Why Are You Trading?

Very few traders stop to think: why am I trading? They focus almost exclusively on how much money they could earn and they set themselves a goal like: “I want to have a million dollars”. Sorry to be blunt, but this is a pretty crap goal.

Very few traders stop to think: why am I trading? They focus almost exclusively on how much money they could earn and they set themselves a goal like: “I want to have a million dollars”. Sorry to be blunt, but this is a pretty crap goal.

Such goals spoil your trading performance. If you focus heavily on how much you can make from trading you inevitably become greedy and start making really dumb trades rather than focusing on getting the process of trading right and letting the money come to you as a result of following your trading plan.

In thinking about your motivations for trading, you are far better to start by asking yourself a more serious question like: “I want to make money because …”. It is the “because” is critical to your trading success.

When you do this exercise you need to be realistic and honest with yourself. For example, “working for yourself” or “being financially Independent” or “having a million dollars” are nice goals, but they don’t motivate you or make you happy in the long term and they certainly don’t help you pick up the pieces when the wheels fall off your trading.

There are many people who have worked hard for these three goals and they usually end up lonely, miserable and stressed out of their brains as they realised that they have traded in a cushy full time job for a more stressful and even more soul crushing experience. They try to medicate themselves by wanting to “own something”, only to discover it is a short lived piece of relief. Buying something new is like a sugar rush, it wears off pretty quickly. Trading your way up to buying a new BMW wears off in about a few months later once you see everyone else on the road has one. You need to think beyond “having” goals, such as “having a million dollars” or “having a financial freedom”, and think more broadly about other goals.

Getting Beyond “Having” Goals
When most people sit back and really think about “having” financial freedom they realise that what they really want is more time in their life to do something they don’t have time for. True financial freedom is about having the time to do the things you really want to do.

Therefore when you are thinking about why you are trading you need to think beyond “having” goals and look more at those things you wished you had time for. These are your “doing” goals (i.e. what do you want to do that you wish you could always do?) and your “being” goals (i.e. what kind of role do you wish you could fulfill with your family, friends or community that you haven’t done before?).

Look at Alexander Elder. He is living the dream. His “doing” goal is he wants to travel the world. His “being” goal is he wants to be a great trading teacher. For some traders, travel and teaching by itself isn’t enough (it isn’t enough for me – and it probably isn’t enough for Alexander). Some traders regularly give a percentage of their profits to charities. They feel like they are actually giving something back by trading. I met a trader once who moved to Fiji to live by the beach and work with the local community. I heard of another trader who bought an old farm and is turning it into a nature reserve.

I don’t mean to sound like some namby pamby tree hugger here. By all means set some Gordon Gecko “greed is good” style goals, just make sure you also pick some goals that mean something to you.

“Elimination” Goals
In addition to “doing”, “being” and “having” goals, you need to also look at “elimination” goals. Elimination goals are about removing those genuinely useless things from your life so you can free up the energy, time or money you need to achieve your other goals.

Elimination goals are about removing those daily annoyances that can easily be removed from your life completely, subordinated to a computer to do or given to someone else to do in return for something else (money, bartered services, etc). If you do this, even within the scope of an existing job, you will be surprised at how much time you will free up.

Now, if you apply this thinking to trading as well, and say stop day trading and trade on end of day charts instead, you will free up even more time.

Elimination goals are a truly powerful concept. If you are willing to apply elimination goals to some of your not so necessary “having” goals and then total up the amount of money you need to hit your doing and being goals, you might be really surprised how little money you actually need to feel “financially free”. You are probably only a few steps away from something you thought was impossible.

If you want to read more about this topic you should have a look at: Tim Ferris’ “The 4-Hour Work Week” and Dominguez’s “Your Money or Your Life“.