Why do you trade? I ask this question to myself constantly. There are many reasons. I think you have to ask yourself this before you set goals, while you are setting new ones and while you are trying to accomplish previously set goals. Let me tell you how I set my goals. I look at my trading career as a three step process. The first step is to learn how stocks trade and move intra-day. During this process just learn and survive. This is because you are at an enormous disadvantage while trading against the other players in the market. During this time I have seen many different trading days and trading plays. Although, I know I have much more to learn I have developed a system and style that I am comfortable with. I try to constantly improve and modify this system but it takes time.

At this point in my trading career, I am in the middle of what I consider to be the second phase; building my bank roll. This is an important stage as it is a stage that many people do not understand. If you do not build a bank roll, you will never be able to take the swings that are involved with bigger market bets. For example, Monday I would have loved to have shorted at least 20,000 shares of BAC at 9.72 when it broke its premkt support. I knew it had more than a 60% chance of trading to 8.50 before it did 10.10. The risk/reward is there, and the probability is in my favor. The question becomes, could my career afford to be wrong on plays like this and if it could how many could I lose on before I go bust. But what I realize is that I have to build my cushion first.

I am very confident in my market views and predictions on the likelihood of the next move. The problem here is that during this second stage of trading I lose track of the important things. My goal everyday is to try and net 2-4 times my gross stop out. This way one bad day does not take out more than one or two good days. As I become more consistent I will increase my stop out and in turn increase the amount I shoot for everyday. That is one goal everyday.

Any one can set goals or a profit target or an estimate of what they should make a day but people will over trade or start to trade on tilt. During this building of your bank roll you need to conserve money once you make it. A rule that I have recently implemented to keep myself on the right track is for every 500 I make from my low I am not allowed to give back more than 150. Two quick examples of this would be if I go down 400 on the open and then make it up to net 800 I will not let myself give back more than 300. If I have a good open and quickly go up more than 1500 in less than 15 minutes and proceed to give back 500 like today I will stop trading until I have calmed down. Then wait for a great set up. The flaw in this system is that I missed a very good move in my primary stock Tuesday, STT, because I had just lost money in IBM because I took on to much risk.

Basically what this rambling has been trying to convey is that I had to stop trading for a brief time on the open because I had hit my limits. What I am starting to realize is that it is fine to trade a second stock actively; you just cannot let this stop you from making money in your primary stock.

What I was doing when I jumped into IBM was looking at how much money I could make not how much money I could lose and what that would do to my day. This in turn had a big impact on what I am trying to do in my trading career. If I was just trying to make one good trade at a time and not try and load up for one play my results would have been much different.

So are you trading to be the next great trader on the street or are you trading because you have a great passion for the markets, or is it because your final objective in life is to come into work everyday not have a boss and only have the market and yourself to answer to (I now know we are supposed to have a final objective in life thanks to a clip I saw on the soup of Stephanie Pratt). So ask yourself are you trying to take your trading to the next level everyday that you trade, or do you not even know what you want your next level to be? Be consistent, in every trade you should have a road map and you should have a road map on how you expect to accomplish your broader goals. Do not get caught up in the events of one day or your PnL in one day.

Don’t forget to follow us on twitter.