We all start trading for 1 reason - to make money.
And usually when we start you will ask yourself "What can I realistically make my 1st year trading?"
Pretty normal question to ask when you just start out I would say.
I often find that most wannabe traders don't have a clue as to what to expect in terms of profit from the market. Yet there they go, investing their hard earned money day in and day out. Unfortunately most of you are going to learn the hard way - hell I did.
To be blunt, I have no idea in the world what you can expect to make in your 1st year of trading. And you can never really command or assume to much when trading.
What I can tell you is that without proper education and a solid trading plan you are probably going to lose a couple years worth of income.
What Are Some Realistic Expectations?
Every trader, especially beginning traders, opens their account with unrealistic expectations what their possible future performance might be. How much they will make in profit or return right.
But where are they getting these numbers from? Just because someone traded 1 penny stock 5 years ago does not mean that a 454% return is normal, or even expected.
I've even have people ask me point blank if making a 25% return each month is reasonable - um let's see. . . NO!
This goes for options trading as well. I see sales pages all the time that show you 200%+ returns on some cheap options they bought.
But what they don't tell you is that those trades happen once in a while and are not consistent. Maybe they did make 200%+ on a trade, but that doesn't happen all the time and to set your expectations that high would be very ignorant.
Starting off your trading career with unrealistic expectations inevitably will lead to failure.
Trust me, it will make things much easier down the road.
Want To Hack The Learning Curve Your 1st Year?
Let's stop talking about how much you'll make or not and start focusing on education.
Here's a podcast we did a while back that might help you put together a game plan for hacking the options trading learning curve in 3 months.
We layout the complete framework here and in the show notes page so that you have a complete guide moving forward you can work with.
Need Help Making Realistic Goals?
Here's a quick list of some things to consider as you write down your expectations and goals.
1. More traders lose more money than they make. The figures are a little off depending on who you talk to, but it is 80% to 90% (maybe more) who end up losers and leave the business altogether. So figure out why they fail and learn to avoid the common mistakes early.
2. Only a small percentage of retail traders are profitable. The numbers get even smaller if you look at a 3-5 year average which measures consistency. Don't get discouraged, we all fell off the bike before we learned to ride it right? If you are just starting out, you should expect to incur some losses as you climb the learning curve.
3. Paper trade first with a small amount of money. I always tell my beginning coaching students to paper trade everything first. This way you learn how to enter orders, adjust trades, and more importantly learn you're your mistakes without losing real money. Then when you are ready to invest real money, keep it small. If you can't trade profitably with $1,000 how in the world are you going to make it with $100,000.
4. You will have losing trades. Again, I see too many people quitting after a streak of 4-5 losing trades. What, you didn't think this would be a walk in the park did you? Come on people, losing money is part of the game. It's how you manage your losses that make all the difference. Besides, it is impossible to predict price movements consistently (which is why our strategies don't need the requirement for success). Listen to the technical indicators, control your emotions, and above all...preserve your capital!
5. Don't expect to become financially independent. Don't you think it's completely unrealistic to expect a small account, say under $5,000, to generate consistent income to replace your regular job? I sure do and anyone who has done it in a year wouldn't be reading this blog. Rather, concentrate on low-risk, low-frequency trading with income-oriented trading systems. Hit singles instead of home runs.
What Were Your Expectations When You Started?
Don't be shy on this one. I'm sure we all had some pretty crazy expectations before the market knocked some reality into us.
Add your comments below and share your "beginner" expectations, however crazy they might have been!