July 18, 2007 at 10:28 am | | Comments 1

Round Numbers

Lots of traders (myself included) notice that stocks behave differently as they approach round numbers, like $20 for example. That’s probably due to many stops being set around those levels, both on the buy and sell side. Once a stock gets through the large buildup of orders at those whole numbers, they often see a nice pop because the resistance (of sellers, or of buyers on the downside) is now behind the stock and it’s now able to move more freely.

But have you noticed the same thing in your trading account? As your account nears a nice round number (whether it’s $10,000 or $3,000,000), do you notice some “resistance” in clearing those zones? I sure have.

Of course, once they are cleared, things seem to cruise along nicely again. The trades tend to keep producing, and the account balance climbs.

I finally realized why that is….it’s because as my account approaches a nice round number, my attention gravitates to that number rather than focusing as I should on my trades. I get to thinking about how a particular trade might impact “the number”, but that’s not what got me there to begin with.

Fortunately, my broker has a great tool which allows me to hide “the number” with a single click, and that helps a lot. It makes me turn my attention back to my open positions so that I can manage them the best way I know how. That’s what good trading is all about – managing each position well.

If you’re finding it difficult to get over the hump in your account as you reach a certain number or account highs, HIDE THE NUMBER! I’ll bet it helps you focus on your trades much better, and that alone should get you back on the right track in growing your trading account.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

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