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"5 Considerations When Trading: Expectations vs Reality"

This is an interview/conversation performed over Easter 2024 - if you are struggling this article is for you. - Trading can be very profitable but you need to have the right mind set and guidance.

A conversation that I've had with a lot of other traders, and tend to keep having, is relating to expectations and how people are completely naïve about the reality of what this journey is going to look like.

The False Idea

Everyone is sold on this pumped-up idea of getting rich from trading, driven from social media and ads of these young kids sitting in front of a Ferrari or a Lamborghini. Or they've been sold this false idea that they're going to get a 200k or 500k account from one of these fake prop firms, but they have to pay for it, right? Which is mind blowing to me. You have to pay to have the chance to get into a prop firm! Really? Where the dissonance with that is that you've got to earn your way to that type of thing and earn that ability of becoming a prop trader or an elite trader.

The Reality of Expectations

A lot of traders are not ready, but they think they are. The problem is; you can do very well on demo because you don't care about the money. But as soon as it involves real money, especially with a legitimate prop firm, you're going to have a lot of cognitive biases, you're going to have a lot of behavioural issues that will creep in.

It’s impractical to think you can go straight from demo to trading half a million dollars, especially with an envelope of restrictions like 10% loss or 10% gain requirement.

You need to have the wiggle room. These prop firms want you to fail because they want to collect your $250 or $500. They're banking on the fact that you'll fail.

A lot of my traders have experienced this. Because, when you've got an expectation of being a hot-shot trader and come into this game with a massive ego – and remember, all ‘ego’ means is “preservation of self-identity” – and you think “I'm going to be the number one trader within six or twelve months”, the reality is - you’re setting yourself up for failure. When it all comes together and you're in the trenches firing away on a big account, and you fall over, what happens to you?

Your ego gets damaged and then you go into depression mode. That’s when you start to make all the common mistakes – overtrading, FOMO, revenge trading, moving your stop, etc. There’s a fantastic quote from Mike Tyson; “everyone has a plan until they get punched in the face”.

And it is so very true.

You've got a plan, and this dream of becoming and being this superhero, and it just doesn't happen. What I try and teach all of my trainees is to break their black and white thinking. Realign their expectations, aspirations, and their goals. And let's be realistic - if you’re trying to be that guy that's sitting next to a Ferrari on the internet. It is not going to happen until you correct all of your behavioural short comings and psychological positioning.

Be Realistic

A lot of new traders also don’t realise that the guys that are actually earning millions from this aren’t trading on $200,000 accounts – they’re managing massive portfolios.

  • You can't make and decent money in this unless you've got at least a hundred thousand US dollars in your account. 

  • You cannot replace your income with a $10,000 account, if you are trying this then you are over leveraging and you will blow the account. This can only really be done if you're already a highly elite trader.

If you've got a $10,000 account and you’re trying to make $10,000 a month, you essentially have to double it every month... Seriously, what planet are you living on if you think you can accomplish this? My accounts are $300,000 – that's my personal account. And I can maybe double it in a year, IF everything went well for me.

If you're thinking to yourself that you want to replace your income, and to do that you need to be making $1,000 per week to survive, what's going to happen when the market doesn't follow your strategy and you're not making that type of return per week? What is your backup?

When in drawdown, a lot of guys will go into depression mode where they change their system, flip strategies, overtrade, do whatever it is that they're doing, which is going to be counterintuitive to what they should be doing.

What they should be doing is having a 6-month and a 12-month overview of their performance. For example, I might double my account one year if I'm lucky. But the second year I might only make 30% because I had a couple of months of drawdowns.

Trading income is non-linier.

It's not always upside. And I see this all the time on these social media ads, that promise to replace your income – it’s not true. You've got to see this as business flow – some months are going to be good, some months are going to be bad, some months are going to be average.

If we just take a mean of the entire equity curve, throughout a 12-month period, that is a representation of reality.

Euphoria & Depression

We’ve spoken about this our Discord channel. In the middle, you're calm, collected, process-driven – you have no attachment to the money. This is one thing that I teach all my trainees; how to remove your attachment to money. You can't see losses as “that could have paid half of my mortgage”, or “that could have taken all the family out for a really nice dinner”.

You can't think like that. If you lose two or three thousand dollars in a trade, you've got to just move on and have no personal attachment to it.

I experienced this with a trader just recently, where he's been doing very well, but now I can tell that he's really excited. I can see what he's thinking in his head. “I'm paying off my house and buying myself a Lambo, I’m unstoppable!”.

You've got to catch yourself in that moment where you're completely euphoric, and bring yourself back to that calm, process-driven state. Because that time is not going to last. 

One of the biggest traders that I know, Tom Hougaard, hasn't made a cent this year! But he usually makes around £300,000 a year. You've just got to keep going, you've got to keep yourself centred, especially when you're in a drawdown. You can't be controlled by your own personality.

One thing that I teach my trainees is how to have self-reflection, realistic expectations and goals so that they don't fall into the trap of depression or euphoria. Because when you start getting depressed or euphoric, you start getting frustrated, angry, delusions of grandeur. You start changing the system, trying to find other solutions or trying to beat the market.

The biggest lesson that I've ever learned from trading; it's how to deal with myself.

Understand The Process

The other day, one of my traders was blown away when I took a couple of losses while I was trading live in front of everybody, I was nonchalant about it. I didn't care because I knew that if it's not today, it'll be tomorrow, or it'll be Thursday, Friday, or it'll be another day – I'll end up coming back up. 

You've got to be completely removed from the money, removed from your losses – you don't have to win. And there is an amazing book that I read called “What I learned losing a million dollars”, by Jim Paul.

Basically, he says that human beings associate loss with failure. And associate win with success.

In trading, you can't think like that. Losses are just part of the game. Wins are just part of the game. Losses are just a learning experience, but also just a part of the process. It's about how you control the losses and how you react emotionally toward them.

Another really good book I recommend is “Learned Helplessness” by Martin Seligman.

Because, unfortunately, when we do something and get beaten down one too many times, we kind of just give up. But the thing is, we can't, and it is possible to undo learned helplessness to make it learned optimism.

This is what we do in the training – we get everyone to learn our strategies, then we work on you as an individual. We go really deep into who you are, how you react, what your trigger points are, and develop these skills to turn you into a profitable trader.

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