To some extent, the expectations that we set tend to influence our mood, way of thinking and actual experience. Looking forward to a positive outcome usually makes one feel giddy and excited while expecting a negative outcome makes one feel anxious.
As my favorite trading psychologist Dr. Brett Steenbarger discusses in The Daily Trading Coach, the relationship between emotions and expectations is very important for newbie traders. After all, he says that our emotions are barometers of the degree to which we are meeting or falling short of our expectations.
If you are guilty of making unreasonable trading expectations, you might be in danger of setting yourself up for disappointment. Consistently feeling disappointed about not meeting your goals can be very discouraging so it makes sense to set reasonable expectations. Here are some examples of trading expectations that are unrealistic:
1. Hard work = More trades
This expectation assumes that if you take more trade setups, you’ll be able to speed up the learning process and make more profits. The problem with this assumption is that it doesn’t take the quality of the setups into consideration.
Aside from that, this also makes a trader prone to overtrading. One might end up forcing trades instead of picking the high-probability setups that have a better chance of winning.
Remember that quality trumps quantity when it comes to trading. Even if you still end up with a losing trade, you’ll be able to draw more lessons from a setup based on sound technicals and fundamentals than from one that was simply taken for the heck of it.
2. A good day is a winning day
The problem with this line of thinking is that emotions will go on a roller coaster ride if they depend on the bottom line profit and loss statement. The truth is, it is inevitable that, as traders, we will have losing days. I repeat, it is INEVITABLE.
Don’t get me wrong, it is perfectly normal to feel disappointed when we lose. After all, it’s part of our competitive nature to want to win. That said, we should keep in mind what the late, great coach John Wooden used to say, “It’s okay to be disappointed, but never get dejected.”
Instead of letting the losses affect our emotions, it would be more constructive if we look at each loss as an opportunity to learn. Furthermore, each loss could serve as a reminder that the measure of a good trading day is whether or not we followed our trading plan.
3. Success means making a living from trading
For most people who are learning how to trade, the end goal is to make enough money day in and day out so that forex trading can become a full-time endeavor.
While there are a few who do succeed early on, most traders do not make their earnings during the early years of the development curve.
During this learning stage, one should not expect to rake in massive profits. Instead, the goals should be to manage expectations, protect capital, and learn from each trade.
The point I’m trying to make here is that we can help ourselves by not setting ourselves up for disappointment and failure through unreasonable expectations.
One way to manage expectations and to get rid of unattainable assumptions is to maintain a trading journal. This way, we can track our progress and keep the focus on the trading process and not on profits and losses.