How Expectations Affect Your Trading Results

A realistic or controlled expectation is not bad for trading, but it becomes unhealthy when it moves from a guiding light to absolute certainty.

Let’s look at how high expectations dictate your trading decisions and destroy your performance:

1. Viewing forex as a get-rich-quick venture

One of the most destructive mindsets in trading is believing that FX will make you rich overnight.

This is often fuelled by flashy advertisements and (sometimes exaggerated) success stories of “big boy” traders on(off)line.

New traders see these images of luxury lifestyle, join trading with the hope of massive & instantaneous profits/wealth.

Consequently, they speculate price movement with greed; enter trades without proper analysis.

Here, we see extreme risk-to-reward ratios, big position sizes, and very poor risk management.

2. Expecting every trade to be a win

Another detrimental belief that can compromise your performance is the thought that losing a few trades means that you are not on the path to success (not progressing).

You want every trade to be green.

Traders with this perfectionist impression view loss strictly as stagnation and personal failure. They do not embrace it as a core part of the process; an opportunity to learn and modify.

With this erroneous stance, loss isn’t taken lightly. If encountered, every attempt is made (even against sound judgement) to win and recover.

Revenge trading, jumping from one strategy to the other becomes a habit.

3. Constant need/desire for absolute (market) certainty

Do you endlessly analyse the market to know all possible scenarios before you trade?

The market is naturally dynamic and uncertain, so expecting yourself to know 100% of everything can counter-produce.

This demand for certainty can cause analysis paralysis, confirmation bias, and even make you unable to adapt to new market conditions.

For example, you may stubbornly hold onto losing trades in the hope that the market will eventually conform to your prediction.

4. Unhealthy competition and comparison of trading results

This is like number 1, but slightly different. It is for traders who have been trading for some time now.

Are you fond of using others’ payouts or performance history to judge and criticise yourself?

If yes, this has a way of making you expect too much from yourself. It can put you under unnecessary pressure. And in the process, you may self-doubt and completely lose trading confidence.

You may abandon yourself to chase/adopt what you don’t understand.

Comparison has the power to ruin your skill. It can force you to compete from a place of frustration, desperation or inferiority complex.

How to Develop Healthy Expectations

1. Accept that trading is a game of probabilities, not certainties: Work with “what ifs”. This should inform your decisions. Always remember that the market may have a different plan.

2. Do not trade without a pre-set guideline: You must always define your entry/exit points and how much you intend to risk, first, before execution.

3. Celebrate your small wins: This is probably the most overlooked positive habit. Know that a win is a win, and worth celebration. It is less about the amount/quantity, but more about getting a yield by sticking to your plan.

4. Focus on long-term (sustainable) success: You want to take your focus away from your daily P&L. Concentrate more on consistent execution of your plan over weeks & months. Obsession with a moment is mostly the cause of irrational decisions.

5. Set realistic and achievable goals: Your profit targets should always be backed by logic and careful market examination.

6. Have a trading journal: With a journal, you can document your trading habits; your emotions, patterns and expectations. After a review, you would know if your expectations are “practical” or not.

7. Take a break when you feel stressed or pressured: Last but not the least, walk away from the market, from price charts when you feel overwhelmed or confused. Go and relax. Have fun and return when you feel “refreshed”. A peaceful state of mind can protect you from exaggerated hopes.