Have Realistic Expectations

In the newspapers, there are many advertisements that make trading apear to be simple. These advertisements unfortunately promote unrealistic expectations in the minds of new traders.

Everyone should have realistic expectations when they start out in any endeavour.

The following list sets out some expectations that are part of the realism of trading:

·   It takes work to make money trading

·   It takes knowledge to make money trading

·   No matter who you are, you will have losing trades

·   No single trade is likely to make you rich

·   Only expect to make money if you understand and apply money management principles

·   Expect to take risk in order to trade

·   Make your profit expectations reasonable – 100% a month probably isn’t a reasonable expectation

·   Don’t expect that anyone is going to have 100% winning trades

·   Expect to study markets, strategies, and psychology if you want to be a successful trader

·   Don’t expect to get rich quick

·   Expect to pay for your education (college wasn’t free was it?)

·   Expect to keep careful records so you can see what you are doing right and what you are doing wrong

·   Expect to be responsible for your own trades, and recognize that no one else is

·   Expect to go through a learning curve before you are a good trader

Obviously, this is only a partial list, but I want to emphasize the importance of realism over fantasy. Believe me, if I could predict which trades on cheap stocks would make more than 5% or 10% in a short time, I would be placing them. Trading is not an easy business. In the heyday of day trading in a super bull market only about 16% of the day traders were making money. If it were easy, everyone would do it. It takes work, persistence, regular study and good money management to be an overall winner. Luck may be with you on some trades, but reliance on luck will ultimately lead you to the poor house. Make the effort and the expectancy of making money is more likely to be fulfilled. If you won’t make the effort, then don’t expect success. It is really that simple