There’s nothing like entering a trade with confidence and watching your account value go up in real-time. Unfortunately, for many traders, looking at their live P&L, also known as “Profit and Loss”, can be an issue that derails their trading progress. This is particularly true for day traders that are actively moving in and out of positions during market hours. Trading your P&L means that your trading decisions are directly influenced by your profits or losses for the day. This can lead you to make poor choices or taking on larger position sizes without sticking to your rulebook.
It might seem counterintuitive to avoid looking at your live P&L when you are in a trade or when you are day trading since it’s always nice to know how much money you have made or lost on a trade in real-time. After all, we pursue trading with the goal of becoming profitable and making money. The truth is that there are some great reasons why you should avoid looking at your P&L during a trade. Doing so will ultimately help you become a better trader, which is why we’ve put together a list of those reasons below to help convince you of the merits of avoiding looking at your live P&L.
Reason 1 – It Allows You to Focus Strictly on Trading
Without a doubt, one of the biggest reasons why you should hide your live P&L during a trade is that it allows you to focus strictly on the trade instead of worrying about the amount of money you have made or lost. Trading is all about developing a set of rules and a system that you follow on each and every trade you take. You should have already done a lot of work with your trade plan before you even enter a position. That way, you can simply follow your plan and avoid deviating from your strategy. You are much more susceptible to breaking your trading rules and letting your feelings take control when you see your live P&L. Instead of focusing on your P&L, focus on the trade itself and managing it based on your rules. You will become a much better trader as a result and give yourself a better chance of staying profitable over time.
Reason 2 – Losses and Gains Can Influence Your Trading During the Day
If you are an active trader, looking at your P&L throughout the day can have a big impact on your decision-making process. For example, if you lost big on your early trades and see red in your P&L, it can lead you to make revenge trades or size up in an attempt to earn back your prior losses. This is a dangerous game to play, especially in the day trading world. On the other hand, taking a look at your P&L for the day and noticing it is green can lead you to take on riskier trades or overtrading due to overconfidence. It’s best to keep your P&L hidden if you are day trading to avoid letting these scenarios play out.
Reason 3 – Avoid Fear, Hope, and Greed
The bottom line is that staying glued to your P&L during the time you spend trading oftentimes lead to feelings of fear, hope, and greed that can end up influencing your trades. We all know that trading success is about managing your emotions and psychology both before, during, and after a trade. This is a big reason to avoid looking at your P&L until after you are done trading for the day. After you have finished trading for the day is a great time to look at your P&L and track your trades in a journal or a spreadsheet to figure out what went right and wrong throughout the day. The big issue with watching your live P&L is that you tend to emotionally trade off of your gains and losses instead of your plan. Keep this in mind as you continue on your trading journey.
It’s always nice to see a bright green P&L, but make sure you are only checking it after your trading day is over for the reasons mentioned above. Take a long term approach to analyze your P&L and focus on improving your trading instead of dreaming of getting rich quickly. After you make the choice to hide your live P&L during a trade, you will become a better trader in the long run and never look back.