Profit expectations in forex trading

While creating a trading system, most forex traders include a monthly profit. In the natural business sense, this is a good thing to do, but in this scenario, it is not. The business of forex trading is different. Even with an excellent trading system, there are no guarantees.

The average businessman knows all the variables he needs to factor in and exactly how much of his products he needs to sell to make a certain amount of money in profits but a forex trader has very little control on what he is going to make at any point in time.

For instance, a good trade can turn to a bad one with a single tweet on social media from a president or prime minister. This makes having monthly profit expectations in forex trading a waste of time.

Advantages of having monthly profit expectations in forex trading

The monthly expectation helps you to develop a sense of focus.

It removes the need for you to be in the market continually. This is because you can afford not to be in the market, knowing fully well that you are just a few pips away from your target or that you have hit the target already.

Disadvantages of having monthly profit expectations in forex trading

Having a monthly target does not allow you as a trader to maximise your trading strategy fully. This is because you need to take all signals generated by your strategy to keep the statistical edge in your favour.  This is the best way to offset any lost trades in the past and equally have a cushion against future losses.

When you have an unreached target towards the end of the month, you will be tempted to increase your position size to reach it as quickly as possible. This may end up leading to further losses.

There is also, the danger of having unrealistic expectations in your trading.

So What Now?

Some forex trading courses say that traders without monthly profit expectations in forex trading are not taking their trading seriously, but this is not true. Here is a scenario. During months when the market is in a range, you may end up at breakeven level or even cut into profits of the preceding month as a trend follower.

 If you still maintain the target policy for the next month and the month ends up as a highly trending month, you may only end up recovering part of your account instead of recovering fully and making extra profits.

So in your trading, your primary concern should be getting a profitable trading strategy. Once you have your trading strategy sorted, you can then sit back and take trade signals as they come.  There is no guarantee in trading, so the only way to cushion the uncertainty is to make enough profits during the trending days.

When this is done, you will have enough to fall back on during the rough periods. Some months could give you 3000pips in a month using a strategy that should net you 1000pips usually. When such substantial moves occur in one month, the next month is often a ranging one.

The trader that got 3000pips from the last month will be in a better position at the end of the ranging month than the one that stopped trading last month after hitting a 400pip target thereby missing out on a further 2600pips.