Profit and Loss (P/L)
by Cliff Clark
We all want to make money in trading. That's our main objective. But do we need to know how much we are making or losing every moment of the day? I would suggest no and say that it is even detrimental to your trading.
Money has power and it plays on your emotions. When you can see how much you are making or losing on the day it will affect your next decision. Why? Because some of the emotions attached to money are fear, greed and anger, these can cause us to lose focus on the bigger picture. Can you trade rationally if you look at your P/L and see you are down $1500? Are you not going to think about trying to chase those losses to make something back? This is how you can give back several days worth of gains in a single morning. How about if you are up $1000? Do you think you might try to protect your gains instead of trading your plan? This is probably the best way to prevent you from having that really huge day.
As a way to try to control these emotions I would suggest that you turn off the P/L indicator on your trading platform. Think in terms of R's (risk) instead of $'s!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
