Trading is like life in general. As your expectations and ambition grow more prominent, the more risks and sacrifices you need to make. So, you need to set a goal. You need to know how far you want to go and how much you want to achieve. It is no secret that traders trade not just for fun. Well, it can be fun, but you trade first because you want to make money and profit. However, when you say that you want to make money, how much money are you pertaining to?
Once you can name how much you would like to make, you will need to answer another question. Are you willing to take risks for your goal? If yes, how much? These questions play an essential part in a trader’s life because your trading style, the currency pairs you will use, the trades, and all the risks you are about to make somehow depend on them.
Choosing a goal
For instance, you deposited money into your account balance. Now, you pause and think about a goal. How much money do you want to generate from this deposit? Is it 100% more or lesser?
You think about two scenarios. In one scenario, you want to generate at least 30% out of that deposit. On the other hand, you also think that you want to take it further where your goal is to double your deposit at least. It means that you want to earn 100% profits. In this situation, you start to weigh all the facts. If you chose the latter, you have more risks to take, and you need to place more trades than you would if you only expect to generate at least 30% returns. As we know it, trading means that more risks are almost always synonymous with more potential losses.
Drawdowns and traders
There is a term called drawdown in trading. If you are not aware of what it is, it refers to the distance between the highest and lowest peak that your account can get. Let us take into account our previous example. Before deciding whether you want to double your account or just the 30%, you must think about your current finances. Then, name a drawdown price that you are willing to accept if worse comes to worst. This drawdown must not break the bank just for the sake of quoting a goal profit.
Most traders who can only accept small drawdowns often choose a smaller goal profit. On the other hand, a trader with grand ambitions is willing to take a more significant drawdown. After all, if a trader is disciplined and determined enough, he can make it happen. However, we cannot also remove the fact that trading will always be unpredictable. It can also be shocking, and the occurrences can be way too sudden sometimes. Weigh all the factors. Prioritize.
Here is what you can do
Know how much time you are willing to dedicate your undivided attention to trading. This is a significant step before deciding about anything else. If you do not have time and are unwilling to commit, then it is most likely that your account will not double, let alone generate at least 30% revenue. Discipline is the key. No discipline is also equal to losses or inconsistent returns.