October 14, 2008 at 9:20 am | | Comments 0

4 Trading Goals You Can Set Right Now

The power of goals is undeniable, just as Phelps said after going 8-for-8: That was my goal.

The power of goals is undeniable, just as Phelps said after going 8-for-8: "That was my goal."

Goals are huge. They motivate you to get to another level, providing both incentive along the way and some satisfaction once achieved. I’ve spoken of them a few times here on the blog, but felt that a little more elaboration might be in order.

So today I want to cover 4 specific trading goals you can set that you might not already have. My purpose isn’t to tell you how high you should aim – only you can determine that, but rather to point you toward a few more concepts which could aid your trading process. Here we go…

1. Make ‘X’ Intuitive Trades Per Month.

Not everyone is systematic enough in their approach that they can automate their trading, and that’s perfectly alright. From time to time, any experienced trader (those using automation included) should allow gut feel to play a role in the decision-making process. Those of us who are purely discretionary traders aren’t strangers to acting on intuition, even if we go about it in a very methodical way.

Have you ever sensed an opportunity right in front of you, only to talk yourself out of it, thereby shutting down that gut feel which you’ve acquired through years of trading?

Well, what if you decided to make a handful of trades each month, in very small size, allowing yourself to capture a select few of those opportunities? As long as your risk remains defined, it just might help you to think outside the box a little and add some trades to your repertoire. Sticking with your game plan is a good thing, and I’m not suggesting frequent deviation from it. However, allowing a handful of ‘intuitive’ trades can add to your bottom line and enable some of that gut feel to assist in your overall profitability.

Consider making a defined number of “feel” trades next month – you might find yourself catching a few trades you may have otherwise missed out on. It’ll put your feel to the test, and provide you with yet another way to satisfy your craving for risk.

2. Set Your Max Loss Per Trade Weekly.

This is something every trader should be in the habit of doing on a regular basis. As account equity changes over time, so should the amounts that you’re risking per trade. Although you might select a constant value like R, it will still translate into different dollar amounts as your account levels change.

Making sure to update your thresholds either on the weekend or on Monday morning is the best way to stay on top of it. Doing so will ensure that you protect the downside during a tough stretch (as the R dollar-equivalent is reduced), while also maximizing profitability during good stretches of trading (as the R dollar-equivalent increases). The point is to trade smaller when doing poorly, and trade larger when doing well.

3. Consider Your ‘Options.’

Maybe you really prefer to trade stocks, which I certainly relate to, and that doesn’t have to change. In fact, owning (or short selling) the actual shares offers the most liquidity for getting into and out of trades as you seek to capture moves. But every now and then there comes along that trade which seems to offer a lot of potential, and yet inherently brings with it a lot more risk than you’re willing to take.

Whenever that’s the case, look at the options. Defining your risk through the purchase of calls or puts can limit your overall exposure, and yet still offer a ton of upside if you nail the trade. And since the options will never move to the exact same extent as the underlying shares, you’ll likely be far more able to endure some dips and rips along the way which may have otherwise spooked you out of the shares had you been holding them.

Even better, options offer a ton of flexibility when it comes to how you can use them and profit. Being long or short the shares offers you 2 directional choices, but there are many option strategies which really open the doors of possibility.

4. Trade More ETF’s.

With the explosion of ETF’s in recent years, there are now a ton of ways to participate in index-related or sector-based moves. You might be eyeing a particular group of stocks (such as Energy) and believe that a move is coming, but not be able to select 1 or 2 specific plays to make. In that case, turning to the XLE or a similar ETF would enable you to put on a single trade and participate in the movement of the overall group or sector.

Or perhaps you find yourself not long enough as a market rally begins to develop. It’s an awful feeling to feel under-exposed and not have that shopping list handy with some swing trades on it! Whenever that’s the case, consider turning to a product like index-related ETF’s. There are a ton to choose from which mimic the movement of the underlying index (such as NAZ 100, DJIA, SP 500, RUT, etc.).

Even better, there are now quite a few ‘leveraged’ ETF’s which provide you with more bang for the buck and yet require less exposure on your part, such as QLD which moves 2x the pace of the NAZ 100. Hitting the offer for some shares of these will get you quickly positioned for a continued move, knowing that you’ll participate in lock-step (or 2x lock-step!) with the index you most want exposure to.

So whatever goals you’re striving to achieve through your trading, be sure to set the bar high for yourself and work as hard as possible to reach them. Just like Phelps, you’ll be glad you did!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

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