Trading Forex: Having Realistic Expectations

Filed under: Learn Forex Trading |

Picture 3Expectations can sometimes be dangerous things, and in the world of forex trading, it is important to be realistic. If you go into the trading year hoping to double your money because you have given up your day job, then you are unlikely to succeed. If your expectations are too large, you tend to overcompensate in order to try and reach your goals. This inevitably leads to overtrading, and this is one of the most dangerous traps that a trader can fall into.

 

Let’s say that you aim to double your money in one year. That is over an 8% gain each and every month – not impossible by any means, but it is quite a target to reach, especially for a beginner trader. So, what happens when you have a bad start to the month? Let’s say you are down 5%. You now need to make 13% to reach your target, and time is running out. You start to take trades that you would not normally take in order to ‘catch up’, and then things start to go from bad to worse. Now you are down by 10%. Your task begins to seem impossible. You give up before you have even really begun.

 

Now, let’s say that somebody else has much more realistic expectations. They hope to make returns of between 10-30%er year, and they do not have monthly target – but rather, only have a yearly target of 10-30%. That is only an average of 1.2-2.5% per month. This seems much more doable and this trader is in no hurry to make trades, but rather, only takes the very best setups that have all of the signals that he/she is looking for.

 

In summary, having realistic expectations can do the world of good for your trading. And if you do even better than your expectations – well, then that is just a bonus!

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