What is P&L in trading and how is it helpful?
Author - TradeZella Team
I’m consistently profitable, but when I size up, I fail. Advice?
Increasing size is HARD.
Let's say you've been keeping your risk consistent. Add on to that a continuous winning streak. 📈
This scenario is a breeding ground for increased confidence and the desire to size up.
Nothing wrong with that, you've done well! 🥇
Here are few things to consider. 💡
There's a fine line between the confidence that allows you to execute well in trading and overconfidence.
Overconfidence can lead you down the route of thinking...
"If I doubled my size on this trade, I'd make X" or
"I've had 8 green trades in a row. The next one is bound to follow suit." 🤡
No trade has a 100% level of confirmation.
Consider that just because you had 8 green trades in a row, does NOT mean that the next trade will be as well.
Trading performance is determined by taking high probability risks based on what you see on the price chart. 📈
It is not the idea that because you've been consistent, you now have the King Midas touch of turning everything into gold. ❌
You have to be able to stomach a larger loss if you decide to increase your size.
Approach trading from a risk perspective.
With every single trade you take, first think about the downside. Ask yourself:
Can I stomach this loss?
How will this loss impact my P/L?
How will this loss impact my trading performance?
(this last one is the silent killer ☠️)
If the answers to these questions are negative, do not take the trade.
How can you make more money without overextending your risk?
Size up slowly and in intervals. Don't double your size because "I'll make 2x amount, instead of my normal x amount". ❌
Flip your mindset on the trade before taking it. 🧠
Why could this go up/down?
Why could this trade fail?
The true answer to this will help you understand what is really backing the trade. ✅
Edge > Emotions.
Why Running P/L is helpful for trading
Our members LOVE the running P/L feature on their trades. 🤩
Depending on your trading strategy, a running P/L can show you how good your entries are, your risk management skills, and how sound you are at maximizing profits.
While it may seem simple, we can gather a lot of information from just this chart alone. 📊
Take scalping, for example.
Many scalpers pride themselves on their ability to snipe perfect entries and assume very little risk to support the small price movements in their favor.
With scalping, a perfect entry means that price moves in your direction almost immediately.
While this won’t happen on every trade, you’ll be able to identify whether your trade took off right away as you planned, or perhaps you entered a bit early. 📝
You can also get a glimpse into your ability hold winners and scale out of your position.
A P/L that fluctuates might show the emotional rollercoaster 🎢 you may have had to go through to hold that winner.
These are important metrics to know because you’re able to see how your trading psychology develops over time.
Maximizing profits is another reason why a running P/L can show you where you excelled or fell short.
A running P/L will also show you that perhaps you were up $1000 on a trade at one point, and took your profits at around the $950 mark.
That’s pretty good! 🚀
Or vice versa, maybe you were up at $1000 one point and suddenly your trade turned against you into a breakeven result.
Oof, we hate it when that happens.
You’ll be able to view the emotional battle you may have gone through at the time of taking the trade.
After all, who wants to look at their P/L DURING the trade?
Not us! ❌
Save that for later when emotions aren’t involved.
“TradeZella Hates Me”
Meet FJTrades. Apparently, TradeZella hates him. 😈
(We'll explain 😅 ...)
FJ had a phenomenal month of October focusing on developing his strategy and thinking in terms of risk to reward.
He shared the deets with us here. Let’s take a look.
We can see that he was able to identify areas of weakness and dig himself out of a hole.
Great job, FJ! Takes some serious reflection to be able to do that. 💡
But why does TradeZella hate him?
It all stems from Zella Insights, our AI tool to help traders discover what might be going wrong in their trading. 🛠️
This notification above shows that in this case, he isn’t maximizing his profits on the trade.
At one point he was up $1360, however closed at $690. Losing 97% of gains. 💸
What does this mean to us?
Well, as FJ describes, he’d "basically be a billionaire" if he would just take profits. 😂
In all seriousness though, Zella Insights helps us pinpoint where we could do better and where we may be leaving money on the table.
“TradeZella is the tough love that you need”
Well said, FJ!
We couldn’t agree more. 🤝
To watch the full video, check out FJ's Youtube video here.
Catch this week's webinar?
How to build an effective risk management strategy
Risk management is one of the major pillars of successful trading.
Amateur or professional, we're human beings.
We can all use a bit of tune-up in the risk management department.
ICYMI, watch the latest webinar here.
That’s all for now!
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