Goal Setting: A Conversation with Chicago Sean

BellaMike Bellafiore's (Bella's) Blogs10 Comments

Chicago Sean has become a daily must read since he burst onto the StockTwits Blogosphere.  An experienced trader through many markets earns my ultimate respect immediately.  I want to read what he has to say.  Trading is a very difficult job.  Many can’t.  And many fewer can’t through different markets.

Chicago Sean tackled the important topic of goal setting the other day.  A trader sent me a link with a blurb about Sean’s take being different than ours.  I am not sure that was the case but I love clarifying a conversation started.   We have written recently about challenging our younger guys to set a goal of making 1k.  Sean blogged:

However, here in goal-setting is where my problems began. In setting an arbitrary goal, I automatically set expectations that I would achieve it and would therefore measure myself against these expectations which I more-often-than-not-failed to meet. And then I’d feel terrible and spiral in and out of mini-depressions because of it. And of course, I’d press. I can’t tell you how many times I’d be up $450 for the day and then almostly desperately lunge at trades with terrible risk-reward setups in an effort to make that last $50 to put me over the hurdle – only to give back $350 and end the day up $100 – or worse. And the flip side of this was the countless times I banged out of a trade going my way because I hit my “daily profit target” only to watch that position continue a parabolic move in my direction that would’ve made my entire week (or month!) if I had just hung with it for another 30 minutes. Nothing kills the psyche of a developing Trader more than this. And I was insanely guilty. I had no discipline.

Arbitrary goals are certainly not effective.  Goals just outside of your current ability can be very effective.  Making poor risk/reward decisions to hit a number is certainly an example of bad trading/goal  setting.   Becoming discouraged by your results and not most valuing the process is not the best mindset.  Not using that disappointment to trigger an added intensity to your trading work is a missed opportunity.   To hit your goal requires a hyper focus on One Good Trade and then One Good Trade and then One Good Trade (I hear there is a book on this topic 🙂 ).

Some of what I said above may seem contradictory but it’s not.  This is just a very nuanced subject.  Setting goals is necessary.  Setting goals outside your comfort zone is elite performance 101.  Valuing your daily improvement over results is the proper mindset.  Becoming angry at underperforming can be very helpful if you use this as fuel to work harder on your game.   Setting goals but not getting the most out of this process can cause a trader set back.  And finally certain goal setting may not just work for certain personalities.

Goal setting outside of your current reach starts the process of that trader doing everything they have to do to hit a number.  They visualize the trades necessary to hit this number.  They review their work and focus on what was required to hit that number.  They talk with other traders searching for plays that would help them hit that number.  They consider adding size to the plays that make the most sense to them so they hit that number.  They are armed with confidence that they can hit that number because an experienced trader has told them they can.   When I stopped our exercise for this path to 1k most were disappointed.

A blog is a place to start a conversation.  Perhaps you have a different take than me.  Perhaps you have a different take than Sean.  Awesome.  As long as we are getting you to think about your trading and expose you to different ideas than we have hit our goal.

Mike Bellafiore

Author, One Good Trade

10 Comments on “Goal Setting: A Conversation with Chicago Sean”

  1. Seems the difference might be Chicago Sean was setting money goals, whereas process goals may be of more value…improving the process improves the money as a natural byproduct. His goal was putting the cart before the horse.

  2. Agree 100%, Mike. As you wrote, ” Valuing your daily improvement over results is the proper mindset.”

    Focus on executing your process (which is the goal) and the outcome takes care of itself.

    Also, in terms of goal setting, for many people, constantly trying to be the best can set-up difficult psychological conditions due to high expectations. For such people, simply trying to ‘be better then yesterday’, especially in regard to process goals (vs an outcome goal like P&L) is more realistic and is often more conducive to sustainable improvement.

    Andrew Menaker, PhD
    http://twitter.com/#!/PopDocTrader

  3. A quick thanks for your book. Along with “Disciplined Trader” it is the most useful book I’ve read.

  4. Great post, Bella. Is it possible to simultaneously agree and disagree with you at the same time? 😉

    I’m glad you chimed in. I’m currently reading your excellent book and certainly had you in mind when writing my post.

    The great thing about markets is we can line up 100 profitable traders and learn from them 100 unique ways each of them makes their money. And the SMB way of making money certainly works. You and your firm are living proof!

    I hope I was clear in the post, but just want to reiterate here that I’m not knocking goal-setting and/or having expectations. I’m just pointing out it didn’t work for me (because I suck) and that in attempting to trade in a more minimalist way, setting profit targets (and eventually expectations) may be counter-productive to our (my) long-term goals.

    Keep up the great work with your teaching, this blog, and of course your trading.

    See you on the stream….

  5. This is a worthwhile subject and one I have mixed feeling on. In my experience, settings goals will may have following effects:

    Positive
    Hone your focus on on risk management and consistency.
    Keep mind always active toward goal.
    Make conscious the effects of risk to reward

    Negative
    Creates undue stress/emotions near goal objectives
    Detracts from market centric focus and market flow

    Much of the stress comes near the goal line or as a result of focusing on goal objectives. Goal objectives are important but are not sufficient to invoke change. Everyone wants to be a better trader. Truth is they are ignorant as to how to do that. Simply stating you want to be a better trader or even thinking about it obviously is not enough.

    I don’t just want to offer problems. However, if you aren’t creative/smart enough to think this out then I’m not sure I should make it easy for you. My solution is to keep multiple goals and keep them fuzzy. The goal is constant improvement. The goal lines are uncertain. This helps with both aspects.

  6. Nice advice.. looked at your twitter feed “Too much concern with being right will often prevent you from doing what’s right.”

    I have always found that focusing on being right has been a help to me. One trader had the opposite view. How could we have such different views? The answer came to me and became more relevant even today. I valued being right all the time. He valued being right in the past. If I am wrong and right then that was doubly right for me. If he was wrong then he can’t be right.

    I always win doesn’t translate to I win every time.

  7. a lot of stuff in the above comment. one point that i totally agree with is there is a large difference between “new traders” and “experienced” traders setting PnL goals. the dividing line between “new” and “experienced” can be delineated between those who have trading skills and have shown the ability to be consistently profitable and those who have not. if in a 21 day trading period you are unable to finish positve 14+ times then PnL goal setting most likely is not a productive use of your time. you need to focus on process goals exclusively and getting better every day.

    once you are consistently profitable it makes great sense to set daily, weekly, and monthly profit goals. but you need to have the understanding that the goals are not the measuring stick you can use to evaluate your success as what the market offers during any given time period will be unkown.

    this probably deserves a blog post and i may tackle it this weekend.

  8. a lot of stuff in the above comment. one point that i totally agree with is there is a large difference between “new traders” and “experienced” traders setting PnL goals. the dividing line between “new” and “experienced” can be delineated between those who have trading skills and have shown the ability to be consistently profitable and those who have not. if in a 21 day trading period you are unable to finish positve 14+ times then PnL goal setting most likely is not a productive use of your time. you need to focus on process goals exclusively and getting better every day.

    once you are consistently profitable it makes great sense to set daily, weekly, and monthly profit goals. but you need to have the understanding that the goals are not the measuring stick you can use to evaluate your success as what the market offers during any given time period will be unkown.

    this probably deserves a blog post and i may tackle it this weekend.

Leave a Reply