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Open P&L (Profit And Loss) - What is it and why do you need it? - YouTube
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When trading you will see the term
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Open P&L, which means
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open profit and loss.
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But what exactly does this mean?
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And should you pay attention
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to it?
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Why do you need this?
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That's what we are going to talk
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about in today's video.
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So let's start with the definition
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first.
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What is Open P&L,
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or the open profit and loss?
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You see the Open P&L is the profit
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or loss of your position at the
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current market price.
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As the market price of your position
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changes, your Open P&L will
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change. It is not unusual
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that your Open P&L can change by
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several hundred, or even
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several thousand dollars throughout
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the day.
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Here's an example.
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So let's say you bought a stock for
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$100, and the current price of
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the stock is $105.
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This means that you have an open
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profit of
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$5.
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Now if the price of the stock drops
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to $98 and you bought
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it for $100, you're open P&L
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will be a
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negative of $2.
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Now here's an example of the open
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profit and loss for a particular
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day.
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So why do you need the Open P&L?
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You see, the Open P&L gives you a
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quick overview of the value
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of your current open positions
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in your portfolio.
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And open positions can be
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stocks, or options, or
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Forex, it doesn't really matter,
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right? So you will see very quickly
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whether your current positions are
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making you money, or
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whether you're losing money.
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But the Open P&L is
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very misleading because
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as long as the trade is open
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it will change.
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Only when you close the trade
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you will know how much money you
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made or lost.
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So should you pay attention
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to the Open P&L?
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Let me explain it this way.
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You see, both of my kids are
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sailors, and here's how a sailing
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regatta works.
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A regatta is usually 2 to 4
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days, and each day there
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are several races.
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And typically they're 3 to 5
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races per day.
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So this means that some regattas
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have 6 races, while
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other regattas can have 10 to 12
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races. Now, the winner
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of the regatta is the sailor with
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the lowest score.
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For example, if you
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have a 1-1-1-1,
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which means that you won 4 races,
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you have a score of 4.
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So, while the regatta is
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going on and the sailors are
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completing races, the score
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changes all the time.
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By the way, here's a picture
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of my daughter Vivian during a
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National Sailing Regatta in Buzzards
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Bay. Pretty cool, huh?
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Anyhow, here's an example.
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Right now, my son Julius is
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competing in The Chubb U.S.
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Junior Championship and that's a
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pretty cool National Sailing
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Regatta.
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As I'm recording this video,
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they completed 4
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out of the 9 or 10 races
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that they will do.
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And right now, Julius and his
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skipper Lucy are in 6th
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place.
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But this will change.
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By the end of the regatta they might
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move up to the 3rd place, or
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they could even drop to the 10th
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place.
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Almost everything is possible,
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of course, it is fun watching
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the results throughout the day, but
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only at the end of the regatta,
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we will know the final results.
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And this is exactly like trading.
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While you have an open position,
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you can watch the Open Profit
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and Loss all day long, but
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it doesn't matter.
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Only when you close the trade you
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will know how much money you made
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or lost.
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Is this makes sense thus far?
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If this is helpful click on
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"Subscribe" and hit the little bell,
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because this way you are getting
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notified whenever I post a new
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video.
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So back to the Open P&L.
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If you are watching the Open P&L
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while you are in a trade it
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will drive you crazy.
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See I've been in trades that have
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been losing for the first few days,
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and then they turned around
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and I was able to exit them with a
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profit.
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And I have had trades that took
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off in the first few days and then
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sharply turned around and I
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exited them with a loss.
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Long story short, don't
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celebrate open profits
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and don't get upset about open
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losses because trades
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can turn around quickly.
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You see in the sailing example,
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being in number 6 out of
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20 boats in this National
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Championship is a big deal
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because sailors from all over the
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country had to qualify
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through another regatta to be able
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to participate here.
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So my son Julius and his
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skipper Lucy are sailing against the
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best sailors in the nation.
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And today there will be another
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3 or 4 races, and tomorrow
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there will be another 2 or 3 races,
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and then
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I can take a look at the score.
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Looking at the scores during the
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regatta is like looking at the Open
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P&L of your trades.
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It's fun and entertaining,
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but it doesn't matter.
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Hope it helps, and don't forget
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to subscribe to this channel and hit
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the little notification bell so that
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you get notified whenever I release
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a new video and make sure to
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like it. Feel free to share this
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video with anybody who
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might find this helpful.
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I'll talk to you soon.
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