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Beginner traders generally
focus on the amount of money they earn in case of winning trades and the amount
they lose in case of losing ones. Although this is understandable at the beginning,
it can be harmful to your mind.
The pain threshold
of the amount of money a person wins or loses is of course relative. A thousand
dollar loss may be nothing for someone or it can be a lot for someone else.
Watching numbers can be quite impactful.
A better way to
look at profits and losses is in percentage terms. Let’s say you have a 100K
account and you risk 1% on a trade. The more your account grows, the bigger that
1% will become. If you watch the nominal amount, you might feel inclined to
reduce your risk the more your 1% grows.
This action not
only hinders your progress, but it can also cause pain when you experience losses.
If you only look at the percentages, they will always look the same and it will
diminish that pressure you may have when you focus on the nominal amounts.
