Expectancy - the key to success in trading

One of the most common mistakes made by beginner traders is ignoring the actual transaction costs. For example, if you buy shares for 100 PLN and incur additional costs of 1% due to spread and slippage, this means that your actual costs are 9 PLN more than you expected. Another mistake is the lack of consistency in applying stop-loss. Let's say you have a strategy that involves closing a position at a loss of -5%, but due to emotions, you only close it at -10%, which with a capital of 10,000 PLN means an additional loss of 500 PLN. The last common problem is neglecting regular analysis of trading results. Many traders focus on individual transactions instead of analyzing how their system performs over a month or a quarter.

Ignoring actual costs and lack of risk management strategy lead to unforeseen losses that reduce the profitability of your investments. This mechanism is based on the accumulation of small errors that over time can consume a significant portion of profits. For example, if you lose an additional 1% due to slippage every time, then with 50 transactions a month, you are already losing 500 PLN with a capital of 10,000 PLN. Such invisible costs can quickly turn a theoretically profitable strategy into an ineffective one.

Assume you have a capital of 15,000 PLN and you make 50 transactions per month. The average cost per transaction is 20 PLN (spread, slippage, commissions). This means you lose 1,000 PLN monthly just on transaction costs, which constitutes 6.67% of your capital. If your strategy was supposed to generate a monthly return of 10%, the actual profit will only be 3.33%, which significantly affects expectations regarding capital growth in the long term.

1. Analyze your trades for actual costs - include spread and slippage.
2. Consistently apply risk management rules - stick to established stop-loss levels.
3. Keep a trading journal where you record not only profits and losses but also the factors that influenced each trading decision.
4. Regularly analyze the expectancy of your strategy, that is, the average profit per trade, to ensure that the system earns more than it loses.
5. Test your strategies on historical data to understand their potential effectiveness.

Daily analyze the expectancy of your results to understand whether your system generates expected profits.