Warrior Trading Blog

Why Expectations Can Ruin Good Trading

Why Expectations Can Ruin Good Trading


Let’s face it. Trading is a thinker’s game but there are occasions when expectations cloud one’s judgment finally resulting in mistakes. One thing you need to know is that there is no right or wrong way when it comes to trading.

Yes, implementing trading strategies, creating watch lists, monitoring charts and monitoring the latest news are some of the ways traders use to ensure that they are able to take advantage of the market and profit from it.

Problem is when traders let expectations creep in and affect their thinking especially when it comes to decision making, not only will it lead to mismanagement but poor execution too. Just because you think a stock should go to a certain spot, doesn’t mean it will and this why adjusting to the conditions and price action is so important.


Learn to flow with the situation

It is common for traders to spend hours selecting the best trading strategy, creating watch lists, monitoring charts and news channels in order to capitalize on market discrepancies. Now, this is great as it helps to ensure that a trader is able to learn the behavior of different stocks and markets.

Problems emerge when a trader expects too much out of a stock move. Its one thing to have a risk/reward plan that is within reason when entering a trade but expecting a stock to move 40 or 50 cents every time from your entry is not highly probable. To achieve profitability, experienced traders have come to learn that changing with the market conditions improves the probability of making profits.

Just like in sports where psychology mentors help professional athletes to keep their head in the game in trading, traders need to avoid the practice of making expectations as this poisons their trading activities. Flowing with the situation helps traders to be less distracted and eliminates chances of being stressed when chasing profits.


Always ask question to help you make the best trading decisions

The best thing about trading apart from making profits is that it provides the best learning experience for investors and traders. Not only do traders learn the behavior of a particular stock but different markets too. Furthermore, different trading strategies implemented by a trader improves the chances of making profits.

If you want to become a savvy trader, avoid expectations. Instead, ask yourself if/then questions. For example, before you get in a trade you should have a few scenarios already played out in your head. If the stock closes under VWAP, then I’m going to get out or if the stock spikes on volume through highs, then I’m going to add to my position or if the stock moves 20 cents in my favor then I will move my stop to break even.

Not ever trade will go as expected and that is why you don’t want to force something that may never come to fruition. By asking if/then statements you will be able to develop likely scenarios that will help keep your expectations in line with more likely outcomes.


Final Thoughts

As a trader, it is important to know that there is nothing wrong with expectations. Problems arise when a traders starts setting unrealistic expectations and this can be attributed to wanting to make a lot of money.

What you need to know is that these expectations rarely become a reality. Problems escalate when this happens over and over leading to frustrations and disappointment plus resentment towards the market or oneself.

To ensure success during trading, learn to let go of things you can never control and always ask yourself if/then questions to ensure better decision making.


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