Many people go into financial trading with unrealistic expectations. These are often caused by equally unrealistic hype, marketing and overinflated success stories promoted on the internet by websites keen to get their hands on your money. Even if you don’t fall for these myths, their presence can still lead to many people having a mistaken notion of what successful trading requires, and how much profit they’re likely to make.
The problem with these expectations is that, ironically, your trading performance will be worse because of them, making them even more unlikely to come true. The best policy is to go into trading with as few expectations as possible, or at least to manage your expectations so that you have a realistic, grounded sense of the likely outcomes.
You won’t become a millionaire overnight
The most common and damaging false expectation is that you will get rich quick through financial trading with the assistance of a single book. Most new traders suffer from this illusion one way or another. You may not be so naïve as to think that you’ll make your first million by the end of the month, but the chances are that you’ve still overestimated the size of the profit you stand to make, while underestimating how long it will take to get there.
Of course, there are many dubious websites, companies, and individuals that will make extravagant promises regarding their foolproof strategy or unbeatable investment. Managing your expectations will help you to avoid scam brokers and stick to a realistic path through the trading jungle. Start small and aim for compound earnings that gradually accumulate.
It’s not an easy hustle
Successful trading requires a significant commitment in terms of the amount of time you need to spend working at it. This can negatively affect your work-life balance, especially if you already have a full-time day job. Many people underestimate just how time and labour-intensive financial trading can be. If you see it as a hobby, one where you lose as often as you win, then by all means drop in and out when you feel like it – but if you see it as a way to consistently make money, then you’ll have to put in the hours.
It won’t let you give up your job
Of course, there are professional traders, but most of them work for big companies. In addition, some people do manage to live off their investments and earn a reasonable living by playing the markets. To do this, however, requires substantial capital to start with, as well as years of experience, or a full-time financial advisor with the same.
You will lose money
It’s a fact of life that all traders lose money often, and most traders crash out of the market within a few months of starting to trade. Those who succeed do so because they work hard, manage their expectations, and don’t try to run before they can walk.
Social trading, or copy trading, is a great way to learn and adjust your expectations. Before that, start off with a demo account so that you can see how well you currently trade before you risk your own money.
Do your research, know your own strengths and weaknesses, and keep your emotions out of the picture as much as possible. Slow and steady is the name of the game, at least at first. By making sure that your expectations are under control, your chances of exceeding them will be so much higher.