The majority of individuals new to forex live trading do not even realise the need for establishing solid objectives for both risks and profits primarily because of their inexperience in the market and preoccupation with basics.
However, most experienced forex traders state that it is better to start with such objectives because not only do they provide direction to new traders but they also help them compartmentalise the market.
The structured direction provided by such objectives helps in constructive development while compartmentalisation of the market allows for greater understanding and retention of crucial aspects. In addition to these aspects of establishing risk and profit objectives, there are many other things that you should consider as you dip your toes into forex live trading.
Tangible and Intangible Objectives
There are two types of risk and profit objectives that you will need to define to succeed in forex live trading. These categories are tangible and intangible. Tangible objectives are those that can be quantified such as profits gained, success rates, or account growth while intangible objectives are those that cannot be quantified such as retiring early, having enough money, or being independent.
While devising your objectives you will have to approach both profit objectives and risk independently because even if they are linked they should not be mixed up. Consider the following.
Profit Based Objectives
Profit based objectives are essentially positive-positive objectives wherein you aim to improve your performance by way of increasing the returns you get from forex live trading.
The tangible sub category of these profit based objectives will have to do with a sum of money that you make from each trade or a percentage increase of your total account equity. On the other hand, intangible profit based objectives will relate to how forex trading will improve your lifestyle and standard of living.
Risk Based Objectives
Risk based objectives will be negative-positive objectives where your aim will be to counter threats of forex live trading to your account equity and your personality.
The tangible sub category of risk based objectives has to do with your methods for dealing with risks in the market and how much risk you would be able to tolerate in each trade. The intangible sub category of these objectives will be based on how the market will affect your personality or your emotions and how you will cope with them.
Aspects to Consider While Defining Objectives
There are various things you will have to consider while defining your risk and profit targets. First and foremost, you will have to consider what you expect to achieve with forex live trading. This is your starting point. Your overall expectations from forex trading will form your intangible profit objectives.
You should also make it a point to figure out the market a little and assess the risks so that you know what you want to avoid which will form your intangible risk objectives. On the basis of these intangible objectives, you can form your tangible objectives and break them down into smaller portions so that they become easier to follow and review.