How will Marking to market put some rationality back

Question

How will Marking to market put some rationality back in trading?

Answer 1

By marking to market, or using a model-based marking which is as close to this as possible, your losses will be plain to notice. If your theoretically profitable trade is performing badly you will distinguish your losses mounting up. You may be forced to close your position while the loss gets to be so large. Certainly, you may have been right in the end, only a bit out in the timing. This loss could have reversed, but when you have closed out your position before then hard. Having said that, the human nature is as people tend to hold on losing positions so long, on the assumption which they will recover, even close out winning positions so early. Marking to market will therefore put some rationality back into your trading.