BarroMetrics Views: Unrealistic Expectations
The other day I participated in a forum on why so many traders fail. The agenda was to go beyond the truth that so many trade without a proper foundation for ‘Mind’, ‘Money’ and ‘Method’. I suggested that there were two underlying reasons:
- Most failures came about because traders entered into the profession with unrealistic expectations of what it takes to succeed….the necessary investment of time, effort and money. And,
- Once the ‘easy money’ illusion is shattered, an unwillingness to pay the price necessary for success.
In some ways, a newbie cannot be blamed for having unrealistic expectations. Just look at the hype we receive …hype that proclaims 80%, 90% and above win rates, a mere 1% per day profit (200% pa) etc.
A story to illustrate…….
Last year, my personal trainer asked me what I thought about a software that produced day-trading signals that ‘guaranteed’ 80% win rate, and a 45% pa ROI. I told him I’d be happy to have a look at it, but that I was skeptical.
It turned out, his niece had been retrenched and had decided to enter the stock market. After reviewing the software, I advised her to go elsewhere. Course she paid little heed; she is no longer trading, having blown her account.
On the other hand, the hype environment does not excuse the newbie from performing a thorough due diligence. In this respect, the newbie of today is a far better position than the newbie of old. In the days of pre-internet, due diligence was much, much harder.
If unrealistic expectations should be only a temporary problem, the question that naturally arises, is why has the dismal failure rate not improved – given the improvement in technology and learning theory?