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Maintaining Trading Focus

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New traders frequently have difficulty pulling the trigger, and when they do they frequently exit the trade too early. It makes no difference telling them to remove emotions from their trading. So what is the real problem?

 

On most trading platforms we view profit and loss in terms of the deposit currency. The trouble is that we are all programmed to evaluate money in terms of what it equates to in real world terms. For example, when we go shopping, we look at prices and assess them in terms of value for money etc. Hence it is no surprise that when we are trading, looking at risk and return in dollars causes us to think about what that really means in the real world, and emotions suddenly overwhelm any more abstract reasoning.

 

A solution to this problem is to only present risk and reward information in terms of the percentage of the account balance. After all, we are primarily focused on growing our accounts, hence viewing our trading in terms that relate to that objective makes a great deal of sense.

 

Personally, I no longer look at dollar values whilst trading, the percentage values allow me to focus on what I'm really trying to achieve (growing my account), instead of emotive thoughts about the dollar value at risk. Staying focused is key and anything that helps us maintain that focus, must be a good thing.

 

Paul Anderson

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