Is This Subtle Issue Hurting Your Bottom-line?

It’s not always about the big things. We do so many complex and painstaking things to work on our trading, but sometimes it’s the subtle changes that can make a big difference to our bottom-line. And what’s more subtle and seemingly innocent than having expectations?

As traders- and human beings for that matter- it’s very hard to not have expectations. Each time we get in a trade it’s natural to fast-forward in our minds and think about the profits we could make. Each time we sit at our trading desk it’s natural to have expectations about results. But what if having such expectations is hurting your bottom-line?

The Problem and Its Consequences

If you’ve read this blog for a while now, you know how I like sports analogies to apply to my trading. Here’s a quote from the great Golf psychologist Bob Rotella:

I have never worked with a golfer who could play anywhere close to his potential unless he shed his expectations before he walked on to the course. Expectations can hurt you immensely if you are focused on the results of a particular stroke, hole or round. Why? You keep judging how well you are playing against how well you expect to do. You get angry at yourself and tie yourself up in knots. You lose the simple joy of the game. If you must have expectations about results, expect to make mistakes.

This is a great quote. As it says, the problem is that having expectations causes you to become results centered. And being results centered in trading will kill your bottom-line. Let’s assume that you think this day will be a large breakout day that will trend all day long. It’s definitely fine to expect this if the market is showing you signs for its potential. But the problem occurs when you start expecting and looking forward to the great profits you’re going to have. Now you’re no longer process-focused. And so if your first trade happens to be a loss, it’s going to affect you more than usual. Now, not only do you have to deal with the normal emotions of losing, but you have to deal with falling short of expectations. You’ve created a gap between your mind and reality, and you’re naturally going to feel worse because of it. You’ll also feel like you’ve failed and that it’s not acceptable to fall short, and you may become more aggressive and take unwarranted risk. Often, what was just one loss or missed trade becomes your unraveling point because you expected so much better. But what if you didn’t expect?

An Elegant Solution

The problem with expecting is that it’s almost impossible not to expect. If you trade trend days well then it’s natural to expect big profits when you think a trend day is coming. So how do you not do this and stay focused on process instead? The solution is provided by Bob Rotella in the above quote. You can have expectations, but not the same ones you usually do. Rather, by recognizing that trading, like golf, is a game that will naturally contain mistakes and ups and downs, you can expect that. And now if you have a loss, it won’t be something that breaks you down because you were expecting ups and downs. And if you miss a trade, you won’t beat yourself up so much because you were expecting to not be perfect. After all, it’s the nature of the game.

You see it’s all about where we focus our thinking. If we can’t help but to expect something, then instead of trying to get rid of expectations that hurt our bottom-line, we can shift their focus to something that helps it. And what will help your bottom-line is expecting ups and downs and being ready to deal with them from a positive mindset. Now your thoughts aren’t about how much money you’re going to make, but about how well you’re going to deal with the inevitable setbacks during the day. And a funny thing happens when you’re in that state of mind. You make more money. You’re focused on correct trading psychology and correct trading process, and you naturally trade better. And your expectations are now the driving force behind a better bottom-line instead of the thing that is making it worse.

Watch Yourself

Like I’ve said numerous times before, there is a power in self-awareness. Watch your mind and try to catch expectations about results as they arise. Don’t judge yourself about them or try to push them away. That will only make them linger. I know this because I’ve tried this in my own trading. If I try not to expect, or to avoid it, it stays in my mind. In fact that’s the case with anything you want to avoid. The more you resist it the more it persists. So instead just watch it non-judgmentally and then choose to focus on something else. Expect ups and downs and expect to trade great through them. Expect to trade well, and to bounce back well when you don’t. This will keep you focused on the right things.

I faced this issue in my trading when I’d expect the huge profits that are going to be mine when I thought a big trending move would ensue. Thinking about all the profits I was going to have, I would find it hard to change my market view when the move was not materializing. The results expectation would create a mindset that made it hard for me read the market objectively. But eventually I learned to watch these expectations, know they’re natural (i.e. not beat myself up over them), and start expecting myself to trade well or handle adversity well when I don’t. In this way, I would end up either trading well, or bouncing back really well from mistakes which would then end up allowing me to make good trades despite the setback. In this way, I took a subtle weakness that was damaging my bottom-line and turned it into a strength. And whenever you can do that, the money will follow.






  • som

    Hi Ziad, this is more like a “Aha” post & another Nugget from Opentrader. Have read this 3 times already. What you are talking about…. seems to be a very spiritual experience in trading.. Wow !!… This is a very vital point & seems to be extremely subtle. Will be very watchful as I see myself so precise that the win % is very high…but the pocketed % is less….i think i realize after this post why so.

  • Awesome post again, Ziad. It is exactly what I need to realize in current situation. I have read about this issue in Dc. Steenbarger’s book. These expectations work in our subconsious and are very powerful. Trader must focus on process and not the results. This really helped me. Just focus on market not counting how much I gain or lose and how much I can make in near future. Also good tip to avoid thinking on PnL and money results is to keep records of trades in points or ticks rather than in currency.

    • Yes keeping records in terms of points (and R-multiples) is very helpful, and it’s also good to never look at your P&L during the trading day. It serves no useful purpose at all.

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