Realistic Expectations

Buying and selling a market on the expectation of a higher rate of return than is currently available to you should be seen as the tip of a gigantic iceberg.

To be able to produce consistent results with your trading plan will take consistent effort on your part. Success in any endeavor, particularly risking your money in live markets, is a matter of taking the time and initiative to study and understand your educational material extensively, and then be at the right place at the right time so you can execute what you’ve been taught.

A lot of professionals will tell you that to achieve the success you need to have a goal. In trading, that goal should be not to make errors – an error is not taking any action other than what is spelled out in your trading plan – and to show up at your workstation early every day.

Show Up Early

Chicago firefighters have a tradition of showing up at the firehouse 1 hour before their shift starts. This is a courtesy to the firefighters waiting to be relieved. If a call comes in that last hour, and inevitably they do, the firefighter who has already put in 23 hours can still head home while the incoming, fresher man/woman can take his place on the rig.

As a trader, you need to show up early at your trade station also. You will find that being early is going to help you be more prepared, and over the course of weeks, then months, etc help you to find more winning trades.

Have Realistic Expectations

It’s also essential that you have realistic expectations in both how long it will take you to learn to trade and how much of a rate of return you can expect from trading.

I am excited about learning to improve my trading. I just put myself on a regiment to get up three times a week to trade the London morning session. It’s not hard for me since I am located in Europe. I started out trading micro contracts and is now moving up to trading minis.

I am more concerned with the consistency of my regiment than moving up to trading bigger contracts, which is what most people will do after even a hint of success. I am in it for the long haul; I know the value of my trading plan and the danger of greed and haste. I also know that if I can make just a few percentage points a week, or even a month, on a regular basis, and keep my draw-downs even smaller that I will have a good chance of finding work as a trader.

Percentage Allocation Management Module Accounts (PAMMs)

With the advent of automatic percentage allocation management module accounts, also known and PAMMs, and Leader / Follower accounts where an individual trades her own account and whatever she does is replicated on a percentage basis in another account for an agreed upon monthly fee, it’s reasonable for a trader who can show statements that reflect a consistent performance to become a money manager and earn a percentage of profits for the total funds that brokers raise for her, or get paid on a monthly basis per account.

I may or may not end up going that route, but the idea is an interesting one and helps me stay grounded by reminding me that the one thing that matters most is being profitable at the end of the week, and then again at the end of the month.

Traders who overtrade and then use the excuse “I have to trade bigger because I can’t make a living trading a small account” are missing the point that in the world of money management less is more.

Less is More

Let’s take a look at two perspectives, and decide which one is best for you to adopt – both assume you already have found a viable trading method which you have confirmed through several months of demo trading in live markets.

  • Number 1: your job is to show up at your trading desk early and prepared and make somewhere between 2 & 3% per week on a $5,000 account.
  • Number 2: your job is to show up at your trading desk early and prepared, and to make a living on the $5,000.

It’s very obvious which choice has a higher likelihood of success. It’s also apparent based on which route a person takes as to who an investor would entrust with trading funds. It would be much easier to be patient and wait for optimal set-ups and triggers to consistently make $100 to $150 per week on a $5,000 account than to try to trade more actively to make $500 or more per week on the same amount.

One big reason so many people aren’t as successful as they would like in trading is that they have unrealistic expectations. In fact, I find it rare in my position to find people who are grounded enough to realize that making a few percentage points a week is an excellent goal to have, and in some circles still a very aggressive one.

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