What Are S.M.A.R.T. Goals?
- Firstly, goals keep you motivated. They give you a target to aim for, which helps to keep you focused amid distractions and discouragements.
- Secondly, achievable short-term goals can feed into your positive self-image as a trader as you reach them. This can help motivate you toward your longer-term goals.
- Finally, goals can remind you of why you are trading. The reason for trading must go beyond “I want to make a lot of money.” It needs to be something meaningful. Perhaps it is something the money can help you buy, but it needs to be specific.
Have you ever heard of S.M.A.R.T. goals (sometimes simply spelled SMART)? SMART is a mnemonic generally attributed to Peter Druker’s management by objectives concept. The mnemonic has been used by many different writers in psychology, business, and other areas, but probably was first mentioned by George T. Doran in Management Review in 1981.
SMART stands for Specific, Measurable, Attainable, Relevant, and Timely.
Having SMART criteria for your binary options trading goals can help you to establish useful, realistic goals which will help you to trade effectively and become successful. Let’s talk about each of these criteria in detail and how they relate to trading goals.
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A SMART goal must be specific. “I want to make a lot of money” is a common but problematic goal because it does not specify how much or on what schedule. It is so broad that it is not clearly defined, and that means that there is no way to measure whether you are meeting your goal or falling short of it. In binary options trading, it is important that your goals be specific so that they can also be measured.
Specificity also is relevant where non-monetary goals are concerned—or goals which may not be directly related to an amount of money. “I want to make X amount of money by X date” is specific. But so is something like, “I want to make enough money that I can _____” (buy a new house, pay for my child’s college education, create a personal project, etc.). These goals are meaningful and motivating.
You can have all the money in the world and not be happy if you have nothing valuable to use it on. So have a specific plan for what you are going to do with all that money once you get it. You may also want to set other goals in your life outside of trading which relate to achieving those goals. For example, if there is a personal project you want to finance, you might also want to set goals relating to research to complete the project.
“I want to make a lot of money” is not a measurable goal. There has to be some way to objectively (or as close to that as possible) assess whether you are achieving your goals. “I want to double my account within six months” is measurable and specific. There is a specific dollar amount and a timeline set, which allows you to measure whether or not you have met your goal.
You also should set measurable and specific statistical performance goals for your system. These are arguably more important than goals which relate directly to dollar amounts. If you achieved an 85% win percentage while demo testing for example, make it your goal to achieve that same win percentage or close to it while you are trading live. That is a measurable, exact goal which will help you to keep your trading on track.
Out of all the SMART criteria, this is the one that newbie traders most often fail to meet. When you are first getting into trading, you are probably going to find yourself daydreaming quite a bit about the massive amounts of money you are going to make someday. Not a lot of businesses are as scalable as trading. And if you are used to working a 9 to 5 job where you are paid a salary or paid by the hour, you know that there is a limit to how much money you can make. You might get pay raises from time to time, but always in a linear fashion. Trading income can grow exponentially.
This is what leads new traders to set goals like, “I want to make a million dollars within three years!”
You might even run the numbers and discover a goal like this is possible, assuming absolutely everything works to perfection.
This kind of goal is not an attainable one, however, even if it were possible. Yes, there is a chance you could do it, but it is unlikely that everything will work out to perfection and in your favor. And then what happens if three years from now you are nowhere near your million dollars on paper? Even if you are actually making substantial progress with your trading and making smart decisions that will eventually get you to that million dollars, you may get down on yourself and underestimate your progress toward your long-term goal. You may consider yourself a failure, question your choices, and start making bad judgment calls instead. This can actually lead you in a direction which is further away from your original (unattainable) goal.
There is nothing wrong with wanting to make a million dollars. But trying to pinpoint a timeline for it right now, at the beginning of your trading career, is unrealistic. Instead, consider some short-term attainable goals you can achieve:
- “I want to maintain an 85% win percentage or as close to it as possible during my first month of trading.”
- “I want to end my first month of trading in the black, not in the red.”
- “I want to follow all of my trading rules to perfection each and every time I trade.”
- I want to increase my account size by 60% within 6 months.
… And so on. These goals are short-term, finite, and attainable. By striving for them and meeting them, you will find the courage and confidence to continue on your path toward the million dollars you hope to someday make. And after you get used to trading live and start to meet your short-term goals, you will be able to set a realistic timeline for achieving your long term goals.
Goals you set while you are learning binary options trading should have a strong relevance not only to trading, but to your life as a whole. This comes back to making goals which are specific to purposes other than simply making money. All of us want and need money to survive and to thrive. In that sense, wanting money is not a unique goal. It has nothing to do with you personally. In order for the goal of making money to have personal relevance to you, you need to have personal plans for what you are going to do with it once you have it.
Figure out what it is that drives you. Why do you wake up in the morning and get out of bed on your hardest days? What would bring the most love and happiness into your life? How can you create joy for yourself and others? Come up with an expression of the best of yourself that you can create if you have the money from trading to finance it. Then set that goal in front of you as one of your long-term reasons for trading. That way your trading will stay relevant to you. And once you do start making lots of money, you will know exactly what to do with it to make the most of your fortune. The value that money has comes in part from the value we put into it!
The last SMART criterion is timeliness. We actually have already covered this criterion when we discussed attainable goals. This is why it is important to have realistic short-term goals, and not just long-term goals. Long-term goals are not all that timely, even if they do have a timeframe. The longer the timeframe is for a goal, the more unpredictable that timeframe will be. Short-term goals are achievable within a specific and predictable timeline. In order for them to be realistic, they cannot be too over-the-top. A combination of smaller short-term goals and larger, long-term goals is ideal.
When developing short- and long-term goals, ask yourself the following questions:
- What can I do within five years?
- What can I do a year from now?
- What can I do within six months?
- What can I do within the next week?
- What can I do right this minute?
- What goals can I fulfill with each and every trade, all the time?
The SMART criteria provide you with a wonderful tool for setting intelligent trading goals which will actually help you along the road to success. Any time you set a goal, you can reference the framework of Specific, Measurable, Attainable, Relevant, and Timely. If your goal fits within the framework, it is a sound goal worth pursuing. If your goals are failing to meet the majority of the criteria, they probably are not going to help you to win at binary options. This is just one of many aspects of getting your head into the trading game. Read more about it here!