The only reason anyone starts trading stock options is to make money, and one of the most common questions people ask is “What can I realistically expect to make in my first year of trading?” It’s a critical issue, but you probably won’t like the answer very much.
I don’t know.
There is no set figure on what you can make in your first year as there are so many variables. However, what I do know is that without proper trading education and a solid trading plan, you are probably going to lose a couple of years’ worth of income.
New traders tend to dive in, investing their hard earned money day in and day out and unfortunately, most of them end up having to learn the hard way – hell I did myself when starting out. But, it doesn’t have to be that way.
What Would Be A Realistic Earning Expectation For Trading Stock Options?
Let’s face it every trader starting out will have hopelessly unrealistic expectations if they haven’t done their homework. Whether it’s from films and TV shows about trading, or mates down the pub, or wherever the incorrect information comes from, it fills people with false hope and expectations when setting out in trading stock options.
Just because someone traded 1 penny stock five years ago does not mean that a 454% return is normal or even expected. I’ve even had people ask me point blank if making a 25% return each month is reasonable – um let’s see. . . NO!
Starting off your trading career with unrealistic expectations inevitably will lead to failure.
It’s better to face reality now than be blindsided later. I would say a realistic goal would be to aim for around 20-25% return per year… not per month!
What Do I Need To Know To Make My First Trading Year Successful?
Let’s stop talking about how much you’ll make or not and start focusing on education. You need to learn how to trade stock options successfully before you put a penny into the market otherwise you will fail. It’s like any other skill or challenge; you find out how to do it first before you take part.
As a starting point, listen to this podcast which should help you to put together a game plan and aid you to hack through the options trading learning curve in 3 months. Surely it’s worth spending time learning, rather than rushing in feet first and losing money because you were too impatient? We lay out the complete framework in the podcast and notes page.
Next, sign up as a free member to check out our Beginner Video Track which takes you through everything you need to know as a new stock options trader.
Trust me it will make things much easier down the road.
New Trader – First Year Checklist
- Learn to avoid the common mistakes
The figures are a little off depending on who you talk to, but around 80% to 90% (maybe more) of traders end up losers and leave the business altogether. So figure out why they fail and learn to avoid the common mistakes early. On a positive note, take the time to find out how the successful trader’s trade, the techniques and strategies they use, and any other tips that help you move away from the greater majority.
- Accept that you will incur losses
Only a small number of traders are profitable, and that number gets even lower if you look at a 3-5 year average that measures consistency. Don’t get discouraged, we all fell off the bike before we learned to ride it, right? If you are just starting out, you should expect to incur some losses as you climb the learning curve. No question about that. However, what matters the most (and differentiates you from many other traders) is learning from the mistakes and continuing after failing.
- Paper trade first with a small amount of money
I always tell my beginning coaching students to paper trade everything first. This way, you learn how to enter orders, adjust trades, and more importantly learn from your mistakes without losing real money. And even then, you need to keep it small once you decide to invest real money. If you can’t trade profitably with $1,000 how in the world are you going to make it with $100,000?
- Trade consistently – don’t walk away from a small losing streak
Again, I see too many people quitting after a streak of 4-5 losing trades. What? You didn’t think this would be a walk in the park, did you? Come on people, losing money is part of the game. It’s how you manage your losses that make all the difference. Besides, it is impossible to predict price movements consistently (which is why our strategies don’t need the requirement for success). Listen to the technical indicators, control your emotions, and above all…preserve your capital!
- Don’t expect to become financially independent overnight
Don’t you think it’s completely unrealistic to expect a small account, say under $5,000, to generate consistent income to replace your regular job? I sure do. Rather, concentrate on low-risk, low-frequency trading with income-oriented trading systems. The key to success with options is keeping your trades consistent, and trading them persistently.
- Develop your trading strategy based on facts
One of the most effective ways to succeed in options trading is by having a sound trading methodology. Take time to sift through most of the information available on the internet and conduct factually driven research on trading stocks and options. This way, it will be easier for you to set realistic income goals and avoid making too many mistakes. Don’t let your emotions get in the way of the math.
— The Option Specialist
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