The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

2.2. CASE STUDY ON SETTING A GOAL

How do you go about setting a goal? Review what you have done in the past. See what is repeatable. Consider the resources available to you. Understand the firm's standards and set a goal that is a stretch for you but not unrealistic. Then divide the annual goal into monthly or weekly targets. For example, if you have a $1-million-per-month goal on $50 million of capital, you should ask yourself what you would need to accomplish weekly in order to meet that goal. You need to define what specific steps will be needed to reach your goal. This can be done by addressing three areas: quality of work, risk management, and discipline. More specifically, consider to what extent your ideas reflect a variant perception. Are you appropriately sizing your high-conviction ideas? How well-developed are your research and portfolio management processes?

To understand this process better, let's consider the case of Stan, who has been struggling for several years to become a portfolio manager. He has had trouble learning how to manage risk and recently gave up $1.7 million in profit in several positions. In an effort to modify his approach, he has worked up a new methodology, planning to attend selected meetings, targeting $1 million/month on $50 million of capital, and focusing on risk management issues. He believes that he can turn it around and has outlined the following steps to help him do so:

1. Regarding quality of work: Stan plans to travel as much a possible ...