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Don't Ever Count Your Money (Until the Trade is Done)

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August 02, 2012 – Comments (0)

This is going to be a farily informal post, but one thing I've been thinking about, and one thing that I believe gets in the way of traders in general is watching the Benjamin's in their account. For me personally, I think watching how much an active position is up or down can really kill your ability to trade successfully.

I know that sounds like it flies in the face of risk management, and keeping losses small, but as I break it down for you it really doesn't. 

As humans, we all hate losing money. They say don't be emotional about your trading, and while this is possible (the reason why paper-trading is typically so much easier), what is not possible is to be unemotional about your money. 

If you think your the exception than take all the cash that and valuable assets that you have have and flush it down the toilet.... 

I'll bet you'll be emotional about it. Probably fly completely off the hook in the process. 

So then, when it comes to your trading, yes you'll always know based on the current price versus where you got in at, whether you are losing money, but here's the thing, do everything you can not to look at the actually dollar profit or loss of any active position. 

Why do I say that? Because when you are up a sizable bit let's say 10%, but the stock clearly has more room to go, you may get out right then and there simply because you have $2,000, and yes that is a lot of money. 

BUT THAT IS YOUR PROBLEM... IT IS A LOT OF MONEY. When I look at the dollars and cents - I'd sell it, because there's a lot you can do with $2,000. 

As a trader, don't get caught up with the money made on the trade, that causes you to short cut stop-losses that shouldn't be cut short, and ruin your chances at realizing the full potential of a big money gainer as well. 

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