The psychology underlining all high-performance endeavours is universal, and as such, the broad principles can be translated across fields. A recent meta-analysis on the impact of goal setting on performance found the following to be true.
Process related goals had a large impact on outcomes. In the trading arena, this would relate to the goal of following your trading plan and rating your outcomes according to how well you followed your plan.
Performance related goals had a moderate effect. Therefore, setting a target for how much you will make in a given period doesn’t seem to correlate well with actually achieving that performance.
Outcome oriented goals had a negligible effect on overall performance. Telling yourself you are going to own an island in a year and retire seems to be a waste of time.
This is simple but quite powerful on how to set goals. I’m going to rewrite mine now.
Unfortunately having process-oriented goals is beyond most traders because the view it as boring. Their preference is for trading to be exciting as their prime motivation surprisingly is not profitability but entertainment.
Process orientation reduces trading to a production line where you do the same thing in the same way every day according to a carefully crafted set of rules.