Updated from its original posting on 16-09-2011
Setting expectations can be a wonderful tool for traders. They provide benchmarks to help us ultimately determine success and failure, and they also give us goals to work towards.
However, we must be careful in setting our expectations. Set them too high or unrealistically, and we could just set ourselves up for disappointment. Below, you’ll find three of the most common trading expectations that often lead to disappointment.
1. More Trades = Faster Learning Process
It’s true that taking more trades can lead to more experience, but it doesn’t necessarily mean that you’ll learn the ropes of trading any quicker than if you had taken less trades. As a matter of fact, this dangerous mindset can lead to overtrading, a common pitfall of newbie traders that exposes one to unnecessary emotional risk.
The key to speeding up your learning process is focusing on the quality of your trades rather than the quantity. Instead of simply taking as many setups as possible, priority should be placed on selecting the best setups and making smart trading decisions. Also, experience isn’t gained unless you reflect on the trade from start to finish. To help you in this cause, we recommend keeping a detailed trading journal so you can look back and learn from your trading experiences.
2. I can make a living out of trading.
Who are we kidding? Everyone dreams of trading for a living. And this dream is not without its merits. It is possible to make a living out of trading forex. But you’re simply setting yourself up for disappointment if you think you can accomplish this within your first few months (or even years) of trading.
Med students don’t become skilled surgeons overnight, and bar exam passers don’t become competent lawyers in the blink of an eye. Just like any other profession, it takes years and years of practice and experience to develop the skills needed to turn trading into your primary source of income.
3. It’s all about the money.
This last mantra is probably the most circulated, but it also has the most merit. While it’s true that profits ultimately determine the effectiveness of your trading strategy, it doesn’t necessarily dictate success on a day-to-day basis. Even the best traders have days, weeks, or months when their tried-and-tested strategies don’t turn a profit.
Instead of gauging daily success on how much profit you made, you should instead base your success on your decision-making process. Did you take valid setups? Did you stick to your trading plan? Did you practice sound risk management? If you find that you’re still not making profits even after a series of good executions, then maybe all you need to do is tweak your strategy. Whatever the case may be, money-making shouldn’t be your be-all and end-all in growing as a trader.
Embracing the expectations listed above aren’t the biggest blunders you can commit in trading, but they can easily set you up for disappointment and defeat. And in an environment that requires all of your focus and concentration, having unnecessary emotional baggage can hinder you from having the focus to become a consistently profitable trader.