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Avoid this Trading Goal

Whether you are new or a veteran of the markets, goals have their time and place without question. However, in some instances, a goal can actually be counterproductive and work against you as a trader. I want to cover a goal that I see often which, given some limitations in the market, is essentially impossible to keep pace with.

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Transcript:

Yeah you're gonna want to be careful with this goal.(flash sound)First off if you have this goal if you've thoughtabout maybe implementing the rule,you're not an idiot, you're not stupid,you're not being illogical.In fact I would say it's a very good solid goalit makes sense when you're looking at numbers,when you're looking at the math straight out of a textbook.But that's all theoretical math,and what gets a little bit lostwhen it comes to the markets in tradingis well that's all occurring in the real worldwhere some variables of the mathare gonna change things upand essentially work against you within the goal.And this is important and why I wanted to cover itbecause I don't want you to thinkthat you're not doing well as a trader,or you're not meeting your full potentialbecause maybe you're not hitting these sorts of goalsthat you set for yourselfwhen in all actuality you're doing fineit's just that the math gets more difficult over timeand I'll explain what I mean by that.But the whole goal here that a lot of people haveand there's nothing wrong with it at all isI, well there's nothing wrong with itin the sense of it makes sense a hat.But I want and let's just go with 5% per month.So I mean there's nothing greedy about that 5%I like to try to grow my account 5% every single month.And you can put in anything in regardsto their obviously the higher that percentage goes,the more difficult it becomes.But the way the math actually works outdue to the market is gonna make that very very difficultand I'm gonna take extreme examples to really just showhow the math becomes more and more difficult.So let's say your accountis $ 1,000.I want to make 5% of that per month.Well 5%on that is well you got to make $50 okay.So you got to make $50 with $ 1,000I don't wanna say it's easy to dobut it's very realistic to dogiven the overall context of the market.What do I mean by the market?Well that's where our next big point comes inbecause down below all these goalsand math is the market itself.And the thing you need to realizeabout the market is that it is limited.It is limited in volume.Meaning there's only a certain amount of exchangingof shares of exchanging of whatever you are tradingoccurring per day now in the American marketsthat is a very very very large amountbut it's still an amount where depending on your strategyit is going to influence things as the math progressesand I'll get with thatbut remember key word being limited.If this was infinite then this math would justit would totally work out and you could justkeep going and going and going.But let's say you do to this,so you take yourlet's go with this coloryou take your $ 1,000 and you grow itand you grow it and you grow it.Anyway you keep you in $ 50 so you throw that inand all of a sudden this is at$ 10,000.Well again 5% on thatis going to be $ 500.So you've made $ 500 on the 10,000.So still tenth out but you wantto keep going 5% per month, per month, per month.Well let's just say eventually that gets up toone trillion dollarsagain like I said I'm gonna take this to extremes.To still aim to get 5% on one trillion,it's not gonna happenif you have to get those sorts of returns,it's just not going to be possiblebecause the market is limitedand I realize you could be saying well clayand I'm never gonna have a trillion,you could do that with a million,you could do that with ten million.Like I said it really depends on your strategybut if you think that you're gonna have50 million, let me put it this way,if it were that easy 'causeyou'd have a valid point saying well claysure that the numbers that you need to generatekeep getting bigger and biggerbut the amount you have keeps getting bigger and bigger.Fine that's totally totally valid.However, look at the hedge funds,look at people that havebillions of dollars of assets under managementand look at if they're getting 5% or 3% per month.Think about it, 3% for the year would be 36 % yieldhedge fund managers would murder their own motherin order to get those sorts of returnsand that's only 3% per month.But when you have those huge amounts of money,it just becomes more and more difficultto generate the corresponding profitsbecause of the limited nature of the market.Same with let's just say I could you know changes upand say you know what, I want to get 50 % per month.Now, when you're working with $ 1,000,I mean that would be I got $ 5,000which is possible if you trade certain thingsthat is possible nowit's a whole other debate onif you're building bad habits doing that'cause you're probably going all in on thingsand so that I'm not saying the habitsbeing built aren't good but let's just saythat is possible to get 50% on $ 1,000but hopefully you see thatokay, let's say you have a million dollars,really you think you're gonna get 50% on a million dollarsyou think you're gonna be able to generate $ 500,000.It's not gonna happen because the markets are limitedand there's things that have to do with liquidityand stuff like that that just make this more difficult.So just keep that in mindand keep this that it's not,it's a decent goal tool pointand where that point is,it depends on your strategy and there'slots of strategies out therebut just realize that at the end of the day,if your account is growing.If you're losseswhen you do have them you will have themthere's no way around that but as long as those lossesaren't totally wiping away all of your gains.So in other words as long as your accountis doing something like this over time,then yeah like I said losses are gonna happenbut as long as those lows keep getting higher and higherthat's what your goal should be.Not I want an X % because that's gonna startto deceive you after a while when you don't hit itand it's not necessary that you're doing anything wrong,it's just the way the math is workingbecause of that limited nature of the market.So be very careful with that goallike I said I would argue the best goal is justto build good habits and as long as your accountis growing over time and as long as lossesaren't wiping away all of your gains,then hey that's the goal you what you should be focused on.If you are out there trading alone currentlyand maybe are in the market looking for a communityto join to assist you in your trading or to just help youyou don't give you another set of eyeballs,then I do have a private trading communitywhere you can trade alongside meand other experienced traders.So what you see popping up on the screen right nowis both an information linkso if you click on the inner circle one,that is going to take you to the pagewhere I explain all the details of what exactlycome with the community both the chatroom and the newsletterand then the other image that is popped upis a behind the scenes tour where you can see exactlywhat is going to you know be contained within the community.I take you through like I said,behind-the-scenes tour of everythingand that way you'll know preciselywhat you are getting when you join.So definitely check that stuff out if you are interestedand thinking about you don't want it to join a communityand let me know if you have any questions.

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How to Kill Your Stress, Fear, and Frustration as a Trader