Ep 561: Setting Goals for Your Trading

Peter Drucker once said we greatly overestimate what we can do in one year, but we greatly underestimate what is possible for us in five years. In Episode 561 of The Traders Podcast, your hosts Rob Booker and the producer Jason Pyles discuss trading goals, namely, what they could be versus what they should be. Often a trader’s goal-setting has to do with bottom-line numbers, as opposed to goals that help the trader develop characteristics over time to accomplish those goals. Join us to hear more!

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Links for this episode:

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TFL365.com

Trader Interviews.com

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Hear Jason’s movie podcasts:
Movie Podcast Weekly where we review new movies in theaters.

Horror Movie Podcast where we’re Dead Serious About Horror Movies.

Movie Podcast Network a group of eight film-related audio podcasts that cover various movie genres.

Full Episode Transcript:

Rob Booker: Mr. Pyles.

Jason Pyles: Rob Booker.

Rob Booker: Peter Drucker once said, People often over estimate what they can accomplish in one year, but they greatly underestimate what they could accomplish in five years. Your thoughts?

Jason Pyles: Oh my, when I hear this quote it’s a little overwhelming for me because I’m like, okay, how am I supposed to know? If I have trouble grasping the smaller amount of time, how could I even have an idea of what to shoot for in the larger amount of time?

Rob Booker: So, where do you fall on the subject of, the spectrum of goal setting then?

Jason Pyles: Well, that’s a good question. I get the concept that where if you work backwards, reverse engineer your big goal, then you can break it down and find out what the smaller thing should be, what you should do next. Yeah, I’m a big fan of goal setting actually. My biggest mistake has always been I try to make too many goals, too many things to accomplish. For me it’s like pick one or two things and focus on those, accomplish those, and move on to the next thing.

Rob Booker: Oh, that’s interesting. I really like that. I was thinking this morning about my own goals related to trading and what those goals could or should be. I realize that so often in the world of trading, what we do is we set goals that are largely financial in nature. We set a goal to make a certain amount of money, but we don’t often set goals, or we forget that we should set goals that focus primarily on the things that someone does to make money in the markets. What someone will do is they will set a goal to make $500 a week, but they don’t really set any goals related to the type of person that they’re going to be or the type of schedule that they’re going to keep, or the little things that they do, the incremental things that get you all the way to the goal that you said that you wanted. A little bit of each of those things is really necessary, and as a trader, it’s good to think about what you can and want to accomplish in purely financial terms.

What I thought I’d share today is maybe a little bit of a strategy that has worked for me in the past, and even try to explain how those things are interrelated for a trader in particular. Because as a trader, it’s not going to work if you simply say, I want to make a lot of money and I’m going to use the law of attraction, and suddenly then you’re just suddenly making a bunch of money in the markets. It’s just too difficult. It’s just doesn’t really work.

Jason Pyles: And it’s not really specific, right?

Rob Booker: Yeah. I’ve seen this happen a bunch of times to myself and other people. I’ll set a goal to make a certain amount of money from trading, or just make a certain amount of money, and I’ll assume that it’s from trading and then I’ll make the money from somewhere else. So it’s like, okay, I mean thank you universe. That was great, but I really wanted to learn how to do this trading thing. So let’s say someone out there is listening and they’re relatively new, and maybe even they’re listening and their partner or spouse is listening with them and they’re interested in the financial markets. They don’t really know if it is a scam or if it’s possible. They want to set some goals because setting goals makes it sound like you’re serious.

So here’s a little strategy for goal setting. If you’re brand new to the world of trading then your goal should be to not lose more than a certain amount of money. Your goal should be within a six-month period of time to discover and focus on one particular trading method that you’re going to use somewhat exclusively, whether it’s systematic and robotic or otherwise. Those are the two things that matter so much. When you take Peter Drucker to heart, and I’m sure he was a good man … Well, I don’t know if he was a good man. He could’ve been a complete deviant for all I know. I don’t know anything about the man. I mean some of the stuff was kind of creepy.

