Module 12 Innerworth — Mind over markets

Chapter 51

Modest and Realistic Goals

Stan is disappointed with his life. He views his life as a consolation prize, a series of concessions that fail to meet his desires in the end. He wishes he had more money. He fantasizes, “If I can make huge profits trading, maybe all my worries would be solved. I’ll gain the respect and recognition I’ve always wanted. Perhaps I’ll find an exciting, new romantic partner who will satisfy all my needs for love and contentment. If only I could make enough profits to solve all my problems.”

Have you ever felt like Stan? Have you ever dreamed of making a series of huge wins and having all your problems solved? It may be enjoyable to occasionally dream of how you’ll solve all life’s problems by making a few million dollars trading the markets, but it’s unlikely to happen. It’s hard to make that kind of money under most market conditions and without sufficient investment capital. In the end, that kind of thinking will just get you discouraged. It is vital that you identify such flawed plans and develop more modest and realistic goals.

In setting goals, it’s important to have realistic expectations. Trying to make huge profits quickly is unrealistic; modest goals are more realistic, and thus, more satisfying. Yet most novice traders reject modest, achievable goals for ones they can’t possibly achieve. Since their expectations are often unrealistic, they fail quickly, feel disappointed, and just give up. Examples of unrealistic goals are trading with an insufficiently funded account that can’t possibly cover drawdowns or fees and commissions. They may also trade with unreliable trading strategies and expect to make a profit even as new market conditions make their methods obsolete. It’s not only impossible to achieve unrealistic goals, it creates a great deal of stress, which itself can produce trading errors. Setting more realistic expectations eases some of the pressure and helps you build up sound trading skills.

Many novice traders also underestimate how long it takes to achieve sustained profitability. For example, they assume they can trade profitably in a matter of months, whereas seasoned traders emphasize that such consistently profitable trading may take several years. And it’s hard to achieve. It requires a heroic effort, yet many novice traders think only minimal effort is needed. For example, they may think they can trade profitably by treating trading as a hobby rather than as a serious business. They over-estimate their ability level. They overconfidently think that they have the skills and abilities that they do not yet have. Don’t ever underestimate the tendency to be overconfident. Conquer the tendency to trade beyond your skills by cultivating a sense of healthy skepticism regarding your trading skills and your trading strategies. Be realistic about what you can actually achieve.

In the end, it’s important not to get your hopes up too high. Just like Stan who wants to achieve bliss through trading, novice traders think they’ll make more profits than they can realistically see, or they believe that when they achieve huge profits, all of their life problems will be solved. They may believe their spouses will love them more (or they will find the ideal romantic partner). They believe they’ll achieve the recognition and respect they’ve been searching for their whole lives. But these expectations rarely materialize. And even when they do, they fail to meet one’s expectations. Motivating yourself by fantasizing about these potential rewards will likely fail in the end. The only way you’ll achieve profitability is by setting realistic goals. You must accept the fact that trading is just plain hard work. You’ll have to put in a heroic effort to achieve success. With enough persistence, hard work, and determination, however, you will build up the skills you need to become a consistently profitable trader.

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