Dollar Counting, Your Worse Enemy!
By Cliff Clark
Have you ever asked yourself, why am I trading? Of course you have, we all have and we all have the same thing in mind when we come to trading. We are here to make money. Yes, money is important. However, while a trade is in progress you need to ignore the money. Before a trade is taken, the trade must be planned. You have already done this planning, it's all outlined in your trading plan. When you don't follow your trading plan, you could fall victim to dollar counting.
Dollar counting is something that can hinder your trading. It is looking at the amount of money that you are making or losing, while the trade is still in progress. It promotes fear and poor decision making. If the trade was based on the charts, why do you now make decisions based on the current number in your P&L window?
Dollar counting is 2nd only to not taking stops as one the the key issues that cause traders to fail in my opinion. The issue is simple, by not allowing yourself to follow your plan you are essentially giving yourself permission to think you can outsmart yourself. When you do this you are defeating the purpose of your trading plan and are headed for failure.
How do you overcome this problem? Trade a smaller share size that allows you to stay in your trades until you have the confidence to let all your trades play out as they should. There may be times a trade should be ended early, due to a time stop, bar by bar analysis, or anything else you have specified in your trading plan. However, dollar counting is not one of them!
When you can trade objectively, in the moment without looking at your profit or loss, you should see your profits increase dramatically. I do not have a P & L window up on my trading platform. I suggest you do the same!
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.