Anyway, the point is that he said, Oh well, think about what you can accomplish in five years. Let’s see, if you started thinking about five years, you run into what you said, Jason, that when you’re just starting out as a trader thinking about the five-year thing is ridiculous.

Jason Pyles: Yeah, you’re like, I don’t even know if I want a baby in eight months, right?

Rob Booker: Exactly. Think about all the children we could have in five years. Well, let’s just focus on maybe taking care of the one we have. So you don’t want to have an expansive vision as a trader. Maybe if you’re in some other industry, but as a trader you want to focus at the start on finding and excelling at a system that’s going to require a ton of experimentation and a ton of creativity, and a ton of learning about lots of different things, and diving in and bringing in information from all different kinds of sources and all different places. It’s going to require that.

So you’re going to do a lot, but during that time your goal is to eventually come to love and focus on one system that seems to produce any kind of return, any kind of positive return, even if it’s just a dollar a week, anything that produces a return, positive return. Then the second focus is on not losing more than a certain amount of money within each day, week, or month. Those are the two most important … those are the goals that matter that lead to incremental success.

Jason Pyles: So Rob, I have a question about this, that what you said is just very simple and I love that, actually. But I wonder if somebody kind of new to trading, maybe in their previous work … You spend eight hours at a day job doing whatever it is for eight hours and it’s complex. There are lots of things to do. Do you think that traders get a little bit … They’re a little surprises that, Oh, so all I need to do is A and B, like what you just said? Do you think that sometimes they just feel like they should be doing more and so then they try to do more?

Rob Booker: Yeah, I feel like people are disappointed when they find out they don’t have to do more. There’s this badge of honor of martyrdom that traders, or really everyone kind of has it; I’m doing something difficult. Like the tech used to say, I’m doing the laundry, if you wanted to be called a superhero for having done something really ordinary. I think we want trading to be different and we want it to be exciting, and we want it to be complicated. A lot of people get into trading because they’re interested in the markets, and they’re interested in the markets because it seems like a get rich quick scheme. So they learn everything they can but as soon as it becomes apparent that the primary responsibility is to not lose money, the primary responsibility is not to make money then people just, they lose their interest.

I think one way that people get caught up in the markets is this idea that you can make a lot of money and that’s what inspires … So, it’s the same way that you want to learn everything you can about someone you’re dating in order to get that relationship to the next level, hubba-hubba-hubba, you know. If you realize that that’s never going to happen … yeah, maybe it’s just not going to happen, then your interest in learning their favorite color or favorite flavor of ice cream … then you’re not going to do it anymore. You’re just not as interested.

I think that happens a lot in the world of trading that true love is in a relationship … Listen, what I’m learning in life is that it’s getting through the simple moments and enjoying the companionship when all that other stuff has faded away and some of that passion isn’t the same as it was at the beginning of the relationship, and it’s a friendship and it’s a lot of other things. You want to know more about that person even though you already know everything about that person. I want to get to that stage and getting to that stage requires not blowing it, you know.

Jason Pyles: Right.

Rob Booker: Not blowing it, but the challenge at the beginning of the trading career isn’t that you’re going to become bored with it or it’s going to bad or whatever. The challenge is blowing the whole thing to the high heavens. That’s the challenge and that’s the same with the relationship. In trading, it’s very similar that the goal is to just not blow it. Don’t lie to the other person at the beginning of the relationship. Don’t give them a disease. There’s just things you don’t do, and the same with trading. Don’t blow it. It makes it kind of sad because you want it to be all over the top and crazy and wonderful and amazing, but there are these simple things to do and that’s all you need to do. It’s your only responsibility.

Jason Pyles: Well, as most of the traders out there know, I’m not a currency trader myself. But I will say I can see into the world sometimes, maybe. I think that the reason why perhaps they feel impatient or frustrated is it reminds me exactly of that dating advice you get when you’re single and they’re like, Hey, when you stop looking, that’s when it’s going to happen and you’ll fall in love. Because I feel like we’re saying, Just don’t lose money. Then once people get that and they stop having their hearts set on making money, then they actually do start making money, but we can’t think of that.

