-term trading strategy that aims to be in and out of the market by the close of business. Succinctly stated, you do not want to be in the market overnight, even if the Forex market trades 24/5. Trades can turn from positive to negative in a flash. So, you must close all of your trades before you sign off for the day.
Secondly, it’s essential to place small trades. Therefore, when you lose, you do not lose significant amounts of money.
Thirdly, it is critical to add stop-loss points to each trade, even if you are watching the Forex’s prices move. In summary, a stop-loss point is an exit strategy. It is the position at which the trade will automatically close, should the currency pair price move below a certain point.
For example, if you buy a currency pair (EUR/USD) at 1.80 EUR to 1 USD. You are expecting the price of the EUR to increase against the USD. So, you set your stop loss at 1.78 EUR to 1 USD. And, you don’t set the take-profit point to let the price run.
There is some contention amongst expert traders whether you should set a take-profit point or not. There are merits and disadvantages to both. The choice is up to you and should be determined by your trading strategy.
3. Your strategy is not risk-adverse
Forex trading is considered a high-risk activity. And you should not risk money that you cannot afford to lose.
Therefore, it is essential to place small trades or micro trades. Ergo, your profits are small but, more importantly, your losses are small. A typical day trading strategy espouses the ideal low-risk trading strategy. In other words, you must implement a risk/reward ratio: the relationship between how much you expect to make on a trade versus the amount of money you are willing to lose.
4. Your goal is about results when it should be about the process
The example of a lofty ambition cited at the beginning of this article describes a results-related goal, not a process-related goal. The expectation of being able to a certain amount of money per day is unrealistic. The Forex markets can be volatile, especially when trading exotic currency pairs such as the USD/TRY (Turkish Lira) or USD/ZAR (South African Rand).
On the other hand, a robust process is defined by the strategy and not the results. And as time goes by, it is essential to adjust the process to suit the rapidly changing market conditions caused by the novel coronavirus pandemic.
5. You have not studied the art and science of Forex trading
Knowledge is a critical component of trading successfully and reducing the risk of losing more trades than profiting from them. It is essential to read and understand statistical analysis tools that show historic, forecast, and current trends. It is also necessary to gain a fundamental understanding of how the events listed on the Economic calendar, like the release of the US jobs numbers, affect the currency pairs’ pricing.
These are five of the most important reasons why you might be struggling to meet your trading goals. In summary, it is essential to set achievable goals, study the complexities of trading Forex, and change your results-driven goal to a process-driven goal.
Finally, your trading results will improve through practice and perseverance, as well as the continual adjusting of your strategy to account for the rapidly changing global economic circumstances in the post-COVID-19 era.