This is one of the most common reasons why traders remains unsuccessful in the market after giving the time to the markets. They create the system or trading rules but they don’t follow it. Because following rules, sticking to the one trading system doesn’t give excitement, instant profits, instant dopamine etc. Meanwhile breaking rules gives sudden money, make them feel good, satisfy their ego and other things as well. However, having the rules set and following the rules are two different things.
Understanding about the why traders struggle to follow their rules, can make the significance change in their trading career and success.
Why Trading Rules Matter
Trading rules exist to eliminate the emotions and weakness of the human from the trading. It basically develop the probabilistic mindset which helps traders to manage the emotions and accept the uncertainty.
Importance Of Trading Rules
Preserve Trading Account: A trade without the risk management or the stop loss have the power to wipe out the entire trading capital. However having the risk management rule in the trading rules allow you deal with the nature of the market without wiping out the trading capital.
Psychological Prevention: However the market presents infinite opportunities every second and every minute, trading every opportunities may reduce the trading capital size. Trading rules help you focus only on the opportunities that meet your trading criteria, filtering out countless setups that do not align with your strategy.
Performance Assessment: Anything can’t be improved until you fix the mistakes. Following the trading rules allow you track the flaws and work on it.
Trading rules are designed to allow you to deal with the nature of the markets.
Without rules you can’t deal with the uncertainties and unpredictabilities of the markets.
The Gap Between Knowledge and Execution
Many traders believe that having the more knowledge about the market can make them a successful trader. Meanwhile over information about the anything may cause the probabilistic mindset.
Why the Gap Exists
When your mind is calm, you can think rationally and create trading rules that support disciplined decision-making. But when the real money is on the line traders often forget to follow the rules and start taking impulsive decision.
The Mirage Of Paper Trading: However the paper trading will make you use to of market nature. But it won’t give the real emotions feel just like when the real money is on the line.
Instant Satisfaction vs Delayed Results: The brain want instant gratification just to satisfy their ego. Rather than waiting for the delayed results.
Fear Often Causes Rule Breaking
Fear of losing the trade or money generally cause the rule breaking and engaging into the overtrading or revenge trading. After a while it leads to wipe out the whole capital and damages the trading psychology.
The Mechanics of Fear
Attachment To The Money: At some extent everyone is attached to their money. Meanwhile the trading involves risking the money which initiate the fear of losing the money.
Fear of Missing Out: The market creates new opportunities every minutes. Traders who don’t follow the trading rules, the market develop fomo in them. In the end it leads to catching the every move and running behind the profits.
Afraid To Be Wrong: Many new traders believe that accepting the mistake is a curse. This forces them to keep shifting the sl and tp amind the running the trade. Which indicates the rules breaking.
However these action’s confirms the breaking of the trading rules. This may give you the temporary profits but it can destroy the trading account.
Greed Can Override Discipline
Greed is one of the primary reason of avoiding or breaking the discipline. When the traders feel strong urge to make instant wealth or profits, it often leads to abandon the risk management rules first. Rather than executing with the rules, they execute with the emotions which includes high risk trades.
Actions Of Overriding Discipline
Shifting Stop Loss: In the fear of the trade may end in the loss, traders tend to move the stop loss. By doing this, it doesn’t confirm the guaranteed profits instead it increases the risk more on the trading account.
High Leverage: In the view of increasing the amount of the profit, traders often opt for increased leverage. This allow them increase the lot size in same account size.
Running After Setup: Greed often forces the traders to chase the setup in the hope capturing the every move. As a result traders enters without the confirmation based on the fomo.
Staying In The Winning Trade: Rather setting the exit price or target price in the trade, traders try to capture the whole move. In the end trades often see a profitable trade turning into the losing one.
Long-Term Success Depends on Rule Following
Strict rule based trading is foundation long term success in the markets. Most traders doesn’t fail because of strategy or lack of trading funds. They fail because of the trading with emotions rather trading with the rules. However it’s not only protects trading capital but it also preserves the discipline, psychology etc.
The Core Rules for Long-Term Profitability
Execute a Written Trading Plan: Never enter in the position until the market meets all you entry and exit criteria. If any doubt occurs while placing the trade the avoiding the trade is the best option in that case.
Practice Rigorous Risk Management: Rather than executing the trade without the loss limit. Learn to put the stop loss in every trade 1%, 2% 0r 3% depending on the trading account size.
Consider It As a Business: Treating trading as the business will shift your mindset from quick profit generating system to the long term success. It will make you accept the loss as the part of the business or trading. Ignoring the all noises and doing what is good for the trading and following the trading rules
Ending Lines
This is the reason why most of the traders remains unsuccessful in the trading profession.
They let their emotions drive the trade rather than the rules.
The immediate satisfaction like greed, overtrading, revenge may give temporary results or profits but it can destroy the trading account slowly slowly.
In trading having deep knowledge about the trading rules is essential.
Following the trading rules consistently and executing them with the discipline, separate the successful traders from the failed or struggling traders.