It's been said that if you don't know where you're going, you could wind up anywhere. The same is true in trading - if you don't know what it is you're trying to accomplish, you're not likely to accomplish much of anything. One of the biggest pitfalls we face as aggressive investors is a lack of a specific plan.

At the very least, your trading plan should have (1) a monetary goal, and (2) a proven method. A lot of traders have neither, opting instead for a gunslinger approach. In other words, they take trades that seem solid at the time, and they hold that position until it becomes more painful to hold it than to not hold it (and they may even make an occasional profit). But that lack of focus and specificity will ultimately lead to poor performance. Instead, smart traders treat their trading activities as a business.

First, make sure you have tangible goals. There's an amazing mental "stick-to-it-iveness" factor that kicks in just in simply having a framework to follow. If you know that a 50% annual return is all that you need, then you can plan accordingly. The initial view you might have of a goal that lofty could be daunting. But with a little planning, you may find that the rewards you seek don't require much risk.

To earn 50% in a year, you'll need to earn about 4% per month on your account. That type of return is quite possible, and easier to swallow than the large 50% figure. By focusing your attention on those smaller increments, you'll not be forced to take excessive risks. The other benefit to a specific goal is the fact that you can track your progress. If you know that you averaged 5% per month for the first six months of the year, you can scale back on your risk for the last six months of the year.

The benefit of a proven method or system is also twofold. First, if you have a plan, you'll be able to ignore all the data that doesn't affect your trading. The media is not kind to traders - at any given time, you could find ten reasons to buy a stock, and at the same time find ten reasons to sell it. That emotional roller coaster is a nightmare, but if you are systematic and approach trading as a business, you won't talk yourself out of good trades (or keep yourself in bad ones).

Second, if you have a system, you actually have something to analyze. You can't improve gunslinging, but you can improve your trade signals.

These are two simple ideas, but exceedingly difficult to do. It's tough because it forces us to acknowledge some failures, and we all seek to avoid pain. It also forces us to look at our account balances, which again can be a source of pain. But the best traders know exactly where they stand financially, to the penny, and they know exactly why each trade failed or succeeded (these are the same people who actually still open their account statements). To know where you need to go, you have to know where you are.

As a first step, I recommend starting small. Set a goal of a 5% return for next month, and set a goal of winning trades 50% of the time - say two out of four. Once you get into the success habit, you can then enhance those goals.

Price Headley is the founder and chief analyst of BigTrends.com.