Today's Quote: “The intelligent man is one who has successfully fulfilled many accomplishments, and is yet willing to learn more." Ed Parker.

The upcoming lessons are going to deal with a variety of topics and many will focus on how psychology affects your trading. Today we start off with ‘dollar counting’. This is different than tracking your profits and losses. Proper tracking of trades at the end of the day is something that needs to be done. The money is important. The trade must be planned out, and the money risked must be determined, and weighed against potential profits. However, the money risked is determined by your share size. The target and stop of the trade comes from the chart. When you don’t follow this, you could fall victim to ‘dollar counting’.

Dollar counting is something that can hinder your trading. ‘Dollar counting’ means looking at the amount of money that you are up or down, 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 ‘profit’ window?

Dollar counting is such a problem that is has earned its place as one of the “Seven Deadly Sins of Trading”. This is a chapter in the book, “Tools and Tactics for the Master Day Trader”, written by Oliver Velez. The issue is simple. Was the strategy good? Was the trade entered properly? Is the stop and target correct? Did you play the right share size? Has anything changed? If all of these answers dictate that you should stay in the trade, then stay in. Don’t let your ‘dollar counting’ take you out way before your maximum profits are hit, or before the appropriate stop is hit.

How do you overcome this problem? The answer is usually quite simple. Trade the share size that lets you play out the plays until you have the confidence to let all trades play out as they should. There are times a trade should be ended early, but not because you are counting the dollars.