We have prepared another article from our trading psychology series. This time, our performance psychologist Nikola shares some insights into a topic of motivation and trading goals. Enjoy reading.
At the beginning of this article, I will ask you to reflect on and answer the following questions:
- What are the latest achievements I am proud of?
- What drives me most in my life?
- What is the missing part to achieve my goals?
- How am I going to feel if I don’t fulfil my expectations?
- When I go to bed in the evening, am I looking forward to the next day?
As you have probably guessed correctly, in this article we will focus on motivation and goal setting and will show how to set goals in practice on an example.
Let's start with the definition of motivation. Motivation is the driving force of a psychic character that sets human behaviour and activity in motion. It's the force that makes us get out of bed in the morning, what drives us in our daily life. The force that helps us to chase our dreams. We are almost never motivated by a single motive but always by a complex of motives. So when exactly is a motivated behaviour activated? When the motive is strong enough, when the probability of reaching the goal is high and when the value of the goal is satisfactory.
What happens when the motivation is low? Some of the underlying causes include poor goal setting that doesn't inspire us enough and low self-esteem that follows after several losing trades. We will focus on self-confidence in the future, the main focus now will be on proper goal setting.
Exercise: Think about your goals, whether you have just one ultimate goal or several short-time goals. Do you have them written down somewhere or do you just keep them in your head?
So, what is the most important thing while setting your goals?
It is important to have challenging yet realistic goals. The best goals are those that are slightly higher than your current level - they inspire hard work and if you constantly pursue them, they are achievable.
Every goal needs to be written down. If we write something down, a thought changes into a specific wording and there is no danger that this thought will disappear in 2 seconds. Pin your written goals somewhere where you can see them, it will motivate you more to accomplish them. Continuous evaluation and feedback are also easier for written goals.
Goals should be daily, monthly and annual.
It is important to distinguish between progressive, performance and outcome goals. Progressive goals focus on improving technique, strategy, thus how much time we spend educating ourselves, how much in details we think about our chosen strategy. Performance goals focus as we can derive from its name on performance, how we act, how we think, how we can handle technical and psychological aspects while trading.
Outcome goals place emphasis on the final outcome, on what we want to achieve. They focus on long-term profitability. Outcome goals can increase short-term motivation when a person is not actively trading. Focusing on the outcome goals before or during trading often leads to increased anxiety and insignificant distracting thoughts. Progressive and performance goals are important as they can be set and adjusted more accurately than outcome goals.
The combination of all goals (progressive, performance, outcome, short-term, long-term) can bring better results than just setting one type of goal.
Every goal, whether progressive, performance or outcome should be determined according to SMARTER principle. Many of you certainly know SMART goals, but in the last few years, two more principles have been added. So what exactly do these letters mean:
S – specific
M – measurable
A – achievable/acceptable
R – realistic
T – timely/trackable
E – evaluated
R – rewarded
Goals should be recorded in a systematic manner, kept in a visible place and continuously evaluated and adjusted. Never forget to reward yourself for the effort and energy you put into accomplishing your goals.
A lot of theory, but what does it mean in practice? Let's look at one example. The goal for most traders is to be profitable in the long run and reach the freedom to do so. But this is only an outcome goal, progressive and performance goals are missing. Therefore, it is necessary to establish them. In this case, the progressive goal could be courses completed within the time set aside for education, but the goal needs to be adjusted to follow the SMARTER principles. Thus, we need to determine specifically which courses we attend, when we attend them, what we want to achieve, what specifically we want to learn, establish a time frame and then evaluate whether we fulfilled our expectations. Always reward yourself for the effort dedicated to this goal. You also need performance goals, one of them could be improving your focus while trading. Again, this goal is too general, we need to make clear what method we will use to improve our focus, how much time we will spend on it, and when we will assess whether our focus got improved and what will be the criteria for determining that.
Exercise: Set goals according to previous rules. If you are not sure whether your goals are set correctly, get in touch with me to discuss further.
Nikola - FTMO Performance Psychologist