Having expectations as a day trader can be counterproductive:
1. Overconfidence and Bias:
– We expect a certain outcome & become overconfident, leading to biased decision-making. This can result in disregarding important signals that contradict our expectations.
– Example: You expect a stock to rise after a positive earnings report. Despite seeing signs of market resistance or a broader market downturn, you hold onto your position, ignoring warning signs.
2. Emotional Attachment:
– Expectations can create an emotional attachment to a trade, making it harder to exit a losing position or take profits when needed.
You may become stubborn, refusing to acknowledge when you are wrong & holding on to positions for too long.
3. Lack of Flexibility:
– Rigid expectations can prevent you from adapting to changing market conditions which can lead to missed opportunities or unnecessary risks.
– Example: You expect a particular pattern (e.g., a breakout) but when the market doesn’t behave as expected, you fail to adapt and continue trading based on your initial plan, which no longer aligns with market conditions.
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4. Unrealistic Goals:
– Setting high expectations for returns can lead you to taking excessive risks, cause you to overtrade, chase losses, or enter trades without proper analysis.
– Example: You set an unrealistic goal of doubling your account in a month. So you start increasing position sizes and taking riskier trades.
5. Focus on Outcomes Over Process:
– Expectations can shift focus from the process of trading to the outcome. Successful trading involves following a well-thought-out plan and strategy rather than focusing on whether a single trade wins or loses.
– Example: You expect to make a profit on a particular trade and become overly focused on that outcome.
This can cause you to deviate from your strategy, such as moving stop-loss orders in the wrong direction or ignoring exit signals, leading to poor trading discipline.
