In the Charles Dickens story of “Great Expectations,” the protagonist Pip (not the FOREX “point in percentage”) is given the opportunity to become a gentleman by an unknown benefactor; someone who had “great expectations” for him. He assumed it was from someone other than the actual backer, and upon discovering this, he felt disgusted, devastated and betrayed.
He proceeded to forego his “expectations” of becoming a gentleman, something he wouldn’t have otherwise become without the benefactor’s money.
It’s an interesting parallel we can apply to trading the markets. How?
Millions of people invest and trade in the markets with certain, and might I add, “great expectations.” Who doesn’t expect to make millions in trading the markets, or at least to make enough to quit their 9-5 job. Maybe the great expectation is just to have enough for retirement. We all want financial independence, don’t we?
But, then comes along the unexpected market event and POW! All of a sudden we have all sorts of feelings of devastation and betrayal!
“The market should have warned me it was going to go against me!”
As if the markets have an obligation to inform you of its future. Well, it can’t. No one can tell the future. And God, who I believe knows the future, isn’t going to tell you.
You can’t and shouldn’t expect the market to do what you think it should do.
But what you can and should do is manage your expectations. If you can make appropriate adjustments to your expectations, then you will less likely experience devastation of your trading, as well as mental capital.
How is this to be done? You still have high hopes, lofty goals and great expectations. These are a must in order to get through the rollercoaster ride that is trading.
Your great and grand expectations are quite important on the whole. They provide perspective and a reason to carry on when the going gets tough. You should add these to your great expectations if you decide to embark on this rollercoaster ride. There may be:
1. Euphoric highs and depressing lows,
2. Sharp turns and unforeseen corrections,
3. Slow ascents and quick descents,
4. Long stretches of capital plateaus,
5. And much more unpredictability.
As I stated before, I believe it’s imperative you have great expectations for yourself for your overall performance. It’s a hard road and you should have great rewards waiting for you should you endure.
However, if you do not temper your expectations, especially on that “next” trade, you will surely meet with disappointment and possible devastation.
Pip, in Great Expectations, decided to stop taking money to become a gentleman once he found out who his true benefactor was. At times, when the markets have done something unexpected and destroy one’s great expectations, they decide to quit altogether.
Don’t do it! Temper your expectations!
Don’t expect every trade to be a winner. Don’t expect to be right 100% of the time. Don’t expect to never have a losing trading. Don’t expect to make a million dollars on one trade (although be sure to welcome it if that does happen, right?). Don’t expect your equity curve to mimic a parabolic curve with zero draw-down.
This is what you should expect:
EXPECT THE UN-EXPECTED!