Tuesday, July 1st, 2008
Brett Steenbarger on trading goals (Goals, III)
One of the best discussions of goal setting for traders is in Dr Brett Steenbarger’s book 
Enhancing Trader Performance.
Dr Brett says research shows that goal setting improves performance in business and sports. But that doesn’t mean all goal setting is good. He says the type and level of goals also have an important impact on performance and they need to be tailored to our current skill levels.
Dr Brett notes that one set of research found performance goals are more effective than result goals. A performance goal might include something like ‘I will adhere to my stops’; an example of a result goal is a trader wanting to make $1000 each day.
Performance goals relate to actions under a trader’s control, whereas result goals are subject to the vagaries of the market.
“The reason that result goals may not be as effective is that they can create divisions in the minds of performers, encouraging them to evaluate their performances even as they try to remain immersed in them,” Dr Brett said. “Writers experience blocks when they critique their prose as they write.”
Beginners benefit most from developing skills and advanced practitioners get more benefit from goals that keep them motivated. “Beginning traders are likely to benefit most by setting goals that reflect proper mechanics and tactics such as risk management goals,” he said. “Expert traders, however, might gain an advantage from outcome goals that are motivating.”
Research has actually found that performance and result goals together are more effective then either.
Dr Brett also says goals can hurt performance if they’re pitched too high or low. “Very easy goals do not motivate performers or energize their efforts, but very difficult ones also seem to have dampening effects. Goals of moderate difficulty allow performers to marshal their efforts while maintaining optimism over goal attainment.”
One of the best ways I’ve found to work out if you’re setting appropriate goals is to monitor how they make you feel.
Setting a goal should not only be based on rational factors, such as the state of the markets, or what you believe would make you a successful trader.
A good goal will energise and challenge you. Bad goals will overwhelm or leave you feeling listless and bored.
In the next post, I’ll look at how setting three distinct trading goals a year can help.
Word Count: 389. This entry was posted on Tuesday, July 1st, 2008 at 11:25 pm and is filed under Investing psychology, Trading goals, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
July 10th, 2008 at 12:06 am
[...] The previous posts on goal setting looked at what we can expect from the market, and the thoughts of trading coaches Ari Kiev and Brett Steenbarger. [...]
March 4th, 2009 at 4:37 pm
[...] * Setting Goals - A look at the kinds of goals that further performance. [...]