Trading requires that you keep your emotions under control. You can’t be extremely disappointed or fearful. Extreme emotions can be distracting. They not only drain precious psychological energy, but they distract you from the task at hand. You can’t fully focus your attention on trading because, in the back of your mind, emotional issues gnaw at you. There are many possible reasons for experiencing unpleasant emotions, but one reason may involve the expectations you set for yourself regarding your trading goals. If your expectations are not in line with your current trading skills, you’ll be prone to experience extreme disappointment or extreme fear.


Common sense tells us that if we want to achieve success in life, we must set high standards. Indeed, how could one hope to achieve any amount of success by setting low standards? Ironically, setting standards too high can undermine our efforts, however. If we set our standards too high, we tend to fail. And when we “try and try again” to no avail, we often quit in despair. In actuality, it’s much more useful to set goals and expectations that match your particular skills. In a series of studies, psychologist Dr E. Tory Higgins has shown that when we fail to meet our expectations, we feel either fear or disappointment. People set expectations in two basic ways: in terms of what they want to achieve as an ideal, or in terms of what they think they “ought” to achieve. We continually judge our performance in terms of whether it meets our expectations. For example, we may feel that “ideally,” we should quit our jobs and work as full-time traders, a noteworthy goal.

Such a goal can be very powerful and motivating, but what happens when we don’t seem to be achieving it? A trader who isn’t trading well enough to trade for a living can use a form of “denial” in order to fool himself or herself into believing that the ideal goal is still within reach. Eventually, however, reality sets in. He or she may start to realize the goal is unrealistic. When this happens, the trader is prone to experience disappointment. He or she knows the goal is unrealistic and starts to feel unworthy and inadequate because his or her cherished ideal has not been met.

If, on the other hand, the trader had set lower expectations, such as making merely a few winning trades a year, he or she would have not experienced disappointment, an extremely distracting and debilitating emotion, and would have felt satisfaction (and would have probably traded more profitably as well, since he or she would not have been incapacitated by feelings of disappointment). Traders may also feel they “ought” to achieve a particular standard, such as achieving a 20% return. When we fail to achieve what we think we “ought” to achieve, we tend to feel fear. And as you know, fear usually leads to illogical, impulsive trading decisions, so it’s useful to do whatever it takes to avoid fear. Again, it’s useful to set personal standards that closely match our current skill level.

All traders want to be consistently profitable, but it’s essential to remember that success happens in stages. Few consistently profitable traders were an overnight success. They put in time and effort over the years to build the skills they needed to master the markets. If you set your aspirations too high, you’ll likely experience fear and disappointment. And that will adversely influence your trading decisions. Don’t let your emotions get the better of you, set realistic expectations and you’ll be able to cultivate the cool and objective mindset required to trade consistently and profitably.

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