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Tales of a Technician: Realistic Goals

June 22, 2021

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Some enter the trading realm on the wings of high hopes and wide-eyed optimism. Big-league returns are potentially in the offing and these go-getters want to grab their share. Watching their enthusiasm from afar is inspiring and it makes me want to throw every tip and trick that I know of at them to increase their chances of reaching their lofty goals.

Sooner or later, however, some discover their aspirations were a bit too ambitious. Through the school of hard knocks, they realize their expectations must be re-calibrated. How they respond to the hard, cold truth that their expectations were unrealistic is critical.

As an example, suppose someone was shooting for a 5% return per month. They soon discover they lack the skillset or risk tolerance (or both) to accomplish such an epic return. Reality demands they lower it to something closer to 1%-2% per month.

The Unproductive Path

The worst response is quitting. Think about it. Just because you can’t get 5% a month doesn’t mean you should make a decision that guarantees you get 0% a month. Because that’s what you’re getting when you quit. You’re relegating yourself to whatever the generous banking giants decide the peasants are allowed in their savings accounts. And, I hate to bring up the most depressing topic of all time, but even when you’re getting 1% or 2% a year in your savings account, you’re still losing out to inflation. Go read this month’s Trading Justice Newsletter if you want to really understand this.

I don’t know about you, but having the potential to capture 0.5% to 1% a month sounds loads better than sitting in cash.

So, don’t quit. If you want to be mad for a bit or get depressed, go for it. But after a week, come back and get to work.

The Productive Path

Focus on what you can control, not what you can’t. My first year of trading was pretty good. But it was partly a matter of being in the right place at the right time. As a result, I had unrealistic expectations about what was possible. Once this became apparent, I pivoted. I increased my savings rate and invested more. This allowed my account to grow larger so that the same percentage return delivered a bigger payday. For instance, making $1,000 on a $10,000 account is a 10% return. It’s not that easy. Doing the same on a $100k account only requires a 1% return. It’s a cinch.

Rather than getting depressed that I couldn’t consistently create as high of a return as I wanted, I focused on building the overall account balance so I didn’t need to!

It saddens me that people come to the markets with a gambling mentality, get washed out, and sit in cash for years before realizing the folly of not investing in some fashion. Shooting for sky-high returns requires taking too much risk. And taking too much risk usually translates into blowing up an account. And, to state the obvious, when you torpedo an account, not only do you not get 5% a month, you don’t even get 1%.

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