"Now, the biggest mistake I see people make when setting goals for
their trading is that they set money-oriented goals. And that’s a big
mistake because for a goal, to be set up for success, it has to be
entirely in your control. Making and losing money are not in the
trader’s control. If it were, then you could just say, I want to make a
million dollars this year, and you would be making a million dollars
What is in a trader’s control, is the quality of trades they
make or the work that they do beforehand. Just like in baseball, a
batter only has control over the pitches that he chooses to swing at.
Once he hits the ball, once the trader makes the trade, it is out of
that person’s control. It goes into the environment, there’s physics
that attack it, there are players out in the field that decide whether
the ball lands safety and the hitter gets on base.
In the trading world,
once you push the button, the world, the economy, the markets, decide
whether you are going to get paid for that trade or not get paid for
that trade. Then it comes back to you and you get a chance to make
another decision (called managing the risk of the trade). You get to
decide whether you want to add to that position or take the risk off,
but your job as a trader is not to determine whether you make money or
Your job as a trader is only to make high-quality trades
every single time. You have faith that if you consistently do the right
thing, then over time you will make money and have a successful career
I appreciate the interview from The Crosshairs Trader. The excerpt above does a good job of highlighting the new trader mindset.
I often get questions along the lines of:
- How much money should I expect to make?
- If I'm an average trader, how much will I earn?
- What percentage return on my investment should I seek every month?
No one has ever asked what's the best way to learn to make good trades. No one wants to know how to avoid the most costly errors. Beginners want to know how much they will earn when trading.
As Doug cleverly points out, the traders job is not to earn a specific number of dollars.
I'll go farther. The trader's main goal is to survive. To do that you must make enough good trades that you have a chance to earn some money. If you can do no better than make a series of trades in which the risk is far too high when compared with the potential reward and the probability of earning that reward, then the math is against you and your chances of survival are very small.
If you can get past that first barricade on the path to success, then proper risk management is essential. If you cannot pick reasonable trades, and if you cannot manage risk well enough to prevent a disaster, then there's not much hope. Sure, you can get lucky, but lucky streaks come to an end.
Make good trades [Good is not defined by whether the trade makes money]. Manage risk carefully. Do those two things well, and your chances of success are good. Do neither and you would do better to give your money to charity instead of attempting to trade.