P&L Syndrome What is IT?  & How to Avoid It

This is a topic for new traders and on occasion I have run into experienced traders that fall into this trap as well.

First, let me explain P&L Syndrome – It’s when a trader has their P&L on their main screen and they continually look at it over and over again.  They look at it before the trade, when the trade is executed, and while in the trade. Often the make the decision to close the trade because of what they see verse what’s happening in the market at the time. This can cause a mesmerising effect and affect important trading decisions that may not be beneficial.

If the trader wants to increase their “feel” or intuition about the market they must focus on the moves of the market. The distraction of the P&L just doesn’t do anything for intuition.

Yes, it’s advantageous to set goals for the day but the bottom line is that it’s critical to focus on the quality of the trade NOT the quantity of the trade. The reason is the effect on the mind by doing this. The mind starts to become influenced while in the trade looking at the P&L all the time. It can even create a “block” and we all know what the block can do to us. 

When the thought process goes to the numbers all the time, different decisions get made than when watching the moves the indicators and levels show. When switching the focus the trader will miss the important things they really need to when honing their skills.  The mind seeing the P&L over and over creates a compounding effect of the same the “thought” and even can cause trading errors that are unnecessary bad decisions.

A trader can exit the trade too soon and miss out on a good move looking at the dollars instead.  They can avoid taking a trade because the P&L is at a certain point.  What’s worse is looking at the money will also increase the fear and emotions that need to stay under control while trading.  We all know how important control of emotions can be to a successful trade, how, out of control emotions can really mess up a trade.

I am not saying don’t use stops or not to stick to rules that protect your cash. Both of those items are also important and P&L syndrome can cause the trader to miss out on many trades great set-ups while looking in the wrong place and having the focus be somewhere else than on the quality of the trade and what’s happening in the moment in the market.

I can tell immediately when a trader I’m coaching is looking at the P&L because their language and conversation is always around the dollars. They say things like: “I had a bad day I was at 1000.00 on the P&L and in the next trade I gave back all of it and more finishing down for the day.” Or “I was up 100.00 in the middle of the trade and it went up to 300.00 and than pulled back.” They don’t mention the market at all, they don’t refer to the “ticks” or the actual numbers of the market they’re trading. They only refer to the dollars in some way.

So what’s a trader to do? If they have the P&L Syndrome? Well here is a very drastic solution and I will warn you ahead of time, that doing this will make each trade better and improve the trader’s instincts of the market quality of the trade.

If you think you are doing this and you DO NOT have a problem than I challenge you to test it……try the test. AND

Take the P&L off the screen and just focus on the indicators, market movement and set-up. Stick to the quality of the trade and have your stops in place.  When you enter the trade and have a plan you should KNOW how much you will make without looking, right?

If you react with and have a feeling of going through “withdrawal” or are getting anxious, than you do have a problem.

If you do have the bad habit it could take you a little while to break it. Remember repetition is the mother of skill and over time the anxiousness will reduce, I promise and you should see a change in your results that are positive.

Try it! What do you have to lose, nothing but you may increase your profitability and catch those longer running trades you have been missing.

As always be happy be health and most of all be responsible!  Great Trading!