“In preparing for battle I have always found that plans are useless, but planning is indispensable.” -Dwight D. Eisenhower

A few weeks ago we talked about the necessity of treating trading like a business and coming up with a business plan.  This week, let’s look at the structure for what should be in a plan.  We talked about generic things and unrealistic goals.  I used fun exaggerations, like turning $1,000 into $1,000,000 in only four months to make a point.

Let’s actually sit down and talk about goals.  I’m not going to give you any because without knowing more about your situation, I can’t. 

The first thing any professional should do is look in the mirror.  We need to ask some very important questions. 

•    Where am I in my trading career
•    What is my average monthly return
•    What is my average drawdown
•    How long does it take me to recover from my drawdown
•    What are my greatest strengths as a trader
•    And what are my biggest weaknesses
•    Have I tested my system (or philosophy) with enough rigor to determine its potential longevity

I’m sure I’m missing some questions, but this is a good start.  Next, let’s employ some of that, oh-so-difficult, introspection.  This includes timing, ability and desire.  I like percentage based goals, not dollar ones, but you can take your pick. 

Ask yourself things like:

•    How much did I return in my account last month, in the last 3 months, 6 months
•    How many hours do I spend in an average day or week looking at the markets
•    How much money do I want to risk (in both my account and on a per trade basis)

Also, another important consideration: How do I want to define my risk capital (yes, this is different for everyone – more on that in a different article.)

With this framework in place, we are probably ready to start talking about goals. 

These are also personal so I’ll talk in generalities.

Again, this depends a lot on you.  Does your goal have a destination, or does ithave a progression?  Either one is ok.

What I mean by that is do you have a 12 (or something) month goal for overall return?  Or do you have some sort of progressive increase as your goal?  Do you want to live off your trading returns, or just make (or lose) some extra money in the market. 

I like the idea of having a long term goal and short term steps to help me get there.  The latter should lead to the former.  I like destinations, but you can figure out for yourself if you need one.

So, where do you want to be in 12 months?