Monday, March 29, 2010

Goal-Setting, Discipline, and the Emotions of Traders

An important post from last year linked goal setting in trading with emotional well-being--and especially with sound trading discipline.

Discipline problems typically begin with experiences of frustration.

Frustration is a function of not meeting goals and expectations.

Many times, traders try to adopt psychological strategies for combating frustration. These can be helpful, but they don't get at the root of the frustration problem.

If we do not set challenging, but feasible goals, we cannot experience ourselves as effective, successful people. Goals that are perfectionistic cannot be met and thus generate frustration.

The failure to set goals robs us of opportunities for cultivating a sense of purpose and well-being.

Goal-setting is not just essential to mastering markets; it's essential as a tool of psychological management. We shape our experience of ourselves by controlling what we pursue and how we evaluate the pursuit.


The Moxie Trader said...

"Frustration is a function of not meeting goals and expectations" . . .

Wow! I own that T-shirt.

I like your prescription for the cure: setting smaller, realistic goals to help us realize more accomplishment. I think our psyche is a fragile thing, and in need of nourishment in order to function optimally and better contribute to our overall wellbeing.

Thanks for your post. Made me think! Very timely topic, as I'm in process of setting a new batch of goals.

Marek said...

I totally agree and would say it is more important to be right more often with smaller gain than chasing huge winners.....

harry said...

Thanks for the great advice.

Have you tried any goal setting tool/system?

I've been recently using a goal setting app called GoalsOnTrack and it has worked very well. It saves me a lot of time in keeping track of my goals and most importantly it helps me better organize my daily todos towards achieving my goals. You may want to check it out.