Fly Fishing the Stock Market: How to Search for, Catch, and Net the Market's Best Trades

CHAPTER 4

Expectations

What can I expect to gain from trading? What is a reasonable return? What are my goals and dreams? Would I like to make a consistent gain of 10 or 12 percent per year? What would it take to boost that to 20 percent? What would a 40 percent consistent yearly gain do to my nest egg over time?

Perhaps you have asked yourself these questions. Perhaps you already know the answers through a disciplined execution of a well-designed trading plan.

On the other hand, you may have gone through some of the same disappointments that I experienced while learning to trade. More than a decade ago, my early expectations became shipwrecked on the rocks of discouragement—all because I had no clear plan and was emotionally unprepared. After suffering a deep drawdown, I would dust off my “future value” spreadsheet and run new projections in hopes of resurrecting my trading account. I kept adding intricate details to my trading plan that I thought would be necessary to be successful: money management, type of stocks to trade, length of the holding period, and so on.

At one point, I became so discouraged with my results that I gave up trading and let a fund manager take over. After a few years, it became obvious to me that his primary concern was with generating commissions out of my account, so I took it back. All the while, I continued to study trading books. Deep down, I remained confident that I could discover effective strategies to become successful and outperform the market ...