As we approach the end of 2016, I am sure a lot of you will be casting your mind forward
and thinking about all of the things you are going to do with your trading in the New Year.
And the question that I get all the time related to that very thing, is whether we should be
setting trading targets on a daily or a weekly basis.
Based on the amount of pips that we want to accumulate, based on our financial performance
or even on the number of trades that we should be opening in that set period of time.
For example, traders ask me, say ok I’ve made £200 today and that’s is my target
so therefore I am going to stop trading for the rest of the day.
Or for example, I have opened now five trades in this day and my maximum each day is five
trades and that is my target so I am going to stop trading for the rest of the day.
And I know that a lot of you watching have asked me that question before, and you know
what I am going to say next so…ssshhh!
Don’t you dare spoil it for everyone else!
“You’re my special friend” Basically, I always explain my view on this
topic with a bit of an analogy, well actually it’s a bit more than just an analogy it
is based on a study that was conducted in 1997 on Taxi drivers in New York and what
this study found was there was some really irrational behaviour going on that was leading
to some very irrational economic strategies.
So, the study found that (surprise, surprise) when it is raining or when it is bad weather
the demand for Taxis in New York goes up.
Of course you want to get your hair out of the rain, right?
But here is the funny thing, at the same when there’s rain and there is bad weather and
the demand is skyrocketing the actual supply of Taxis is decreasing.
But strangely enough on the days where there is good weather and therefore demand for Taxis
is lower, people quite happy wandering outside in the sun.
The actual supply of Taxis on those days was much higher.
“…Wait a minute” Strange, right?
But what the study found was there was some weird economic rationalisation going on in
the minds of the Taxi drivers that in their eyes at least justified the reasons for doing
this.
So the reason was that the Taxi drivers had a daily income target, and they would basically
work the hours needed to hit this income target and then they started to bugger off home.
So this meant that on all of those days where there was really good weather and demand for
Taxis was lower, they were ending up sitting there working an extra-long day because they
might have to wait a while before they get a passenger.
So they’re willing to work long days, long boring hours of waiting around to someone
to actually pop in their Taxi and pay them.
But on the days, where the weather was bad and they have a constant stream of passengers,
they hit their income target quite early on into their session, which meant they were
able then to go home.
They only maybe worked a couple of hours because they has passengers, one after the other.
Now that might seem like quite rational decision making, you’ve got an income target, you
hit the target you go home.
But actually when you think about it is extremely irrational.
If it is a slow day, and you are having to wait ages for a passenger, you might as well
call it a day and head off home and go and do something else that is a lot more productive
with your time, rather than waiting around.
“Have fun, fun, fun, fun, fun, fun!”
On the other hand if there is a constant stream of passengers and there is a lot of demand
for your services- your Taxi driving services, then you might as well work all of the hours
under the sun for that day and milk the opportunity as much as possible.
So what happens if we put this in perspective with our own trading, what happens if you
set those daily financial targets for yourself?
Well just like in the New York scene, the markets, the financial markets are also going
to provide you with days that suit your strategy a lot better, and you are going to have a
lot bigger and better opportunities coming up.
On those days if you had financial targets, that when you hit those then you finish, you
are going to be finishing your days really early, rather than milking the opportunities
that are being provided to you on that really good day in the market.
And what about those long slow days?
When the market’s not really doing what you wanted it to maybe consolidating and only
moving in little tiny ranges all of the time.
Those days, if you have a financial target each day, you are going to be working these
long hours and it is going to be really frustrating, you might even start to get impatient and
start seeing opportunities that aren’t really there.
When in fact on those days you should be cutting out early.
Finishing your day early and focusing more of your attention on the days when the opportunities
are there.
If you sit there waiting for opportunities to come, we all know what happens and you
end up sabotaging your own trades by accident.
I prefer to trade a lot more often on days where I see that the markets are being what
I call the “Goldilocks” markets where they are just right, and I actually released
a video about this in February this year so really early on this year, the link is in
the description box so go and check that one out when you have got some time.
However, when it comes to these trading targets I have got two points that run counter to
everything else I have just said.
Hey, don’t judge me 2016 has been the year of contradicting yourself.
“Can you guarantee that’s going to go to the NHS?- No, I can’t, and I would have
never of made that claim- wait a moment that was one of your adverts”
“You’ve been hearing me say it is a rigged system, but now I don’t say it anymore because
I won.
Now I don’t care!”
It is obviously in fashion at the moment.
So firstly, although I don’t have strict targets for every day, every week, every month.
I do have overall financial expectations for each month or each year and this is what I
talk to you about in the very first lesson of the mini-series that you get for signing
up for our free Inner Circle mailing list, the link is in the description box and also
at the start of our online course.
So basically, this allows you to kind of reverse engineer what you need to do to achieve those
financial expectations.
So whether that is with how active you are with the strategy, what your working hours
are and that kind of thing.
And if you have that expectation each month and you realise that one month, so let’s
take November, I wasn’t hitting that target, it doesn’t mean that in that particular
month you need to push yourself further and try and open more trades, you know that is
going to end in disaster.
Instead it just means that the next month or if that continues and trends that every
month you are below your financial expectations, you can review what you are doing and see
if you need to make some alterations to your strategy or to your working hours or even
to your expectations.
So it’s almost like a benchmark each month that lets you know if you are performing how
you would like to.
It is not a target for you to hit, it is just a benchmark so you can analyse whether you
are in the right vicinity of how much money you should be making or not.
And the second slightly contradicting point is that although you don’t want to set a
target number of trades each day, you might want to cap the maximum number that you can
open each day, because you need to take into account your ego depletion and your decision
fatigue and this is something I talk about in much more detail in our free e-Book “How
to Trade Like a TraderPreneur” so I won’t go into all of the details now because I will
just be wasting your time, you can go and look at it there.
But basically what it is saying is that we have sort of a maximum level of efficiency
every day and every time we make a decision that’s reducing and reducing.
So after a while then your ability to make the most efficient or the best decisions to
the best of your ability is less, like less chance of that happening because you haven’t
got the same decision making energy as you had earlier in the day.
In particular with trading it was found to be for the average person between two to three
trades before the decision fatigue really starts to take hold.
So although you might not want to have a target for the number of trades after two or three
trades or whatever you find is the optimal amount for you, you might want to consider
reducing your position size on any trades above that number each day.
Just to make sure that you are being safe and you are not exposing yourself to mistakes.
So traders, I hope that clears up all of your concerns and questions on the topic of targets.
Now if you have got any questions or comments related to that leave them down below otherwise
just get cracking on your planning for next year.
Guys, if you like this video make sure you hit the little trading glove thumbs up down
there and if you want more videos about learning to trade make sure that you subscribe to the
channel, because I want to see you back here next time for the next video which is coming
very soon.
I appreciate you watching you take care and I’ll see you very soon bye-bye.
“Thanks…Kazooooo!”