| What can I expect to make my first year of trading? | | | | those unrealistic expectations. |
| We get questions like this one quite often. We find that | | | | 1. More traders lose money than make money. The |
| most aspiring traders don't have a clue as to what to | | | | figures are fuzzy, but it is 80% to 90% (maybe more) |
| expect from the market. Yet here they are, putting up | | | | who end up losers and leave. |
| their money. Most are going to learn the hard way. | | | | 2. Within the industry, only a small percentage of retail |
| We have no idea in the world what you can expect to | | | | traders are profitable on a consistent basis. Moreover, |
| make in your first year of trading, or any other year, | | | | if you are just starting out, you should expect to incur |
| for that matter. What we can tell you is that without | | | | some loss strictly due to error on your part as you |
| proper guidance and help, you are probably going to | | | | climb up the learning curve. Increased trading |
| have some very bitter experiences. Why? Because | | | | knowledge and experience combined with trading |
| your anticipations are almost completely wrong. | | | | strategies that have superior risk/return characteristics |
| Futures traders, especially beginning traders, often | | | | can help put the odds of success in your favor. So, it is |
| open an account with unrealistic expectations of | | | | important to study the markets and educate yourself |
| trading performance. These expectations could be | | | | before trading or, alternatively, you can rely on the |
| formed by the sales literature for a trading program | | | | support of your broker professional. Another option |
| that emphasizes its profitability, by reports of success | | | | you may also want to consider is paper trading. It's a |
| stories by top traders or by some brokers within the | | | | viable option because it's a lot cheaper to make a |
| industry. In all cases, you are rarely made aware of the | | | | mistake in a fictitious account than a real one. |
| many other times when performances were | | | | 3. You will have losing trades. In fact, most of your |
| considerably worse. In other words, you are a victim of | | | | trades will be losing trades. It is impossible to predict |
| selection bias. | | | | price movements every time. Even when the technical |
| Most advertisers of courses, systems, books, etc., will | | | | and fundamental factors are in agreement, the market |
| mislead you into thinking that you just can't lose if you | | | | often moves in an unexpected way. This can even |
| buy what they are selling. We are talking here about | | | | happen several times in a row. For this reason, it is |
| hype, major hype - as much as the authorities will | | | | always important to make sure that loss is limited on |
| allow them to get away with. | | | | every trade and that you have sufficient trading capital |
| Selection bias is a term well known within the social | | | | to withstand several losing trades without being taken |
| sciences and occurs whenever some undesired | | | | out of the game. |
| screening factor leads to a misrepresentation of a | | | | 4. Don't expect to become financially independent. It's |
| population sample. For example, traders seldom | | | | unrealistic to expect a small-sized account, especially |
| express their losing trades with as much enthusiasm | | | | one under $5,000, to generate consistent income to |
| as their winning trades. Consequently, a random | | | | replace regular employment. While this may be |
| selection of letters or phone calls received by a | | | | possible for a very low percentage of traders, it does |
| company that sells a trading program often will | | | | often require high-risk trading. High-risk trading means |
| overstate the proportion of traders who are doing well. | | | | that if you are one of the many who lost money, then |
| Sometimes the cause of the selection bias is not | | | | you probably lost your money very quickly and you |
| obvious. For instance, let's say that a trader who | | | | may end up owing even more money to the clearing |
| purchases a very expensive price and charting | | | | firm. High-risk trading should be avoided, especially by |
| package is more profitable than another trader without | | | | the beginner. Rather, concentrate on low-risk, |
| it. The merits of the package seem obvious. Maybe | | | | low-frequency trading and devote appropriate effort |
| not. It could be that the individual who can afford to | | | | to increasing your knowledge and understanding of |
| purchase the package is better capitalized than the | | | | futures trading. |
| other trader and this is the reason for the better | | | | Keep in mind that, as a beginner the emphasis should |
| performance. | | | | be on learning and proceeding slowly. By that, I mean |
| Starting off your futures and options trading | | | | practicing in a paper trading account and confining your |
| experience with unrealistic expectations inevitably will | | | | trades to those that have low risk. The expectations |
| lead to frustration and disappointment. It's better to | | | | of huge profit that many beginners start out with may |
| face reality now. It will make life as a trader easier | | | | be realized, but only after you invest the requisite time |
| down the road. Here are just a few facts to dispel | | | | and energy and only after a slow and realistic start. |