Expectations can be harmful to your trading. We ask all of our prop traders to set goals for themselves. I do for myself. Whether its for my trading or our trading firm. As John Wooden says,”make each day your masterpiece.” But goals often for the new trader are incorrectly results based and not process based. And I want to take some time to explain this important distinction.

I have noticed that my bounce trading has not been as strong as in the past. And that since we are seeing bounces more often these days I need some work on this. I was taught by absolutely one the best bounce traders in day trading history. This guy has made 400k in an intraday bounce. I recognized that I was selling too early when the bounces started. Yesterday we gapped down and my game plan was to watch the futures, see them stabilize, let them hold higher, load up playing for a bounce, and hold for a huge upmove. If I saw weakness I was ready for Plan B. I chose AAPL as my stock to trade. On the Open I saw exactly what I had gamed and loaded up in AAPL. And I traded this bounce really well. In fact, this was the best I have traded in two weeks. I was very pleased with my work. And you know what I made very little money in the bounce.

Ok so now you are checking that last line that I just wrote and are probably asking if you read that correctly. I thought Bella said he was pleased with his work. Why was he pleased if he didn’t knock it out of the park? The reason is simply- my goals. My goal for yesterday was to start playing a bounce better. My goal was not to make a certain P&L. I was selling my stocks too early and yesterday I held. There were multiple trades where I was 1.5 points in the money with multiple lots and did not sell (I will leave an explanation for why you don’t sell in this situation if playing a bounce for another blog). And AAPL retreated right back to my original purchase price. CMU, one our traders, kept asking me if I was selling AAPL. I responded numerous times, “No I am looking to buy more. I am playing a bounce.” Todd Harrison from Minyanville wrote the other day, “As traders, the destination we arrive at pales in comparison to the path that we take to get there.” Well said. My goal is not to make money it is to get better at trading bounces.

One of the disadvantages of running a trading firm is that you often have to solve problems that distracts your trading. Often there is just too much to handle and trade. This coupled with a certain mistake I commonly make can harm my trading. The mistake? I will be thinking about my trading over the weekend and will set a goal to make a certain P&L over the next five trading days. I am setting a goal correct? And now it’s 9:50 and many of our traders are up a ton and I am negative $1500. And I get frustrated. I chastise myself for not accomplishing my goal. But this is all wrong. This is all the product of harmful expectations.

What I should be doing is setting a goal to make one good trade and then one good trade. I should concentrate on finding as many one good trades as I can during a day. I should set a goal of becoming better at bounce trading during certain markets. I should set of a goal of trading all day and just letting the results take care of themselves. I cannot control the opportunities that the market will offer on a given day. But I can control my own process. I can work on my goals. I can manage my expectations and ensure that they are aligned with my long term interests as a trader.

So today I will watch some tape of my bounce trading yesterday. And I will work on that some more. And next week my expectation will be to get better as a trader. And not worry about my results.

Enjoy your weekend.