subject: Embrace The Reality Of Substantial Trading [print this page] One of the important reasons of failure of many traders is the lack of awareness of reality. A proper realistic expectation is an integral part of trading. Be it a trade or management of your account, you should tread with realistic expectation and analyze the situations by keeping the reality in mind.
Dont Expect Emotionally
Realistic expectations are essential for successful trading. Many beginners naively believe that they can start with a few thousand dollars and turn millionaire quickly. You will likely to over trade for realizing your unrealistic dream of becoming millionaire quickly. Over trading is a sure path to blowing up your accounts.
So what is the realistic expectation of growing your account? Lets assume that you trade conservatively and put only 2% of your account on the table on every trade. For 5 trades every month, you risk a tenth of your account every month. If you achieve 70% of the winning percentage, with a conservative expectation of risk reward ratio of 1, you can expect to grow your account 7% each month. Now this is just the guideline to give the realistic expectations.
Expect and Take Realistic Profits
When you enter a trade, you should also know when you are getting out of it. Target and stops should be predefined before entering a trade. This is where a realistic assessment of the situation comes into play. There are many trading strategies available to follow. Choose any of these strategies but the profit targets should be determined based on logical assessment. One should not aim hundreds of pips with a very tight stop loss. You should study different exit strategies.
Always Trade with Realistic Stops
Every trader should take the stop loss seriously. Trading without stops is like driving a car without breaks. Stops should be determined based on the trading strategy. Calling your losing trade as positional trade and keeping it without stops is a bad trading habit which should be avoided. Also you should not keep a tight stop loss as you will likely to be stopped out. Let me remind you that there are trading strategies which follow strict stop loss.
Mistakes Are Part of Journey
You as a trader should assimilate the fact that you are not going to win all the time. It is very difficult thing to accept that you have committed a mistake. Once you accept the fact that you are not going to win every time, you are most likely to accept your mistake. It will keep you away from a bad practice of keeping a losing trade because you can not accept a mistake on your part. It is your responsibility to judge the situation objectively.
Reality check is nothing but an ability to see what is going on objectively. When you take emotions away from every trading decision, you trade what you see and not what you think. With practice you can achieve that. Embrace the reality and trade profitably.
by: Ownen Moore
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