How much money can I make?

Many independent traders come to trading with preconceived ideas about how much money they can make (I’m sure all the ads promising you can make X number of points, ticks, pips, dollars per day fuels this notion). But as anyone who’s been trading for a while knows, how much money one can make depends on many factors including the viability of your trading strategy, how you manage risk, how well you manage yourself, and whether the current market conditions and your strategy are in synch.

Now, I have no empirical evidence to prove what I’m about to tell you, but I wanted to share an interesting observation. What I have found is that as long as this idea of ‘how much can I make’ is playing a dominant role in one’s thinking, it is often associated with not being profitable. And, very often, right around the same time that someone becomes profitable, the ‘how much can I make’ thinking disappears or decreases. Caveat: When the ‘how much can I make’ thinking re-appears, perhaps after a nice winning streak, it is often the prelude to a drawdown.

Here’s another related observation I wanted to share. Some seasoned traders have had the experience where they made good money for a period of time, and are now swinging for the fence, hoping that this next trade will be the big one that resembles something from the past when they were making money. I’ve seen this particular phenomenon across all levels, pro and amateur, large and small. When the swinging for the fence stops, and the trader resumes a focus on doing what’s right, as opposed to being right, that is often the prelude to a new period of profitability.