The goal of a trader is to make money. Plain and simple.
So, you should monitor how much money you are up or down on a trade, right?
In fact, seeing your open gains and losses in dollar amounts will likely have a negative impact on your trading.
Instead, try to focus on the percentage gain or loss.
There’s a reason I say this… Money messes with your mind.
Focusing on big gains or losses in dollar terms triggers fear…
Fear of losing your gains… fear of missing out on a bigger profit… fear of seeing your account balance go down.
If you don’t believe me, just listen to what happened to me the other day.
On Tuesday morning, I bought shares of Upstart Holdings, Inc. (UPST) after it began to break out higher.
By the end of the day, I was up 4.71% on the trade.
How many dollars was I up? I don’t know. And I don’t want to know. Because seeing my trade in dollars makes it seem too real.
Had I looked at my gain in UPST in dollars rather than percentage terms, I would have been much more tempted to take profits.
And I might have missed out on its nice follow-through move over the next few days.
I’ve found that in order to maximize my trading, I need to detach myself from the money.
Let me explain…
Trading Your Equity
Depending on your account size, a quick $500 gain may seem like a huge win. Or maybe you consider $5,000 to be a big win for you.
Either way, focusing on the money will interfere with your ability to trade objectively.
I call this “trading your equity,” and it almost always causes performance to suffer.
Instead, focus on trading the stock.
For most of us, a 2% move isn’t enough to take profits. But if you put your whole account in that one stock, the dollar amount will be substantial.
On the other hand, maybe things haven’t been working lately.
Markets are choppy, stocks aren’t following through, so you size down your trades like I’ve done over the last few weeks.
If you have a 17% gain on a small position, the dollars will seem insignificant. You’ll want to let it ride until the profit is a big number.
Again, you are trading your equity – not the stock. And the result is another poor decision.
Most platforms have an option to display your results as a percentage (%) instead of in dollars ($).
Give it a shot.
See if your results don’t improve.
Embrace the Surge,
Editor, Traders Daily Direction