Rob Booker: Yeah, right. I mean imagine a movie where the hero of the movie is desperately seeking love, and then in the search for love becomes lonely, and in the search for love hit’s rock bottom, and in the search for love exhausts all the options that they could have thought and runs through everything. Then doesn’t notice, right, the person that works at the record store that’s kind of geeky, and loved them all along and he didn’t really notice it and invested … Anyway, I mean you get the idea that this is what traders do. They go, Oh well, I didn’t know how to use those moving averages. This Fibonacci stuff is amazing, [crosstalk 00:11:06]. They have an affair with Fibonacci and then one day they wake up and the Fibonacci is tying their shoes quietly at the edge of the bed and they’re like, Where are you going? The Fibonacci is like, I just need some space, and then they leave.

Then they’re like, Oh, fudge muffin, and later on by the pool they meet again, or they meet exponential moving average and they’re like, Oh, wow, that’s just what I needed! It’s my rebound. They’re constantly going from one to the next and it’s exhausting. Then they realize that there’s this simple way of doing things that produced a return, and it wasn’t spectacular but it wasn’t for anybody that’s doing well.

I have a friend. His name is Tim Sykes and he’s a penny stock trader. He’s good to his family and he’s good to his students. He’s just … overall he’s a good person. He used to have as really brash persona. Time says to people, he says this all the time, Like start with a small account and you’d be surprised what you can accomplish if you focus. He’s not saying you’re not going to make a lot of money. He’s just saying don’t put your entire focus on that. Learn the pattern. Learn the system. What I say is download a simple robot. Automate your trading and watch the robot trade. Manage the robot. Be an asset manager, and don’t go down the road of all the other crazy things that you can do. Just be a little bit less frantic about trying to achieve success and do one thing, and that is protect your account. Don’t lose money. Don’t have a big loss.

If you can do that, if you can simply cross that hurdle, the stuff that opens up to you as a trader is unbelievable. It’s unbelievable what will happen to you if you simply never allow a significant loss to occur in your account. If you’re constantly paying down your bad trades or cutting off your bad trades, or whatever … Everybody can find a simple strategy that will make some kind of return, but most everyone blows it all because they get too excited. That’s the challenge. Do the things that are incremental. Do the incremental small things well and then just, as a primary responsibility, protect your trading account.

Jason Pyles: Uh-huh (affirmative), I love it.

Rob Booker: Let’s plug the movie podcasts.

Jason Pyles: Sure, yeah. So if people out there are into movies, which I am, then you can listen to our reviews of the new movies that are in theaters at MoviePodcastWeekly.com. If you happen to like horror films, we also have another show called HorrorMoviePodcast.com, which is perfect for Halloween season.

Rob Booker: Brilliant. I love the podcasts, can’t wait.

Jason Pyles: Thank you.

Rob Booker: I might even start listening to the horror movie podcast.

Jason Pyles: You’d be surprised Rob. It’s a lot more analytical than you think.

Rob Booker: Okay, that sounds good. Hey, I watched A Ghost Story, starring Casey Affleck and Rooney Mara.

Jason Pyles: Yeah, so what did you think?

Rob Booker: Okay, my wife was like, What is going on here? [Crosstalk 00:14:19]

Jason Pyles: She’s eating pie for 10 minutes straight, right?

Rob Booker: I loved it.

Jason Pyles: Me too.

Rob Booker: It’s a movie that stayed with me after I watched it.

Jason Pyles: Uh-huh (affirmative), it sure does.

Rob Booker: Which is a defining characteristic of a movie that I know I love.

Jason Pyles: Same, yeah.

Rob Booker: But it’s not … It’s a frustrating movie also.

Jason Pyles: It’s a little bit of an art film, so yeah.

Rob Booker: Yeah, exactly. All right everybody, until next time, I’m Rob Booker, and that’s the producer. Thanks for listening and subscribing to The Traders Podcast.