Thursday, October 9, 2008

Critical trading account levels

Crossing critical trading account levels are never easy. It is emotionally draining to cross below a critical trading account level and it is the best feeling in the world to cross above one.

What I mean by critical levels are levels at which you feel are important. For instance you finally make it over the $100,000. It felt great. The only problem is now you do not want to trade anymore, why? Because you are afraid of your account going below $100,000.

These levels can make you stop trading or get out of your trades too early just so you can stay above them. Because of this they can be one of the biggest psychological hurdles to overcome. And even the best of traders will have a problem with it.

That is why you should not count your money while you are in a trade. Kenny Rogers once said “You never count your money when you’re sitting on the table.” That is as true in the stock market as it is with anything else. So how can you avoid counting your money?

1. Hide your balance. Some brokers allow you to hide your balance when you are in your account. It is definitely beneficial to block out the number so you will not be able to see it, and therefore you will not use your account balance to make exiting decisions.

2. Check your account 5 minutes a day. Checking your account balance for only 5 minutes a day can help you stay calm and let you keep your sanity. If you are constantly checking your account balance you will undoubtedly make decisions based solely on how much money you have.

3. Take trading breaks. If you trade too much you will be burnt out mentally. Taking a break here and there help you to come back fully recharged and able to better decisions.

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