Unrealistic Trading Expectations: How to Get Real

One of the main drawbacks of trading is quite simply high trading expectations that border on the unrealistic—especially among beginning traders.

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Expecting to make your first million in a week, or even in a few months, is quite unrealistic. It’s best not to think in terms of millions. Instead, think in daily earnings that compound. Getting ahead of yourself distracts you from the task at hand and usually leads to disappointment and failure.

Unrealistic expectations are emotion and emotion is one of the trader’s worst enemies. If you can’t combat this, you’ll lose, succumb to frustration and then lose more or give up entirely.

A trader’s goals should be focused, realistic and short-term. Especially if you’re just starting out, it is not helpful to set a long-term goal that you don’t yet know how to achieve. Allow yourself space and time to discover what works best for you. And, setting small milestones can be motivating when you achieve them.

Have a goal going into each day and a plan to achieve that goal. Live in the present reality and perfect it.

Take if from STT lead trainer Tim Bohen, who’s seen plenty of new traders dive in with unrealistic expectations and then get burned.

“New traders think they are going to turn $500 into $500,000 in a year. They go too far, too fast,” says Tim. “They get their position sizes too big. They hold on too long. They blow up and then they say trading doesn’t work. It’s important to let go of expectations when you start trading.

But most importantly, says Tim, “Remember that 90%+ of traders lose, so if you don’t take this seriously, you will likely become another statistic. Even the most experienced traders have a 35%-win rate.”

It’s unlikely that you’ll see a home run with your first stab at a strategy. A trading strategy is like a tailored suit. One size doesn’t fit all and there are always alterations to make. The best way to manage your expectations is to understand from the start that you can easily alter your view of the market depending on what price action is telling you.

If you understand that you can’t control the market, but can manage your expectations, you will be able to make trading decisions that are rational. Rational decisions lead to more wins than losses and that is the ultimate goal here.

While we always hear about the wild successes of other traders, there are far more stories about mistakes and lessons learned—they just aren’t shared as enthusiastically. But, at the end of the day, as a trader, you will learn much more from your mistakes than you will from your wins.

The bottom line: Don’t be afraid to lose. Losing is unavoidable. The trick is controlling your losses by sticking to your plans and stop losses. It’s also important to understand that not all losses are the result of doing something wrong. The market isn’t always rational; in fact, it’s a sentient being thanks to all the irrational players speculating on it.

No setup is going to work 100% of the time. As long as you’ve done your homework, it’s not your fault.

As we repeat vigorously here at STT, one the most important steps in trading is to have a plan for entering and exiting a trade. Consistently profitable traders have a plan, people who don’t have one fade away.

So, do you have unrealistic expectations? We’ll help you determine that by posing a few questions. If the answer to any of these questions is ‘yes’, it’s probably time for a rethink:

#1 Are you over-trading?

Are you making too many trades simultaneously? More than a few trades and you won’t be able to manage them or to keep up with events that dictate when you should exit. This is where your plan can fall apart.

#2 Are you ‘re-trading’?

Even worse, are you repeating the same trade you just made, because you exited on a loss and want to try again? Or, are you buying the same trade you just sold because you think you sold too early and could have made more? Don’t chase losses and don’t buy or sell impulsively.

#3 Are you over-leveraging?

Are you too impatient with the pace of growth in your trading account and upping your position out of impatience rather than based on sound research?

#4 Are you trading randomly?

Some traders don’t feel like doing their homework. It seems overwhelming, so they just close their eyes and make a trade that seems good. Random trading works about as much as gambling. Gut feeling isn’t enough here.

#5 Do you believe in the Holy Grail?

If you think there’s a Holy Grail trading strategy, then you likely have unrealistic expectations. There isn’t one. There’s just sound research and planning. There are far too many variables in the market for a Holy Grail.

You can learn more about how to control your emotions and set realistic expectations by watching STT’s Steady Trade podcasts with Tim Bohen. You can also take advantage of the lessons learned from podcast co-star, rookie trader Stephen Johnson.  

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