CFD trading is a well-structured activity and part of each trader’s routine should be setting trading targets. We all want to make money, but exaggerated expectations are one of the main reasons behind overtrading, emotional trading, or other disruptive behaviors leading to a lot of retail traders losing money constantly. Knowing how to set trading goals is imperative especially now when the economic activity is sour and the prospects for the near term are extremely negative. So how should a trader approach this issue?
# Understanding the balance between risk and reward
Professional traders are good at finding a balance between the risk they take and the potential reward. Risk management is one of their most important skills and because of that, they lose less money when they are wrong + plus leverage their winning positions. Thinking about risk before being enthusiastic about the potential profit is one of the signs you will be maturing as a trader.
We are now facing increasing volatility across most asset classes, but few traders manage to realize the challenges arising. Finding opportunities in a volatile environment is not easy for a retail trader, mainly due to his lack of skills and preparation. Being when everybody else is greedy might be a better approach and will end up saving a lot of money.
# Choosing the right trading strategy
The second variable that will influence profit expectancy should be the trading strategy. Along the way we’ve talked about day trading, breakout strategies and many other approaches traders could choose. Each of them comes with both upsides and downsides. No matter your choice, the bottom line is that 100% accuracy won’t be possible and eventually we all will need to handle losses in trading. It’s important to note that during an economic downturn, some strategies like “buy the dip” won’t be as effective as they were one or two years ago.
# Having realistic expectations
On our last note, we should emphasize having realistic expectations. We can’t claim that all traders should not expect to make more than 10% per month. That’s not necessarily true, because, with higher risks, the profit expectations will be higher. The point is that believing you will get rich by outsmarting the market will turn out to be a bad choice. Remain humble and set your priority at least to preserve your purchasing power. Knowing your limitations will be a sign of strength and in the long run, will pay good dividends.