Money is the By-Product of Trading

Traders deal with profit and loss on a daily basis. And it’s instant. You take a winning trade your account grows, you take a losing trade, and your account shrinks. With that instant pain or instant pleasure comes an attachment to the outcome of trading, to the money. Or as the saying goes “Trading your wallet”.

Money is simply a way we keep score. It’s the way we gauge our progress throughout the day. But let’s look at this from a different angle. Every business, no matter what it is, has the ultimate goal of making money, turning a profit. However, during the day to day business activities, you are not thinking of the dollars but the service or product you provide. You want to provide the best service or the best product you can so you will stay in business. If you do, you know that at the end of the month, if you have managed your business correctly, you will show a profit. Notice I said “at the end of the month”?

If you were selling furniture, there may be days you don’t have any sales. There will be days where you break previous sales records, and there will be your typical average days where you sell your tables, chairs, beds, etc. You know if you provide a great product, stand behind your product, and do everything you can to be the best at furniture sales, you will have a successful business. Chances are, you are not worrying each day about how many chairs you sold, or did not sell. You are not worried if the customer who just walked in the door will actually buy today. You know that it’s a numbers game. Some will buy, some will look, other won’t even come in the door. But you have your business plan and your work from that plan because you know over time that if you do, your business will be successful. Not by focusing on the dollars but by focusing on the actual day to day business.

Traders do not share the same focus. Why? Because it just so happens that their inventory is money. They move money all day long. Some comes in, some goes out, and hopefully, if they followed their business (trading) plan, they will have more money at the end of the day than when they started. But traders focus on every tick of the market, watching the PNL go up and down in real time. They are worried about the potential losses that have not even happened yet.

Mark Twain wrote: “My life has been filled with horrible tragedies, most of which never happened”. Traders could learn a good lesson from this. Traders days are filled with horrible losses most of which never happened. They are focusing on the money rather than being the best trader they can be. Rather than following the plan they laid out before they ever took a single trade. Traders see the slightest bit of adversity and jump out of their position. They see the slightest bit of profit and jump out of their position. This only causes frustration as you see the market go exactly where you thought it would…..but without you on board. This is called “churning your account” and the brokers love you for it.

The focus is on the money, the inventory, and the immediate pain and pleasure causes traders to deviate from their trading plan. They do not recognize, as the furniture salesman did, that it’s just a numbers game. Some you win, some you lose, some will break even. But, if you follow your plan, at the end of the month, not the end of this trade, or even this day, you will show a profit in your business by focusing on your job as a trader. By following your rules with discipline and perseverance and by letting go of the need for every trade (sale) to be a winner.

When you are able to let go of the outcome, focus on the task, and detach from your trading, you will begin to see the market with a clarity you have never experienced before knowing all the while that by following your method and letting the probabilities take care of themselves, you will experience success in your trading business and the by-product of your sound trading decision will be…

Good Trading!