I just read Think and Grow Rich (affiliate) for the third time last weekend. One of the key ideas presented in the book is to set realistic long term goal and stick with it every single day. This reminded me of something that I've done lately which I think is very helpful in disciplining myself in my trading. That something is this table below. This is a table of my planned deposit and return for my trading account. The table shows:
- the amount that I plan to deposit into my trading account each year
- the accumulated principal at the end of each year
- the expected yield, which is based on my historical trading performance from the past 10 years of trading, minus the [couple of blowups I've had] (which is a reason why I am starting from scratch in this table)
Estimating future values is nothing new. What I find particularly useful in this table is the fact that they show the following.
- My minimum savings goal for each year (deposit column). So that I can project an annual budget.
- Effect of compounding. A reminder that I don't need to perform exquisitely in my trading to reach my goal. This helps keep my trading expectation realistic and not over-trade.
- I can trade for a living after 16 years even with my conservative expectations. This is my ultimate goal.
- I can update this table at the end of each year with real data so that I can see where I stand with respect to my goal.
This is a simple and easy to do trading goal visualization. I visualize this table often to remind myself what I need to do. Both in terms of setting a bar above to push myself as well as limiting my expectations to realism. A problem many new traders have, myself included, is the need to perform, and in a big way (making it big in that one trade), or conversely, afraid to miss opportunities. This table helps me keep a realistic mentality just so I don't back up the truck in any particular trade. As the table clearly shows, I don't need to take unnecessary risk to reach my goal of trading for a living. What is your trading goal? What is your plan to achieve it? How do you keep yourself motivated? These are some fundamental questions that this table can be helpful in answering.