Every loss in złoty hurts. Every gained złoty brings joy. But what if I tell you that this is not the best way to approach trading in the market?
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- Federal Reserve Monetary Policy — Federal Reserve
A step towards more conscious trading
Imagine this: you enter a trade hoping for a quick profit. The price drops, and you watch as 300 zł melts away from your account. Another attempt, and again 500 zł disappears into the abyss. These numbers hurt because it's your hard-earned money. With 300 zł, you could buy new shoes, and 500 zł is a weekend getaway with your family. When you add up these small losses, you suddenly realize that in a month, 2000 zł has vanished from your account. That's the value of a new TV or a two-week vacation trip. Often, you don't even notice how quickly these amounts add up because you are focused on the złotys.
When you lose money, stress kicks in. Your brain starts working overtime, trying to find the culprits – the market, the strategy, and sometimes even yourself. You enter 'recovery mode'. You focus on how much you have lost instead of thinking about how to improve your approach. Instead of analysis, there is an impulse to quickly recover losses. It’s an emotional spiral that often ends in even greater losses. Your actions become chaotic, and you lose control of the situation.
From the experience of many traders, it turns out that counting money is like looking through a fog. When you focus on złotówki, you lose the broader context. You don't look at whether your decisions are good, but whether they bring profit. This doesn't work because the market is full of variables, and money is just the final effect. Many traders say that only a change in approach – stopping the counting of money – allowed them to calm their emotions. Then they began to see trading as a game of probabilities, not an emotional chase for profit.
Start counting in risk units, that is in 'R'. For example, you determine that you risk 1% of your capital on each trade. This is your 1R. Regardless of whether it is 100 PLN or 1000 PLN – what matters is the risk you accept. This way, your emotions do not fluctuate like currency rates. Each loss is a loss of 1R, not a specific amount, which helps to detach emotions from numbers. Many traders who have switched to counting in 'R' notice that it is easier for them to stick to their plan and analyze their decisions without personal feelings. It is a simple change, but it brings huge benefits in the form of calmness and better analysis.
# Example of calculating risk in R
capital <- 10000 # Your total capital
risk_per_trade <- 0.01 * capital # 1% of capital
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